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PROSPERITY ALLIED FOR

PRESIDENT’S MESSAGE

Established 45 years ago, the Employers Council brings together many of Québec’s largest companies and the vast majority of sector-based employers groups, making it Québec’s sole employer federation. Based on a 2013 census, more than 75,000 employers are directly or indirectly represented by the Council.

This situation is cause for concern. It means we have fewer financial resources than our neighbours at our disposal, not only to ensure our material comfort, but also to teach us, take care of us, help out the underprivileged, modernize our infrastructures, protect our environment, develop our culture and put the conditions in place that will enable our society to meet the daunting challenges of an increasingly competitive world.

Not to mention that it will keep us enclosed in the vicious circle of being dependent on transfer systems such as equalization.

A vision of a more prosperous QuébecThe Québec that we would like to see emerge over the coming decades should, on the contrary, be a leader in Canada and among developped countries, one that is the leader in terms of productivity and overall wealth.

It is a province whose public finances would be healthy and whose taxation would be competitive, which would contribute to the equalization system rather than being a beneficiary.

It would be a centre of attraction because of its modern infrastructures, its dynamic and diversified economy, responsible exploitation of its abundant natural resources, and because of its efficient and top-notch public services.

It would be a population that is growing thanks to a sustained immigration and birth rate, whose labour force would be well educated and well trained in the professional and technical fields, productive and available in ample numbers due, among other factors, to a better retention of workers by Québec.

The point of convergence of employer solidarity, the Employers Council’s mission is to propose measures in an effort to ensure companies have the best possible conditions so that Québec can prosper. And with its unique structure, the Council is also an intervener at the federal and provincial levels.

Through its leadership, the Quebec Employers Council aims to be an indispensable reference in its areas of intervention. It strives to constructively influence the economic and social debates by proposing the vision of a more prosperous society in which entrepreneurship, productivity, wealth creation and sustainable development are necessary conditions to raise the standard of living of the entire population.

Unique assets Quebec has all the assets to be able to succeed. It has an educated and well-trained labour force; abundant natural resources; a diversified economy; a world class education system; a rich, unique culture in North America; an open and accommodating population; a dynamic and creative business community, as is its artistic community; a harmonious social climate; stable democratic institutions; and a quality of life that is the envy of the planet.

Yet, despite having all these assets, Québec is struggling to make its mark. For many years, Québec has fallen behind in terms of standard of living and is living dangerously beyond its means. Québec is also the Canadian province where the government spends the most, taxes the most and is the most indebted.

The future prospects do not appear to be heartening, either, since Québec is the Canadian province whose population is aging the fastest, and soon the population that is of working age will be starting to decline.

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But how are we going to be able to achieve this vision of a more prosperous Québec?

Obviously, we are going to have to change our way of doing things, change our mentality, particularly in regard to our perception of wealth creation, and mobilize the population as a whole.

But we also must – and this is at the core of the Employers Council’s vision – make businesses the engine of economic development. Private investments are the key to Québec’s present and future prosperity.

But to attract investments you need to have a predictable, stable and receptive environment. From this four issues emerge, and they are presented on the pages that follow:

A qualified, abundant and cost-competitive labour force;

Intelligent regulation;

Healthy public finances and competitive taxation;

A sustainable economy.

We are launching this platform, not only to make the voice of Québec employers heard but also to engage in a constructive dialogue with our social partners in seeking solutions to our common challenges.

From an economic standpoint, it’s never too late to act. Québec has all the assets to be able to position itself among the world’s most prosperous societies. The biggest threat we face is, perhaps, ourselves. It’s up to us to take action. We are the masters of our destiny.

Yves-Thomas DorvalPresident of the Quebec Employers Council

Through its leadership, the Quebec Employers Council aims to be an indispensable reference in its areas of intervention.

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A SKILLED, ABUNDANT AND COST-COMPETITIVE LABOUR FORCE

At issue Human capital is undoubtedly an organization’s most valuable resource. Without well-trained, mobilized and responsible workers, without a stimulating environment capable of meeting employees’ ambitions, without competitive work conditions, and without a healthy and safe work environment, an organization cannot aspire to achieve sustainable development.

While Québec, until the most recent recession, has experienced a decade of highly desirable economic growth, the employer-members of the Quebec Employers Council continue to cite matching a skilled labour force with the needs of the job market as one of the main obstacles to their development.

Many factors negatively affect accessibility to a large pool of skilled workers. Consider, for example, the aging population, early retirement (at 60.3 years in Québec compared to 62.6 years in Canada), the expected reduction of the working-age population, school dropouts, failure to fully recognize workers’ experience and skills or failure to integrate immigrants into the labour force.

But having access to a skilled and abundant labour force isn’t enough to ensure a company’s competitiveness and longevity. To succeed, an organization also has to oversee that its labour costs are competitive. Labour costs that are disproportionately high are an impediment to job creation and the competitiveness of a business.

Yet, businesses in Québec are currently subject to the highest payroll taxes in Canada – about 30% higher than they are in Ontario and 45% more than the Canadian average.

One of the reasons to account for this situation is that, over the years, Québec funded worker programs that were significantly more generous than elsewhere in Canada. And many of these programs diverged from their initial mission as “insurance” and turned into social programs. Added to this is the issue of regulation, which quite often involves a lot of red tape and puts more of an onus on complying with rigid processes than achieving hoped-for results.

Québec companies are thus at a competitive disadvantage compared to their competitors. This hampers their development and is also an obstacle in Quebec’s ability to attract companies and create new businesses and jobs.

PrinciplesThe Employers Council’s proposals are aimed at ensuring that Québec has the labour force it needs for its development and that labour costs – including wages, social benefits and payroll taxes – are competitive compared to those of its trade partners.

The Quebec Employers Council’s proposals are based around six principles:

Improving the education system so that young people can complete their general schooling with the tools they need to achieve their personal aspirations and enjoy success in their professional career.

