- Consulting with Canadians -

Computing Technology Industry Association Submission in Response to Finance Canada's Employment Insurance Premium Rate-Setting Mechanism Consultation:

Setting Employment Insurance Contribution Rates

1. Introduction

The Computing Technology Industry Association (CompTIA) is pleased to participate in the Government of Canada's review of the process for setting future Employment Insurance (EI) contribution rates, announced in the February 2003 Budget. We welcome the opportunity to contribute to this important public policy debate.

2. Setting EI Premium Rates

CompTIA commends the Government of Canada for announcing in the 2003 Budget what amounts to the tenth consecutive year of reductions in EI premiums. Reducing premiums results in savings for employers and employees alike, and lowering payroll costs can have a positive impact on levels of employment and profitability. The 2003 Budget announcement does, however, raise two important issues on which we would like to comment.

(a) Transparency

As announced in 2001, the Governor in Council set the EI premium rates for 2002 and 2003. Moreover, the rates for 2004 were announced in the 2003 Budget. Thus, for three consecutive years premium rates were not determined by way of a consultative, transparent process involving key stakeholders. CompTIA is pleased, therefore, that the government has identified transparency as one of the core rate-setting principles going forward.

There are many ways in which transparency and consultation could be achieved. For example, a House of Commons Committee could be called upon to conduct public consultations and report to the government, the Canada Employment Insurance Commission could be re-assigned responsibility to consult with stakeholders, or a new independent body could be created to hold consultations. Each of these options has its merits and we do not propose a specific consultative process for setting premium rates in the future. What is fundamentally important, however, is that the government commit to consulting meaningfully with the business community and other key stakeholders as future rates are set.

(b) Aligning Premium Revenues and Program Costs

It is apparent that more can and should be done to have EI premium revenues correspond more closely to reasonably anticipated program costs. We note this is another one of the rate-setting principles articulated in the 2003 Budget with which we concur.

According to Finance Canada's May 2003 Fiscal Monitor for the April 2002-March 2003 period, EI premium revenues were $18.2 billion over that twelve-month period. EI benefits paid out over that same period totalled $14.6 billion. Accordingly, employees and employers paid $3.6 billion more in premiums than what was required to meet the needs of those receiving EI benefits.

A surplus in the EI Account was not an anomaly last year. In fact, Human Resources Development Canada's Actuarial Services/Insurance report dated September 2001 forecast a cumulative surplus of $45.4 billion in the EI account as at the end of 2002.

In light of the experience with premium surpluses over the past several years, CompTIA supports an approach that would reduce EI premiums to the break-even level, plus a fixed surplus amount that would be sufficient to keep rates stable during an economic downturn. The appropriate amount of the surplus should be the subject of further consultation with stakeholders, supported by independent analysis.

Further, rather than flowing surplus revenues into the Consolidated Revenue Fund as is currently the case, the surplus amount should be held in a specially dedicated fund to be drawn down in any year that premiums are not sufficient to cover all benefits paid out in that year. In this way, the legitimate needs of the EI program could be met without EI premiums constituting a payroll tax that is insensitive to income.

3. EI Premiums and Skills Training

One of the keys to creating a culture of ingenuity and innovation is to invest in people. In turn, one of the most effective ways to invest in people is to invest in their obtaining new, or upgrading existing, skills. Accordingly, CompTIA has advocated the introduction of tax credits to promote training in information technology skills in our 2002 pre-budget submission and in our Innovation Strategy submission last year. Given the clear linkage between investment in, and effective use of, information technology and increased productivity, a key public policy objective of the federal government, CompTIA believes that training people to use information technology in their work is a vitally important investment in Canada's future competitiveness and prosperity.

While we have advocated a tax credit system to help encourage employers to train their employees and to support individuals who obtain training to upgrade their IT skills, CompTIA believes an opportunity exists to alternatively explore using the EI program to encourage skills training. The government should consider implementing a program that would offset the costs of IT skills training against EI premiums paid by employers and employees. Employers and employees have an incentive to invest in training as a means of improving productivity and encouraging business growth, leading to increasing tax revenues for government. Moreover, should employees receiving training be downsized in future, their improved skill levels should reduce the length of time they receive EI benefits.

To be clear, funds obtained from EI premiums would not be used to invest in training but rather employers and employees would see a reduction in their EI premiums for investing in skills training. A simple program with clear criteria for qualification and minimum number of rates would ensure ease of administration for both government and business. As a first step, the government could establish one or more pilot projects to determine the effectiveness of such a system before expanding it across the country.

4. About CompTIA

CompTIA is a non-profit industry association representing over 500 members of Canada's information and communications technology sector, and has members in over 70 countries. One of our organization's greatest strengths is representing the full spectrum of Canada's ICT industry from communities across the country. CompTIA's members range from multinational computer hardware, software and semiconductor manufacturers to small Canadian businesses specializing in the service and repair of computer and communications equipment, and our members also include solutions providers, retailers and training organizations. Moreover, CompTIA is the largest vendor-neutral certifier of information technology skills in the world.

In sum, CompTIA is a global industry association representing Canadians in a global industry.