Good afternoon, ladies and gentlemen, and welcome. This is meeting number 57 of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.
Today we're here to review the main estimates for 2015-16, and we're pleased to have with us, appearing for the first time as the minister to the committee, the .
Welcome, Minister, to your first official committee meeting.
We also welcome, along with the minister, people who have been here before. From the Department of Employment and Social Development, we have deputy minister Mr. Ian Shugart; senior associate deputy minister and chief operating officer at Service Canada, Ms. Louise Levonian; and Mr. Alain Séguin, the chief financial officer.
Also, joining us from Canada Mortgage and Housing Corporation, we have Mr. Evan Siddall, president and chief executive officer.
Minister, because you're just a touch late, I guaranteed to the members that you would perhaps tag that extra five minutes onto your stay so we would have you for a full hour. I took the liberty of doing that.
We'll begin the meeting by proceeding with your comments and then move into members' questions. Please proceed.
Thank you very much, Mr. Chairman.
I'd like to thank the officials from my department and Mr. Siddall from the corporation for being here as well to provide parliamentarians with answers about the estimates.
Of course this is a vast job for us to do. This department is the largest in dollar terms, about $112 billion. It touches on everything from old age security, guaranteed income security, Canada pension plan, to employment insurance, job training, and of course hundreds of billions of dollars in mortgage insurance. We have a vast array of matters that will come before the House in the estimates for authorization.
I always like to simplify, though, the purpose of this department. It really does come down to jobs, families, and communities, the three pillars of good social policy. I've always believed that the best anti-poverty plan is a good job. The best social safety net is a strong family. For those who, through no fault of their own, do not have a job or whose family struggles, we have a third pillar called community.
Let's start with jobs. Our jobs plan is based on the three Ts: trade, training, and tax cuts. Trade is self-evident and it's not directly under the purview of this department, so while I support the Canada-EU trade agreement, the trade agreement with South Korea, and the trade agreements we've signed with roughly 40 countries in total, I won't spend a lot of time talking about them.
Training is definitely a big part of what we do. Our approach at Employment and Social Development over the last several years, especially under the leadership of my predecessor, Jason Kenney, has been to reorient our training programs towards matching Canadians with jobs that actually exist. For too long we told our young people that there was only one way for them to succeed and that was to get a job after going to university, wearing dress shoes in a white collar position. We now know that those jobs are great, but there are a million skilled positions that are needed, many of them in blue collar trades where we don't need dress shoes, where we need hard hats and workboots.
That is why we have reoriented our program to renew respect and value for the skilled trades. We believe that trades deserve the same respect as professions, colleges and polytechnics the same respect as universities, and blue collars the same respect as white collars. So we have created the Canada apprenticeship grant to help with the cost of initiating and then concluding an apprenticeship. We supplemented that recently, in fact just this year, with the Canada apprentice loan, a $4,000 loan that helps students with the in-classroom costs of being an apprentice. Already, I think we have over 10,000 young people who have taken advantage of this interest-free loan.
Finally, the Prime Minister recently announced that the Canada student grant, which had been available only to programs of a duration of 60 weeks or more, will now be available for more vocational-style training of a duration of as little as 34 weeks. That, of course, opens up that grant for a vastly broader array of training opportunities for young people.
Finally, we had something called the labour market agreement, with which all of you are familiar. That gave half a billion dollars a year in training dollars to our provinces. But we found, unfortunately, that it wasn't matching people with jobs that actually existed, so we've transformed that into the Canada job grant whereby an employer pays one-third of the cost and the Government of Canada pays the other two-thirds of the cost of training an employee for either a promotion or a new job within the work setting. That means that the employer gets a tailor-made employee, and the employee gets the guarantee that their training will actually lead to a job. We've had many successes with this already.
That is a small sample of the changes we're making to our training program.
Finally, with regard to tax cuts, in my department we are strongly supportive of measures to reduce the costs on employers. That's why I'm pleased to confirm that in 2017 we will reduce employment insurance payroll taxes by 21%. That will make it much less expensive for employers to hire. When they do, their employees will pay less payroll tax as a result of this change. That means more money in the hands of people who work and more money in the hands of those who would hire them.