Adapting manpower training programs so that workers can have access to continuing education throughout their active lives.

Implementing and evaluating a new immigration law to ensure a better matching of job skills that meet the needs of the job market.

Freezing – and even reducing – the fiscal burden imposed by payroll taxes. A hike in any of the payroll taxes should notably be offset by an equivalent reduction in taxes that employers are already paying.

Revising programs being funded by payroll taxes and whose benefits are more generous in Québec than they are elsewhere in Canada.

Refocusing programs funded by payroll taxes on their essential mission.

ProposalsHere are the measures advocated by the Quebec Employers Council so that businesses have access to a skilled, abundant and cost-competitive labour force.

1. Education system Young people arriving on the job market should have adequate fluency in French, English and other basic disciplines enabling them to effectively communicate and solve problems, and their training should be adapted to the job-market needs.

Enhance basic learning – While Québec students generally rank well compared to youngsters in other

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countries in certain subjects, they are lagging behind in certain others. With the help of teachers, parents, institutions and the business community, Québec should embark on a real transformation of the education system to ensure a better acquisition of basic subjects and that the programs provided are a better fit with the job-market needs.

Address the school drop-out problem – The fight to keep young people in school is a permanent battle. While Québec ranks well among many developed countries in terms of staying in school, it is still behind the rest of Canada in this regard. More effective measures have to be adopted to reduce the dropout rate and encourage graduation within the normal time frame.

Encourage the learning of English – Québec’s economy is one that is open to the world. Its prosperity depends, in large part, on its ability to export. But to succeed internationally, one has to be able to communicate, particularly in English, which is the main language of world trade. The Employers Council recommends encouraging the learning of English, second language, and this should start in the early elementary grades.

Make economics a mandatory subject – Financial literacy, managing one’s personal finances, understanding economic issues, developing an entrepreneurial mindset: these are subjects which, although important to lead a well-informed and responsible civic life, are not included in Québec schools’ curriculum. While there are plans to make the teaching of history a mandatory subject at certain levels, wouldn’t it be just as important to make it compulsory to learn the rudiments and fundamentals of economics? The Employers Council recommends making economics courses mandatory in the basic school curriculum.

Enhance career and job market information – To help young people be able to make enlightened career choices, they should have access to better information on the career options and job prospects available to them. The value of professional training should notably be emphasized.

Harmonize training tracks – The tracks for professional and training courses should be harmonized to promote easier movement between the high school, trade school and university levels.

Ensure our universities remain world-class institutions – Universities should have more autonomy in deciding on tuition fees, based on the disciplines offered. Québec should also promote the implementing of a competitive university education system that stands out for the quality and quantity of its graduates but also for its ability to attract the top human – and financial – resources in the area of teaching and research.

2. Manpower trainingWorkers that are on the job market, whether they are already working or looking for employment, should be able to benefit from continuing education throughout their careers.

Assess skills – Workers should have the opportunity to have the skills they have acquired over the years assessed in order to determine the skills they lack and enable their upgrading.

Provide institutions with more latitude in selecting programs – Learning institutions should be granted more flexibility in the programs they offer in an effort to facilitate the continuing education of workers who have a job or are looking for one.

3. Immigration In an aging population, such as Québec’s, immigration is an important source of skilled labour. But, thus far, the immigration system doesn’t allow for the selection of immigrants who are the most capable of meeting the job-market needs. And Québec immigrants have the highest unemployment rate in Canada.

Align immigration with job-market needs – A new immigration law in Québec should be geared more to job-market needs. More emphasis should be placed on the abilities of future immigrants and on companies’ needs. Selection criteria should also be flexible enough to quickly adapt to the changing job-market needs. And the selection process of immigrations should be speeded up.

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Remove the obstacles for recognizing skills – Facilitate the recognition of immigrants’ skills so they can quickly be put to use for Québec’s economy. In instances where immigrants’ qualifications do not meet Québec standards, we should ensure an immigrant graduate can follow an education track that will quickly lead to acquiring the required qualifications.

Rely on our universities to attract foreign students – Québec needs to rely on the university system to attract foreign students, from emerging countries, among others, and researchers in niche areas where Québec can demonstrate a distinct advantage. To do this, Québec must find a way to provide conditions in terms of courses of study, residency, bilingualism and favourable employment opportunities, in line with its funding ability.

4. Occupational health and safetyWork-related accidents have been reduced by about one third in Québec over the last few decades and work-related deaths are down by about two thirds, despite a significant increase in work hours. The results are remarkable and noteworthy, but unfortunately it has not led to significant reductions in employers’ contributions (in Québec, employers incur all the costs to fund the occupational health and safety program).

While the Commission de la santé et de la sécurité au travail (CSST) administration costs are reasonable, the system differs from that of the other provinces through certain provisions that contribute to reduce its efficiency.

The Employers Council recommends some legislative, regulatory or sometimes simply administrative changes which, along with helping to further reduce the costs of the system, would protect workers employability and encourage their safe return to work.

End over-compensation – The Act respecting industrial accidents and occupational diseases stipulates that workers are entitled to compensation for lost wages following an occupational accident. But the current system sometimes leads to over-compensation that creates inequalities among workers and discourages a return to work.

Thus, the salary base used to determine compensation to replace the income of workers whose employment is of an intermittent nature (part-time worker, on call or seasonal, for example) is annualized based on the minimum wage, after 14 days, as if the worker had a permanent job. This provision results in a certain number of occupational accident victims receiving a higher compensation than the wage they would normally have earned if they had stayed at work. This situation needs to be corrected.

Another source of over-compensation stems from the fact that a worker who retires while receiving compensation payments from the CSST, or who is already retired when submitting a claim can, in certain instances, draw retirement benefits and compensation for lost wages. This situation should also be corrected.

