Liberals use U.I.

fund surplus

to reduce federal deficit after
slashing benefits and coverage

by Phillip Legg, Assistant Research Director

During his two-year stint as Em-
ployment Minister, now former Minis-
ter Lloyd Axworthy, in the name of
Unemployment Insurance reform,
continued to push through changes
and policies that had been started by
the Mulroney government. When he
introduced new legislation in the Fall
of ‘95 — The Employment Insurance
Act — many of the new features were
simply a continuation and toughening
of policies initiated earlier; reduce
overall benefit levels, toughen eligibil-
ity requirements and penalize season-
al workers.

_ The added sting was that a substan-
tial amount of the U.I. fund’s surplus —
the excess of premiums paid in versus
benefits paid out — was being used as
part of the Liberal party’s overall
deficit reduction plan. In effect, the
unemployed were shouldering not
only the consequences of jobless
growth, but also the direct cost of
deficit reduction.

When the trade union movement
leveled that charge against the Em-
ployment Minister early on in the de-
bate over U.I. reform, the government
was quick to deny any connection. It
wasn’t until the release of the recent
federal budget in March, 1996 that the
Liberals were forced to admit the link
between the U.I. surplus and their
deficit strategy.

In an interview the day after deliv-
ering his budget speech, Martin con-
firmed that the multi-billion dollar
surplus building in the U.I. account is
an essential part of the government’s
deficit strategy. .

“It (the U.L. surplus) is part of gov-
ernment’s revenues and people are
going to have to decide where their
priorities lie,” said Martin. A vague re-
ply, but one that is designed to signal
the government’s view that there is
nothing sacred about U.I. premiums,
they are revenue to government and
as such must fit into the government’s
larger strategy. Unfortunately, for
workers, that larger strategy has not,

to date, put much emphasis on the job
side of our economy. Instead, it has
focused almost exclusively on deficit
reduction, to the exclusion and detri-
ment of jobs in Canada.

However, with signs that the Cana-
dian economy is losing what little
steam it had in terms of economic
growth, there is a growing resentment.
building across the country about the
“jobless” recovery that has been
recorded so far. Sensing the political
fallout that will come if this resent-
ment becomes more widespread, the
Chretien government has been scram-
bling over the last two months to pa-
per over its economic gaffs.

The frustration that Canadians are
feeling towards the Liberals’ lack of
substantial economic leadership is an-
chored to some very real grievances.
Despite three years of steady econom-
ic growth in Canada, unemployment
remains at levels that have changed
little since the recession of the early
1990’s. While the economic growth
has contributed to rising profitability
within corporate Canada, none of that
change has translated into good news
on the job front. Quite the opposite,
large corporations are continuing to
slash employment internally as part of
their strategy to build and expand
earnings.

In one of the higher profile exam-
ples of this jobless growth, the finan-
cial services sector, the recent track
record has been nothing short of scan-
dalous. The six major chartered banks
in Canada recorded profits in 1995;
close to 5 billion dollars for the group
as a whole. However, employment
within this sector continues to shrink,
as the banks ratchet up technology,
rationalize service and eliminate jobs.

Equally frustrating for many Cana-
dians is the fact that for most working
families, economic growth has not
translated into any meaningful in-
creases in family income. Wage settle-
ments, for example, averaged close to
1% in 1995 despite overall economic
growth of nearly 3%. Although corpo-

Unions and coalition groups
propose alternative budget

In response to the federal Liberal
government's damaging fiscal policy
and attack on programs which effect
working people, the labour movement
has joined with social coalition
groups across Canada to release an
Alternative Federal Budget (AFB) for
1996.

In anticipation of the Chretien gov-
ernment’s budget released in early
March, the AFB was released on Feb-
ruary 13. The Canadian Centre for
Policy Alternatives and CHO!CES, a
social justice coalition group based in
Manitoba, joined with the Canadian
Labour Congress (C.L.C.) in publiciz-
ing the budget.

John Loxley, Chair of the Econom-
ics Department of the University of
Manitoba, says: “Our program, includ-
ing a cut in real interest rates and a $2
billion increase in spending on em-
ployment creation, would create thou-
sands of new jobs — injecting millions
of new dollars back into the econo-

Mr. Loxley, accompanied by co-
chairs Bruce Campbell and Lyn
‘Toupin and the C.L.C.’s senior econo-
mist Rick Jackson met with Finance
Minister Paul Martin and department
officials.

To counteract the Liberal govern-
ment’s cuts to education, health and

social service programs and systemat-

ic layoffs of public sector employees,
the Alternative Budget suggests other
ways of reducing the deficit with an
employment strategy. The budget
notes that social programs such as un-
employment insurance, medicare and
welfare are falling victim to Liberal at-
tacks, accounting for $3 billion of the
$5 billion in federal spending cuts last
year.