We also announced in our recent budget plans to cut small business taxes from 11% to 9%. This is the largest small business tax cut in 25 years. The CFIB confirms that this will help small enterprises hire more people, build their payroll, and strengthen our economy.
Mr. Speaker, that brings me to our next point, which is families. We believe the child care resources that the government has should go directly to the child care experts, and those are the eight million people we call moms and dads. I see that Mr. Cuzner already knew what that line was, so I'm very impressed that he's coming around to our point of view. We hope he will convince his leader to do the same one day. We have cancelled bureaucracies that were erected by previous governments on the child care front, and replaced them with direct cash payments to parents that they can spend on anything they believe is appropriate.
I've asked my department to look into the impact this has had on child poverty, and we have some good news in this area. Colleagues, the universal care benefit—it's the original $1,200 payment—has already lifted 41,000 children out of poverty and into the middle class.
The methodology of this calculation is simple. We looked at families who would be below the low-income cut-off line if that benefit did not exist but are above it because of its existence, and there are 41,000 kids, based on the original program. That does not include the recent increases to the universal child care benefit announced in the previous fall economic update. That increase will mean $2,000 for every child under six and $720 for kids six through seventeen. It augments the family tax cut or income splitting, and a whole variety of other pro-family, low-tax measures instituted by our government. The overall approach is to put money directly in the pockets of parents so they can lift their kids up and strengthen their families. It's working.
UNICEF looked at child poverty in this country. They looked at child poverty all around the world. What they found was that during the great global recession, while you would have expected that children would suffer the most, in Canada, the opposite happened. We had 108,000 kids lifted out of poverty between 2009 and 2011. UNICEF specifically said that was the result of government policies to put money directly in the hands of moms and dads.
Finally, with respect to community, probably all of us can think of great philanthropic community leaders, people who have gone out into the world and done great things and want to give back. Often when they make these impressive donations to build hospital wings or university libraries or expand food bank operations, they don't have that money sitting under their bed; they have it invested in a small business, in real estate, or in shares. You all know what happens when they sell those assets. They pay taxes. That never hurt the philanthropist; they were planning to give that money away regardless, but it hurt the charity. It was a tax on charities. I'm pleased to share with this committee a recent announcement by our government that any sale of assets for the express purpose of donating to a non-profit will be exempt from all capital gains tax going forward. That means those donations will go 100% to the charities to which they were destined rather than to the government and the taxman.
Another inspiring area where communities have stepped up is in helping our new Canadians achieve their full potential. We have a problem and an opportunity in this country. Here's the problem. Despite the fact that we have 24,000 skilled tradespeople and professionals who immigrate to Canada every year, only about 26% of immigrants work in the field for which they were trained.
Thirty-six per cent of immigrants report difficulty getting their credentials recognized in Canada. Despite the fact that immigrants are more likely, vastly more likely, to have Ph.D.s and master's degrees, they have more difficulty putting those credentials to work in the Canadian economy. Now one of the reasons is that, in the licensed professions and trades, it can often be difficult to get a licence to practise and to get credentials recognized. It's very costly. Many newcomers have no credit history or collateral, so they can't get a loan in order to go and take the training, testing, and time off work necessary to get their credential recognized.
A group of business leaders in Calgary came up with a really innovative idea. They said that if they can't get a traditional bank loan, they will sign loan guarantees for them so the banks can be sure the money will be repaid. A group called the Immigrant Access Fund administered the initiative and helped these newcomers with charting a course to obtaining credentials, planning their studies, and preparing for a job find after the credentialization was finalized. They took small loans of about $7,000 a year. Our department, under the leadership of Jason Kenney, funded the administration at the outset of this. Then we provided a little bit of extra loan capital and loan guarantees to support it as well.
We're starting to get the results of this pilot project. Roughly 1,800 immigrants took these loans. On average, they were about $7,000. So far, the default rate is well under 3%. Employment is up by 47%. At one of the sites where these loans were delivered, incomes have doubled from before they took the loan until after they paid it back, and there's been a very large increase in licensing in the original field. We are still waiting for additional information and data to come, but I am almost certain and very confident in saying that the very small amount of money that we put into this will be paid back many, many times over through the increased taxes that will result from the growing incomes of participants in the program.