Restore the medical-decision balance to the CSST – Currently, the doctor treating the worker is the only one who decides to remove said worker from his or her workplace and the length of time of absence from the job. While the treating doctor should continue to have a front-line role, the opinion of the CSST should be the deciding factor in the medical decision, as is the case in the other provinces and for other comparable systems (automobile insurance, for example).

Limit the length of job search periods – The longer a worker remains out of the job market, the harder it becomes for the worker to reintegrate into their job or equivalent employment. Any prolonged disruption in the continuity of a job becomes an impediment to employability. But, currently, a worker who after his or her rehabilitation or after the expiry of their right to return to their job again becomes able to perform a suitable job, is entitled to receive full compensation for lost wages for a year so they can look for a job. To encourage a worker’s employability and a prompt return to work, the time period should be brought back to make it comparable to that in the other provinces, from 15 to 17 weeks.

Reduce wait times for health care – Currently, workers receiving compensation payments from the CSST have to wait longer than other citizens for access to certain surgeries. Like the other Canadian provinces, the Québec government should ensure that occupational accident victims have just as fast access to health care as the rest of the population. Better still, it would be beneficial to the system and society as a whole if the facilities and the time of the attending medical staff available in the current context could be used at the system’s expense to speed up treatments and thereby free up more time for the rest of the public system.

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Tighten the reimbursement rules for physiotherapy fees – Québec stands out for the high number of physiotherapy and ergotherapy treatments per incidence of occupational injuries. But, it is generally acknowledged that beyond a certain number of treatments they become unnecessary. To avoid an increase in the number of treatments, the CSST should emulate what is done in the other provinces and stop reimbursing fees related to physiotherapy and ergotherapy after a certain number of treatments, except for special cases, which should then be taken over by a multi-disciplinary team.

Make workers accountable for their rehabilitation – Currently, workers have little or no obligation to be actively involved in their rehabilitation program. It might be a good idea to revise the legislative provisions and current practices to add a clause making it mandatory for the workers to actively participate in their rehabilitation program. While it’s the government’s responsibility to oversee that the workers are entitled to the health care their condition requires, the workers’ responsibility is to see to the managing of their rehabilitation so they can reintegrate into the workplace as soon as possible.

Prevent occupational injuries – In the area of occupational injury prevention, experience over the last few decades shows that prevention is more effective when the workplace itself takes charge of prevention. The Employers Council proposes that there be a revision of the Act Respecting Occupational Health and Safety to allow employers, with the participation of workers, the choice on the measures to implement to prevent occupational injuries. Forming health and safety committees and developing action plans in the area of prevention would seem to be promising ways to ensure workers’ participation. But the application procedures should still be done locally and be adapted to the reality of the workplace and the specific risks of the company.

Assess the For a Safe Maternity Experience program – By the provisions of the For a Safe Maternity program, which is unique to Québec, one in two workers who are pregnant or nursing goes on work leave after getting a medical certificate from her doctor attesting to the presence of danger for her or the unborn or nursing baby.

Over the years, however, the notion of danger for the woman or unborn baby has gradually been replaced by the principle of precaution. This change in direction has resulted in the cost of the program going from about $8 million when it was first launched to about $200 million in 2013. These costs are entirely funded by the employers.

If the government hopes to restore this program to coincide with its initial objective of protecting the female worker against inherent dangers in the workplace, the Employers Council recommends, like the Association des obstétriciens et des gynécologues du Québec, that the CSST, which administrates the program, conduct an extensive study about its efficiency on the issue of pregnancies. While the program has existed since 1981, an extensive study has never been done. The study should notably touch on the definition of the notion of danger, on the existing relationship between danger and the level of acceptable risk, and on the disparities noted in the application of the program on the Québec scale.

The program should also be subject to occasional auditing, in matters pertaining to the motives for preventative leaves, the ability to reassign the employees as well as the application of the program.

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But, should the government decide to completely overhaul this program and draw up a new social program that is unrelated to the current dangers in the workplace – which the Employers Council hopes does not happen – the Council would recommend integrating this program into another one which would be equally funded by employees and employers.

CSST governance – Should there be a change in the CSST’s governance regulations, the presence of employers’ representatives on the board of directors should be maintained, considering the fact improvements in the system’s performance largely depend on employers’ involvement in solutions, and, most notably, employers pay 100% of the system’s costs.

5. Employment insurance The Employers Council welcomed the changes to the employment insurance program that the federal government announced in 2012. The Council believes these measures encourage a better matching of job seekers’ skills and the needs of employers.

The program could be further improved and be subject to close monitoring to assess the impact of the changes that were made and implement the appropriate corrective measures. Any change must take into account the competiveness of businesses and the new realities of the job market, notably the aging of the population and the expected shortage of skilled labour.

Encourage active employment measures – The Employers Council believes the employment system could be used more efficiently to encourage a return to work. The program could be rebalanced toward active employment measures such as training and employment assistance, thereby exerting a positive impact on longer term employment.

Review the sharing of employment insurance costs – Currently, only employers and workers contribute to the employment insurance fund – employers contribute 60% and workers 40%. The federal government ended its contribution to the employment insurance fund in the early 1990s. But there is no justifiable reason for the federal government’s decision to no longer contribute. Funding of the program should be reviewed in order to re-establish a fairer cost-sharing system – along the lines of 40% by employers, 40% employees and 20% federal government, for example.

Refocus the employment insurance system on its primary mission – Along with providing income to workers who have lost their job, the employment insurance program also serves to fund social programs such as maternity leave in the other Canadian provinces. The federal government should separate the programs funded by the program into those directly related to unemployment and the ones that are more of a social nature. The latter programs, like all of the social programs, should be funded by the government’s other sources of revenue rather than by wage deductions.

6. Pension plans In December, 2013, the Québec government announced an action plan to deal with the problem of funding pension plans in both the public and private sector. In the Employers Council’s opinion, this action plan is a step in the right direction to ensure the viability of a part of our pension system and encourage better financial security for workers once they retire, while still being mindful of the employers’ and taxpayers’ ability to pay.