Liberals promised 400,000 new jobs
in 1995 while delivering on only
40,000 jobs. Under Chretien there has
been increased unemployment while
eligibility for unemployment insur-
ance has been cut.

The AFB’s basis is that good paying
full-time jobs must be created to off-
load the stress on the country’s wel-
fare system and that an increased tax
base will help reduce deficit and debt.

First, people must be working and
the AFB says there are several ways
to create 800,000 jobs in the next two
years, Some of them are as follows.

¢ establishment of an Enterprise
Development Bank to offer low cost
loans and jobs creating investment by
taxing the huge profits of the big
banks.

© a commitment to build social and
cooperative housing, affordable to
working people.

¢ an improved social (i.e. day care

e The Chretien government is proposing to may the U.I. system even tougher
for seasonal workers while using surplus funds to reduce the deficit.

rate executives saw their compensa-
tion increase by over 20% in the last
year, most employees were left to
struggle with little or no wage in-
crease and a lot less job security.

With these grievances becoming
more conspicuous, the Liberal govern-
ment has moved to try and defuse the
political impact. Although cabinet
ministers are now becoming more vo-
cal about the issue of jobs and
growth, their words do not translate
into any meaningful changes. Despite
their campaign focus of jobs and
growth, the Liberals have adopted an
economic strategy that is a continua-
tion of the Mulroney years; the em-
phasis has been on debt and deficit to
the exclusion of any jobs strategy.

Although ordinary Canadians are
paying a high price for this ineffective
approach to managing a national
economy, it is the unemployed who
are paying the highest price. And
while they feel the impacts on several
fronts, the revolving door of U.I. re-
form is probably the most painful for
this group. Proposed rule changes
made by the Liberals will drastically
cut benefits and make eligibility that
much more difficult.

The trade union movement has
been resolute in its efforts to force the

government to re-think its approach
to U.I. reform. The recently an-
nounced federal cabinet shuffle is the
first indication that our fightback
campaign on ULI. is starting to get
through. Lloyd Axworthy’s replace-
ment, Doug Young, tried to respond to
the growing criticisms by suggesting
that the new rules for seasonal work-
ers would be “reviewed.”

Major protests across the country,
including several by forest workers in
Mr. Young’s home province in New
Brunswick, have substantially height-
ened the profile of labour’s concern
with U.I. reforms. Every major C.L.C.
affiliate has put together campaigns
similar to the fightback campaign that
has been promoted by the I.W.A.

The next couple of months will be
critical, both in terms of what hap-
pens to the U.I. reform process and
what pressure can be brought to bear
to reverse the jobless plight in our na-
tional economy. No doubt, employers
will continue to press for changes that
meet their agenda. For its part, the
trade union movement must expand
its fightback campaign and ensure
that the political agenda in Canada
more fully accepts the commitment
and responsibility of full employment.

and public information) infrastructure
and physical infrastructure (i.e. roads
and highways).

© a commitment by governments to
buy Canadian products.

The AFB calls for the reduction of
high interest rates which add to all
deficits and curb economic activity. It
also suggests a borrowing from Cana-
dians policy which will reduce depen-
dence on foreign bond traders.

In their meeting with Martin, the
AFB advocates were told that debt re-
duction and low inflation were the pri-
mary focus of Canada’s economic pol-
icy and that the government could do
little to change its present interest
rate policy.

Rick Jackson, of the C.L.C., said in
response that unless the Liberals are
willing to challenge the power of in-
ternational markets and multinational
corporations, “Canada’s economic
policy will not be made by its elected
leaders.”

The budget also looks at the cre-
ation of several funding mechanisms
such as an Income Support Fund
which would restore contribution to
welfare and income support programs
and give those on welfare access to
training programs.

A Post Secondary Education Fund
should be established to enhance the,
federal government's contribution to
post-secondary education and convert
student loans to grants.

The budget also calls for a Retire-
ment Income Fund, guaranteed Un-
employment Insurance Fund, Child
Care Fund and Housing Fund.

The AFB would be funded by a net
increase in new taxes of $4 billion and
$2.6 billion in the first two years. It
will increase efforts to collect out-
standing debts of over $6.6 billion, as
has been suggested by the Auditor
General of Canada.

Good paying jobs must
be created to increase
the tax base and
offload the stress
on Canada’s
social safety net

An excess profit tax on banks and
other financial institutions should
yield $300 million in the upcoming fis-
cal year. The budget also proposes
elimination of the meal and entertain-
ment allowance, elimination of deduc-
tions for corporate lobbying, and the
reduction of Scientific Research and
Economic Development credits.

The AFB also calls for taxing over-
seas interest earnings and makes sev-
eral suggestions on the personal in-
come tax side.

eee

LUMBERWORKER/MARCH, 1996/3