We announced in the recent budget that we would transform this pilot project into a full-blown program. The terms of that program have not yet been established. We are not yet prepared to announce how many loans will be available or how exactly they will be delivered, but I can tell you that we are going to keep the budget commitment to institute a micro-loan program to help newcomers get fully credentialed in their fields and working in high-paying jobs so that they can fulfill the outstanding potential that they bring to Canada.
Thank you very much for your question.
I think we need to put the issue of lapsed funding into its proper context. It is the regular practice of governments to spend underneath the budget that Parliament authorizes for them, and there's a good 800-year-old reason for that, which is that departments are not meant to spend what Parliament has not approved, and it's unwise to spend right up to the limit for fear of going over it. It is good, prudent financial management to come in under budget and to leave a buffer between that which you have approved and that which we spend.
As for youth unemployment, the historical reality is that there has always been a gap between rates of youth unemployment and unemployment among the general population. That said, there are some very positive developments as it relates to the financial well-being of our young people.
For one, student loan debt has declined by 10% in real terms. As well, we have ended the Liberal tax on scholarships and provided tax credits for textbooks. We've also created, as I mentioned in my opening remarks, the apprenticeship grants and loans. We've put out 500,000 of these grants. They're worth about $4,000 apiece. They will help us help young people fill, for example, the more than 300,000 construction jobs that will go wanting over the next seven years.
So we do have a low-tax plan to help young people get employed and earning good incomes in high-demand jobs.
I'm going to turn from young people to seniors and income security for seniors. As you know, Minister, demographically Canada is aging, and we're all more concerned about this as we go forward.
Now, there's no magic to pensions. If folks want stable, sufficient income in retirement, it requires people to put away money in a disciplined way in a stable, secure fund for a long period of time.
The Canada pension plan is Canada's largest pension fund. It is the most stable pension fund. It is the most diversified pension fund. It is completely portable across the country. It is jointly funded between employers and employees. It is the cheapest pension fund in the country for employers, because they have no administrative costs for actuaries, lawyers, or otherwise. Also, it has guaranteed benefits.
We know that it was designed specifically to provide 25% of income replacement in retirement. We also know that well over 50% of working Canadians no longer have workplace pensions. That's a change from how it was 20 or 30 years ago when the 25% was figured out.
Mr. Minister, why not implement the NDP's plan to gradually and prudently phase in small increases to the Canada pension plan contribution rate to gradually result in a doubling of pension benefits, to recognize the fact that more seniors will need to rely on the Canada pension plan 10, 20, or 30 years out? What's wrong with that idea?
Welcome, Minister, and officials. Thank you all for joining us today to discuss the main estimates.
Minister, one of the most significant programs your department is responsible for, of course, is the employment insurance system. As a member of Parliament obviously I'm helping my constituents out from time to time with these issues. There is absolutely universal agreement that, thank God, Canada has such a program that helps people who have lost their jobs due to no fault of their own and in fact helps parents and mothers, because we have maternity benefits and parental benefits.
I was just reading an article last week. There is a big debate now in the United States because they don't have maternal and parental benefits in their employment insurance or social security system. We have those great things in Canada.
I want to ask you a few things about our EI system. Obviously, Canadians pay into the EI system through payroll taxes and these premiums fund the administration of EI. Obviously their employers make a contribution to the EI system as well. It's a great social safety net program that we have and I think all political parties cherish the EI system and the important role it plays.
I understand that Service Canada recently brought on additional staff to assist in the processing of EI claims. As a result, can you confirm that Canadians can expect to have their EI claims processed within the 28-day service window? Service Canada's standard, I understand, is 80% of claims processed within 28 days. Are we currently meeting that standard? I can certainly tell you that in my office I'm getting very few constituents coming in indicating that they are having issues with the processing of their EI claims, which tells me that it must be working, because otherwise, they'd be in my office.
Can you give us an update on that? Where are we on the service standards, and where are we generally on the strength of this very important program for Canadians?
Thank you, Minister, and officials for coming here today.
Minister, you've pointed out that this is the largest federal department, and I wish we had an hour for every major program you have just to go through them. It's obviously a generalist situation we're facing with one hour with you.