Here are some of the Employers Council’s guiding principles in its interventions in this debate:

QPP/CPP contributions – Contributions to the Quebec Pension Plan (QPP) and the Canada Pension Plan (CPP) may well be on the rise in the coming years because of the aging of the population. The Employers Council would accept such a hike in contributions but only if this measure was being done to preserve the system’s financial health. The Employers Council would be opposed to any increase designed to enhance retirement benefits.

But the Employers Council would insist that any increase in contributions be offset by a reduction in contributions elsewhere, to avoid putting a heavier tax load on payrolls.

Defined benefit pension plans – Defined benefit pension plans are among the best plans to guarantee workers’ retirement income. But the future of these plans is threatened, largely because of their lack of flexibility. The Employers Council believes the Québec government should start ensuring the sustainability of these plans.

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The principles that should guide these changes for the public sector are: intergenerational equity and the taxpayers’ ability to pay. To ensure this sustainability in the private sector, the government would need to propose measures in an effort to find:

A better balance between the stability of contributions and security of the benefits

A better sharing of costs and risks between workers and employers

Rules pertaining to funding and ownership of surpluses to encourage a better capitalization of the plans

New types of pension plans – The Employers Council urges the government to adopt a proper regulatory structure to encourage the implementation of pension plans that are more in line with the new demographic and economic realities, such as target benefit plans.

Extending an active life – In the context of the aging population and the expected shortage of skilled labour, the Employers Council believes the government should ensure the plans currently in place provide enough incentives to extend the active life of workers and discourage early retirement, and thereby raise the effective retirement age.

The Employers Council welcomed the changes to the employment insurance program that the federal government announced in 2012.

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At issue Regulation is essential so the state can assume its responsibilities. While regulation is necessary it results in costs for businesses and it mobilizes human and financial resources that could otherwise be used more productively. The gradual increase of regulation and administrative formalities could thus have an unfavourable impact on economic growth and job creation.

Québec is distinctive in many regards in terms of regulation. As an example, Québec has set down a series of social regulations that are more restrictive than they are in the rest of North America. At times, the complexity of Québec regulation can even become stifling. The regulation is also finicky and too often places the emphasis on the means rather than the results. And the regulation, which quickly becomes outdated by the swift changes that occur on the labour market, is no longer always adapted to new business realities.

Principles The Quebec Employers Council believes any new regulation should comply with the following principles:

The regulation should set objectives rather than impose restrictive procedures to attain these goals.

The regulation should be consistent between the various government bodies.

The regulation should be reviewed on a regular basis to adjust to new social and economic circumstances.

The regulation should be simplified and aimed at achieving reasonable results and objectives so that small businesses can comply with them without jeopardizing their profitability.

The regulation should be done in such a way that it encourages investment and job creation in a sustainable development and global competition context.

The power of inspectors ensuring compliance with the regulation should be judiciously defined to avoid arbitrary and abusive decisions.

ProposalsSince the creation of sustainable and competitive companies depends on efficient regulation, the Quebec Employers Council proposes the following improvements to regulation in various sectors.

1. Reduce regulation and administrative formalitiesIn January 2014, the Quebec government introduced a new policy in the area of regulatory and administrative reduction. The policy, which was a follow-up to the tabling of the report by the Groupe de travail sur la simplification réglementaire et administrative (Audet report), is designed to ensure that regulation plans do not jeopardize the competitiveness of businesses and contribute to the preservation of a favourable business environment.

The policy notably provides that every regulation plan affecting companies must be subject to a regulatory impact analysis which will be systemically published.

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The policy also provides that the regulatory burden of new measures be adjusted according to the size of companies and should not be more restrictive than that of Québec’s trade partners, notably Ontario. And the departments and agencies must develop a revision of standards mechanism.

The Employers Council, which was actively involved in developing the new policy, believes the guidelines and measures contained in this policy respond overall to the concerns the business community has repeatedly expressed about the need to promote a more flexible and intelligent regulation, based more on results than on ways and means.

But the Quebec Employers Council intends to stay vigilant about the implementation of this new policy. Consequently, it recommends that the government:

quickly implement the new legislative and regulatory streamlining policy notably by applying it to initiatives that are already underway, and to the entire public service as well as to companies;

continue its efforts toward implementing all of the recommendations of the Groupe de travail sur la simplification réglementaire et administrative (Audet report);

adopt a governmental guideline that would be in line with the objectives of the “one in, one out” rule, which means the adoption of any new legislative or regulatory measure should be accompanied by a mandatory revision of other legislative or regulatory measures of

the same significance, while considering the feasibility of such an approach (which is why the Council isn’t suggesting a law to this effect). The Council believes such a principle avoids regulatory sedimentation so that there isn’t an accumulating layer upon layer of regulation and it pushes the government departments to conduct a useful review;

show good judgment in applying fiscal regulation, by avoiding, for example, the transfer to companies of auditing obligations and responsibilities that should belong to the government, or replace the presumption of innocence by the presumption of guilt and connivance;

to devote special attention to the simplifying of numerous forms, including corporate income tax forms, forms relating to tax collection on payroll and sales tax, and forms relating to the application of the occupational health and safety system and the francization of businesses.

2. Modernize and simplify labour laws The Labour Code and the Act Respecting Labour Standards were written in the 1960s, reflecting the job-market reality at the time.

The job market has evolved considerably over the last few decades. Hourly wages, for example, which was the standard back then, is no longer adapted to the needs of several categories of workers, such as professionals, whose jobs frequently involve managing complex dossiers rather than doing work almost mechanically. And technological development in some companies has required a major adaptation to work organization, which is dependent on a concern for flexibility that is virtually non-existent in current labour laws. Employees’ needs have also evolved, notably in terms of balancing work, family and personal life.

In an effort to adapt labour laws to the current reality, the Quebec Employers Council recommends:

that the Labour Code and the Act Respecting Labour Standards be modernized and simplified so that there is more flexibility and suppleness in the organizing of work;

that any new legislative or regulatory provision be supported by impact studies showing the need for such and its economic feasibility;

that the minimum labour standards be harmonized as much as possible with those of the other provinces and American states in an effort to avoid widening the gap that already exists with these jurisdictions;

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that the financial load of any new legislative or regulatory measure in terms of labour relations is not borne by the companies.

More specifically as it pertains to the Labour Code, in the aim of injecting more democracy into the union movement, increasing the financial transparency of unions and restoring the balance between employers and the unions, the Quebec Employers Council recommends:

making the secret ballot mandatory in the union accreditation process. The vote should be held very soon after the tabling of an accreditation request;

limit union dues paid by the workers – and made mandatory by the Rand formula – to union activities relating to the negotiations process and the implementing of collective bargaining agreements. If political or ideological interventions must be made by the unions, these interventions should be funded by voluntary dues. The government should also force unions to produce an annual accountability report that clearly shows how the money paid by their members was used;

abolish the provisions of the anti-replacement worker legislation to allow employers to assign work usually done by its salaried employees to workers or sub-contractors of its choosing. The abolishing of these provisions will serve to restore a fair balance of power between union and employer and promote negotiations in good faith;

facilitate the freedom of membership of workers to a union. Remember, the freedom to become a union member also includes the right to decline such membership;

More specifically as it pertains to the Act Respecting Labour Standards, the Quebec Employers Council recommends:

simplifying the recourse available to employees by forcing the plaintiff to choose one of the many available recourses for a same dispute in the aim of avoiding multiple recourses while maintaining accessibility to justice.

3. Continue the modernizing of regulation in the construction industryIn 2011, the Québec government adopted Bill 33 aimed at eliminating union placement and improving how the construction industry operates. The bill’s objective was notably to end intimidation and discrimination tactics that were frequently seen in the construction industry and restore employers’ right to manage their businesses.

The Employers Council supported the general guidelines of this reform, which it believes may help in improving productivity and competitiveness in the construction industry.

But the Employers Council wants to make sure the new reference system put in place by the Commission de la construction du Québec results in an actual - and not just theoretical elimination of union placement on construction sites. Thus, the Quebec Employers Council recommends that the Québec government:

closely monitor the new worker reference system in the construction industry to ensure the objectives being sought are properly attained.

And the Employers Council urges the government to further extend its reform by attacking other major irritants in the construction industry, including the compartmentalization of trades. Currently, the construction industry has 26 trades in Québec, compared to 6 in Ontario. This increased number of trades is coupled with a rigid compartmentalization which increases the number of workers required on a construction site, and construction costs rise as a result.

For greater flexibility on construction sites and to improve productivity in the industry, the Quebec Employers Council recommends that the government:

adopt measures to raise the versatility and mobility of workers in the construction industry.

4. Promote free trade and interprovincial tradeThe economic prosperity of Canada and Québec largely depends on international trade and investment. In recent decades, Canada has signed free-trade agreements with many countries, including the United States, Mexico, Colombia, Jordan, Panama, Peru, the European Free Trade Association countries (Iceland, Liechtenstein, Norway and Switzerland) and Honduras.

More recently, the Canadian government signed a free-trade agreement with South Korea and an agreement in principle with the 28-member European Union states – the world’s biggest and most lucrative market – and announced the start of the first series of negotiations aimed at expanding and modernizing the Canada-Israel Free Trade Agreement (CIFTA).

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Free-trade agreements facilitate commercial trade by reducing obstacles to the flow of goods, reinforcing cooperation, improving regulation transparency and reducing the cost of transactions for businesses.

Consequently, the Quebec Employers Council recommends that the Canadian government:

Continue in its endeavors in an effort to reach free-trade agreements with other countries worldwide.

While it’s true that international trade contributes to Canada’s economic prosperity, interprovincial trade is a major contributor as well. But there are still too many obstacles to the flow of goods, services and people between the provinces. This is notably the case in the area of manpower mobility.

The Quebec Employers Council thus recommends that the Québec government:

Continue discussions with the other provinces and the federal government with the aim of eliminating all impediments to interprovincial trade and facilitate the mobility of manpower.

In 2011, the Québec government adopted Bill 33 aimed at eliminating union placement and improving how the construction industry operates.

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At issue The Quebec Employers Council believes there must be a clean-up of public finances so that the Québec population can continue to enjoy a desirable quality of life and be able to prosper and fund its public services. It’s also a responsibility we have toward future generations. And it’s the only way we can maintain our independence toward the financial markets and remain masters of our destiny.

But the state of public finances in Québec is especially worrisome:

Québec stands out for the substantial size of its public sector. Public administration spending in Québec as a percentage of GDP is 22% higher than the Canadian average, and 10% higher when measured in per-capita spending1. The more generous nature of our various social programs compared to elsewhere largely accounts for this situation. Another contributing factor is the administrative structure surrounding the delivery of public services in Québec, which isn’t adequate in relation to a population of eight million inhabitants, the equivalent of a major city like New York.

In terms of revenue, the fiscal load is much heavier in Québec than that of its North American partners. In 2009, for example, Québec’s fiscal load was 15% heavier than Canada’s as a whole and 61% heavier than that of the United States2.

Despite the economic recovery in recent years, Québec has been slow in getting back to a balanced budget. According to the Québec government’s 2014-2015 budget, the budget deficit is expected to reach $2.5 billion in 2013-2014, far from the initial objective of a balanced budget, which will only be achieved in 2015-20163 at best, providing there is economic growth and the government rigorously controls its spending.