You said at the beginning that obviously jobs are a key priority, and certainly there would be agreement on that. My colleague has pointed out $40 million of allocated funds was unspent in youth employment programs.
When you look at something like adult learning, literacy, and essential skills, that was underspent by 31%, which is quite shocking given that the OECD says that 49% of adult Canadians fall below high school equivalency. Obviously, that's a very important program in terms of job readiness.
You spoke a little about foreign credentials. That program has been underspent by $30 million over five years. You talked about the pilot project, which sounds well and good, but it seems to me there's a pattern here.
Your response was, “Well, you know, every department likes to come in under budget”, and that's good, but we're talking about millions and millions of dollars here that haven't been spent in the way they were meant to be spent to help people who really need it.
I don't feel satisfied by your answer. I think it requires some explanation as to why, for example, with youth employment, money that's meant to go to such a critical area, or adult literacy, or foreign credentials isn't being delivered.
Either the departments are deliberately overestimating what they need, or the whole thing's a bit of a farce. These estimates are meant to be there as estimates. They're meant to be there. The allocation is meant to be real. I wonder if you could give us a better explanation as to why so much allocation is unspent when there is such a high need, whether it's for youth, adult literacy, or whether it's for new Canadians.
Thank you to all the officials for being here.
I want to turn to the temporary foreign worker program. That's on page 65 of the report on plans and priorities. I have a number of questions.
I want to focus first on the live-in caregiver program. As I'm sure you know, the live-in caregiver program is a very important program for Canadian families and businesses. It's an important source of caregivers for families for their children, for aging parents—particularly those with dementia and other disabilities—and for people with disabilities.
Since the changes to the LIC program, though, the statistics are, I guess in a word, startling. In December 2014 there was an 85% rejection rate for LIC applications from families across Canada. In January 2015 there was a 93% refusal rate. In February 2015 there was a 91% rejection rate. In March 2015 there was an 86% rejection rate.
I have families who run businesses coming to my office and saying they need caregivers to take care of their children so that they can actually devote their time to their business and so they can action into the workforce. They're telling me they have to pay $1,000 to the government; that's not refundable. They are told by the government that caregivers will be available. They cross every t, dot every i, and comply with every requirement of the program, and then their application is rejected.
They want me to ask you why there is such an appalling rejection rate of valid applications. They also want me to ask you if the government is really trying to kill the LIC program but just doesn't have the political courage to come out and say so.
Sure. It's my pleasure to be here.
Mr. Chair, that was a two-part question. The first was on the status of the housing market, and the second was on the solvency of our mortgage loan insurance business.
With respect to the housing market, we endorse comments that in general Canadian housing markets are modestly overvalued. We're not dispirited by that. Markets go up and markets go down. Sometimes they're a little overvalued and sometimes they're a little undervalued. Our assessment in general is that markets are a touch overvalued.
Last year we published for the first time, and republished last week, as we will do quarterly, something called our house price analysis and assessment framework. It uses, based on economic background—I won't get into the technicalities of it because it will bore me and you even more, I'm sure—different measures of the market, the performance of the market and status of individual housing markets in 12 different cities in the country. In general, after that work, which was quite extensive, we pronounced a robust housing market that we think will evolve naturally.
As I said, markets are a little overvalued and they're a little undervalued. There were a couple we picked up as being of higher risk. Those were Regina, Winnipeg, Montreal.... Regina and Winnipeg we thought were at high risk primarily because of overbuilding and oversupply in those markets, and Montreal and Quebec City at modest risk in part because of their price levels and some overbuilding as well, in particular in the condo sector, which is also a challenge in Toronto. In general, we believe the markets will evolve naturally, as markets do from time to time, and that's what we project for the future year.
We project a moderation in house prices. We do expect a potential decline in house prices in Alberta as a result of the oil price adjustment and in particular the unemployment that would result from that.
I'll just add briefly that with respect to the solvency of our business on the mortgage loan insurance side, CMHC returned $2.6 billion of profit to the government in the past year. It's a very profitable business. That's all of our business, but the majority of that is our mortgage loan insurance business. We retained $16.5 billion worth of capital in that business, which is almost double the regulatory minimum we think is needed from a solvency point of view.