Successive deficits in Québec over the last few decades have hiked the debt to an extremely high level, to the point where Québec is Canada’s most indebted province, with a debt-to-GDP ratio of close to 55%4 – and one of the most indebted states in the industrialized world.

If the deficit and debt situation is worrisome, what about the prospects for the coming decades? According to some projections, if nothing is done to remedy the situation, the combined effect of the aging population (in 2010: four workers for every person over the age of 65; in 2030, two workers for every person over the age of 65) and the declining work-age population may lead to a structural deficit that will rise every year over the next few decades (the deficit could reach 2.7% of GDP in 2030 and 5.1% in 2050), and that would push the public debt to unsupportable levels (the debt-to-GDP ratio could more than triple5.)

HEALTHY PUBLIC FINANCES AND COMPETITIVE TAXATION

PUBLIC FINANCES

1 The Centre for Productivity and Prosperity. Productivity and prosperity in Québec. 2013 Report. HEC Montréal, section 2, January 2014, pg. 28.2 Idem., pg. 43.3 Gouvernement du Québec. Ministère des Finances et de l’Économie. Budget 2014-2015. Plan budgétaire, February 2014.4 Ibidem.5 Luc GODBOUT, Suzie ST-CERNY, Matthieu ARSENEAU, Ngoc Ha DAO and Pierre FORTIN. Chaire de recherche en fiscalité et en finances publiques. Université

de Sherbrooke. La soutenabilité budgétaire des finances publiques du gouvernement du Québec, document de travail 2014/01, 22 janvier 2014, pg. 45 and 46.

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ObjectivesTo address the situation, the Employers Council believes Québec will have to spring into action in terms of public finances. The attitude it has to adopt in order to do this can be summed up in one word: courage. Here are the four major objectives around which government action should be based:

Return to a balanced budget – and keep it there once you’ve balanced it – The government should set an objective of returning to a balanced budget as soon as possible and maintain it over the coming years, even accumulating budget surpluses if possible, so it can reduce the public debt. Québec can no longer constantly put off attaining a balanced budget. Doing that not only affects the economy, it’s not fair for future generations and it’s the easy way out – political expediency, one might be tempted to say – and it’s risky and creates uncertainty.

Rigorous control of public spending – The return to a balanced budget should be done by conducting a rigorous control of public spending, because first and foremost the deficit stems from a higher spending level than elsewhere. The ratio of public spending to GDP should, notably, be brought back to the Canadian average in this regard.

No tax or income tax hikes – The government should avoid resorting to raising taxes or individual or corporate income tax to fight the deficit because the tax load is heavier in Québec than elsewhere in Canada. Any new tax or new income tax should be offset by a lowering of taxes or income taxes elsewhere in the fiscal system. Moreover, the implementation of user fees – which the Employers Council favours – should be done with a great deal of tact and transparency so that users realize the relationship between their contribution and the improvements in the service used. Such an

implementation of fees should also be accompanied by the reduction of a tax bite elsewhere.

Instilling a favourable investment environment – The government should put measures in place to instill a favourable environment for investment and wealth creation, in an effort to stimulate economic growth and expand the fiscal base.

The following section presents the Employers Council’s specific recommendations in the area of controlling public spending and managing government revenues. Measures aimed at wealth creation are presented in the sustainable economy section.

Proposals: Public spending Put a “deep freeze” on any new public spending – The high level of public spending justifies the need for Québec to take a timeout so it can restore these expenditures to the Canadian-average level. In this regard, the Employers Council proposes using a measure called “deep freeze”, which would prohibit the adoption of new spending that wouldn’t be offset by an equivalent reduction in existing expenses. The deep-freeze measure should be subject to a formal annual accountability report under the supervision of the auditor general or budget officer, a position the Council recommends creating.

Restore government program benefits to those of the Canadian average – While Québec isn’t as well off as most of the other Canadian provinces, its programs – particularly its social programs – are, in many instances, far more generous than elsewhere. Consider, for example, the daycare program, for which the parental contribution is increasingly disproportionate to the costs of the program; university tuition fees which are comparatively far less than the Canadian average; the parental leave program or the For a Safe Maternity Experience program.

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Without calling the validity of the objectives of these programs into question, the Employers Council recommends reviewing all of these social programs in an effort to see that the benefits related to each specific program are comparable to those offered elsewhere in Canada. The review should also include the different types of aid to businesses (see the Council’s recommendation on this subject in the “Sustainable Economy” section). The Employers Council believes Québec will not be able to afford the luxury of paying for programs that are more generous than elsewhere as long its overall wealth is not above the Canadian average, unless there is an evident return on the investment.

Reduce administrative structures – Québec has a population of some eight million people, the equivalent of a major U.S. city, but it has structures that are the equivalent of a large modern state. While the government has to consider the breadth of its territory and its low population density in developing its programs, there would certainly seem to be a need to change the way it delivers public services in an effort to reduce administrative structures, avoid duplication between the different levels of government and align the number of organizations to the proportion of population.

Maximize the use of public sector equipment – Québec has a considerable amount of upscale equipment in the public sector, but it’s often under-used. Some examples of this equipment include equipment and facilities in the hospital sector, such as some of the operating rooms that are used only part of the day, along with the related medical manpower. The Employers Council recommends that the government try to maximize the use of equipment and manpower in the public sector, especially in the health and education sectors, in an effort to improve the service offering and productivity. The Employers Council even believes that some of the assets that are actually regarded as cost centres could be turned into value-added centres with the contribution of the private sector.

Align the overall public sector remuneration to that of the private sector – The “overall remuneration” component related to the public sector accounts for a bit more than half of the province’s spending on programs. While it’s true that public sector wages are lower than they are in major companies in the private sector, it’s the reverse in terms of overall remuneration, when you add in pension plans and other social benefits. In order to maintain the private sector’s ability to attract workers, the Employers Council believes the overall remuneration in the public sector should be comparable to that of the private sector, by using a scale in line with the average wage in Québec companies.

Control health care costs – The funding of health care consumes almost half of the Québec government’s spending on various programs. These expenditures are higher than elsewhere in Canada, as a percentage of our wealth, and they are rising much faster than spending in other budget sectors, notably because of the aging of the population. The costs, moreover, are funded in part by the Health Services Fund, which is the main tax on companies’ payrolls and is the major source of the gap with the rest of Canada (the Fund is entirely financed by the employers). The Quebec Employers Council believes the government should review the way the health and social services system is funded in an effort to gear it more toward the efficiency of services provided to patients. In doing this, it should draw on the most promising recommendations made by the many work groups who have been examining the health-care issue in recent years, including those made by the expert panel for patient-based funding.

Create a budget officer position – To heighten the chances that the government fulfills its budget commitments in the medium term, many groups have advanced the idea of creating a budget officer position modelled on that of the federal government. The Employers Council supports this idea. The budget officer would come from the National Assembly and be independent from the government. The officer would deliver an annual report before a parliamentary commission.

PUBLIC FINANCES

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Proposals: Government revenuesQuebecers are known for their great social solidarity. But this solidarity, which is needed for social cohesion and economic progress, can be threatened if citizens feel that the tax load had become excessive or unfair. And there are many signs leading one to believe that Québec, in this regard, has reached a limit that would be inadvisable to exceed.

In addition to refraining from adding new taxes or raising income tax to battle the deficit, the Employers Council, on fiscal matters, recommends:

Having taxation lean more on consumption taxes than on income tax by using a graduated refund mechanism for lower income individuals to maintain the fairness of the taxation system between richest and poorest. Consumption taxes have less of an adverse effect than income tax from an economic efficiency and wealth creation standpoint.

Make more use of user fees to fund public services (user-pay principle). A transparent public service fee would give people who use the service a fairer indication of the service’s value. It is also essential that the new revenue stream derived from service fees be used to improve the services in question and that this fee is accompanied by a corresponding fiscal reduction.

Quebecers are known for their great social solidarity. But this solidarity, which is needed for social cohesion and economic progress, can be threatened if citizens feel that the tax load had become excessive or unfair.

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At issue Sustainable economic development has become an essential topic of discussion in any social debate. There are three dimensions to it: environmental, social and economic. While there is plenty of media coverage about environmental and social concerns regarding development projects, far less attention is given to the economic benefits of these same projects.

But in our society the economic aspect is fundamental. Our entire social structure is based on it. Nothing can be done without economic growth. There can be no environmental protection, no implementing of social programs. Economic growth is the source of our prosperity, the enhancement of our standard of living and the improvement of our quality of life.

But in examining Québec’s economic performance, what is particularly striking at this time is the slow yet persistent decline of its economy.

For example, Québec is lagging behind in terms of standard of living compared to its main partners. In 2012, it had a per capita gross domestic product that was 17% lower than the Canadian average and 14% lower than that of many developed countries6. This gap has become even more pronounced over the last three decades.

The gap is mainly due to the weakness of Québec’s work productivity, which is 8% lower than that of the Canadian average7.

Only one conclusion can be drawn from this fact: Québec is living beyond its means.

But what can be done to re-launch Québec’s economy? The Employers Council believes that, in addition to ensuring there is access to a skilled, abundant and cost-competitive labour force, and that there is intelligent regulation and healthy public finances in place, Québec also needs to unleash its potential.

For the Employers Council, unleashing its potential means promoting its natural resources, investing in public infrastructures, putting the emphasis on well-paying, value-added job creation along with supporting the development of its businesses and Québec’s entrepreneurial development in particular.

A SUSTAINABLE ECONOMY

ProposalsHere are the Employers Council’s proposals to help Québec to unleash its economic potential:

1. Promote Québec’s natural resources Responsible exploitation of our natural resources is an essential condition for Québec’s economic development and prosperity. The wealthiest provinces in Canada and the richest countries in the world are the ones that have promoted their natural resources, notably their hydrocarbons. With an available household income that ranks 12th out of the 13 provinces and territories in Canada, a faster aging of the population and a higher public debt than elsewhere, Québec absolutely needs to exploit its natural resources.

Expand hydrocarbon exploration operations – Before exploiting Québec’s underground natural resources, you would still need to assess the potential of doing so. This is why the Quebec Employers Council is in favour of the exploration operations announced by the government in 2014 to determine the extent of oil reserves on Anticosti Island. Such exploration initiatives shouldn’t just be limited to Anticosti Island; they should be extended to other areas on Québec soil, where hydrocarbon potential has been noted. These operations could be a major advancement that may pave the way, if so deemed, to eventual investments to exploit Québec’s petroleum and gas resources.

Facilitate the transporting of oil from the rest of Canada to – and across – Québec – The Employers Council believes it is important to ensure the safety and diversity of Québec’s energy supplies. This is why it favours the transportation of petroleum projects by pipeline, or otherwise, providing this transportation can be done safely, in an effort notably to replace crude oil imported from outside the country with Canadian oil. Moreover, Québec could reinvest the additional revenue from the petroleum transportation which would go through its region in projects aimed at reducing its dependence on oil.

Continue to promote Québec’s hydroelectric potential – Québec has one of the cleanest, renewable and most sought-after energy sources in the world: hydroelectricity. This energy source has always been

ECONOMY

6 The Centre for Productivity and Prosperity. Productivity and prosperity in Québec. 2013 Report. HEC Montréal, January 2014, section 1.7 Ibidem.

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one of Québec’s most comparative advantages, along with being a strong economic development lever. But developing Québec’s hydroelectric potential must be done in a responsible manner, complying with the profitability criteria for any economic development project. The Quebec Employers Council encourages:

pursuing the development of major hydroelectric projects in Québec, provided they are economically feasible;

using surplus electricity to attract investments and create or save jobs. But in developing this, businesses need to have a rate-setting policy that is predictable and stable in the medium and long term, and competitive on a global scale;

using surplus electricity to electrify public transit. But the electrification of public transit must be done in consideration of Quebecers ability to pay and by conducting a rigorous analysis of the advantages and costs of the different options presented by each project;

reducing the inter-financing of electricity rates between residential and industrial sectors;

diversifying sources and forms of energy in an effort to meet the varied energy needs of Quebecers as efficiently as possible;

developing other sources of renewable energy. There are emerging options that are becoming increasingly interesting economically. Such initiatives must be conducted with transparency and done with cost-advantage analyses in developing the various projects. Promoting waste material – the development of biomass, for example – might be a promising solution to meet Québec’s energy needs, while helping to reduce greenhouse gas emissions.

Ensure that regulation in the mining sector is predictable and competitive – Québec is fortunate that it can rely on abundant and varied mineral reserves. It would seem essential to take advantage of this wealth by ensuring the regulation governing it remains predictable and competitive. It would require, at that point, a close monitoring of the impact of the new regulation and a periodic objective evaluation of the corrective measures required if deemed appropriate, to encourage optimal development of the resources. The Council believes that the Québec government, which owns these underground resources, should also have the final say in decisions pertaining to the land set-up, while being mindful of considering the interest of all affected stakeholders.

Assess royalty fees that are fair, competitive and stable – The Employers Council believes the state has the right to assess royalty fees on natural resources so that all Quebecers can benefit from this wealth. But to be effective, these royalties must not jeopardize the development projects. They should notably be:

fair and equitable in relation to the risks incurred by the companies and to the expected performance of the mining projects;

globally competitive;

predictable and stable in the medium and long term

Establish an economic evaluation agency – Before they are given the green light many development projects are subject to an environmental impact study conducted by the Bureau d’audiences publiques sur l’environnement (BAPE).

But the environmental impact of a project is just one facet of a development project, which also has a significant economic effect, with a potential impact on jobs, people’s income, governments’ revenue streams and the vibrancy of a community.

In an effort to have a better balance in the debates currently being conducted on the impact of major economic development projects, the Employers Council supports the proposal by the Fédération des chambres de commerce du Québec to create an economic analysis agency, a type of economic BAPE.

This economic Agency, which would be independent from public authorities, could evaluate, for example, the economic impact of major oil or gas-sector projects, and even assess the economic impact of legislative measures such as establishing caps on greenhouse gas emissions.

2. Invest in public infrastructures Accelerate investments in public infrastructures – Infrastructures that are modern, efficient and in good condition are essential for improving companies’ productivity. But over the last few decades, public infrastructures have greatly deteriorated, notably after a long period of under-investment to the extent that many of them are obsolete and dangerous even. The government will thus have to accelerate its program of investing in essential infrastructures, such as transportation, health, education, water works, energy, etc.

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Ensure that Montréal receives its fair share of infrastructure investment – The Montréal metropolitan area, where about 50% of Québec’s population resides, should be playing an engine role in terms of economic development in Québec. But Montréal has trouble playing this role because its infrastructures are often in disrepair and its economic performance is lower than that of many comparable major cities. Its gross domestic product and per capita disposable income of its inhabitants are decidedly less than in other comparable major cities. It also has a higher unemployment rate. Montréal should, first and foremost, have safe and modern infrastructures. And this is what leads to the Employers Council’s recommendation to make sure Montréal receives its fair share of infrastructure investment.

3. Support business developmentThe Québec government’s economic policy (announced at the end of 2013) is based on four strategic initiatives:

The national research and innovation policy.

Québec’s industrial policy.

The external trade development plan.

The transportation electrification strategy.

While they put the emphasis on different aspects of economic development, these initiatives ultimately seek to improve companies’ productivity, encourage investment and create jobs.

In general, all of these initiatives are in line with what the business community has requested. They identify the proper targets and propose concrete measures that meet businesses’ needs

While the Employers Council is in favour of each of these initiatives, it is concerned about the proliferation of these programs in an incompatible budgetary context and the underlying interventional approach that often accompanies it. This is why the Employers Council believes business assistance programs should comply with certain criteria:

ECONOMY

With the panoply of programs and organizations that in some way come to the aid of businesses, the Employers Council believes it would be appropriate to review all of these assistance programs...

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All of these programs should be compatible with the objective of putting public finances in order.

All of these programs should let the market decide on the “winners”. The government should avoid being a self-appointed market substitute by making the decision itself on the businesses they believe will be successful versus the ones they deem won’t be as prosperous.

All of these programs are not a substitute for the state’s need to create a legislative, regulatory and fiscally competitive environment, and put public finances in order.

Thus, considering the importance of the issues regarding assistance to businesses and promoting entrepreneurship, the Employees Council has the following recommendations:

Rationalize business assistance programs – In a modern state, business assistance can take on different forms: subsidies, tax deductions, income tax credits, tax holidays, loans, loan guarantees, stake acquisition, fee discount, tariff protection, buy-local policy, etc. Each of these forms entail a cost for taxpayers.

The government can also justify assistance to business in a number of ways: start-up assistance, expansion assistance; upgrading assistance; research and development assistance; exportation assistance, regional development assistance, etc.

With the panoply of programs and organizations that in some way come to the aid of businesses, the Employers Council believes it would be appropriate to review all of these assistance programs to ensure they attain certain specific objectives.

In the interests of transparency and efficiency, the government should also produce, on a regular basis, a report on the direct and indirect costs related to these programs, along with the actual benefits obtained.

These programs should also be aligned to four criteria:

contributing to productivity;

improving the value-added component through innovation;

marketing;

sustainable development.

Promote entrepreneurship – It no longer needs to be proven that entrepreneurial action is instrumental in the wealth and prosperity creation process. It’s not only an essential condition, it’s the spark and the catalyst. One of the first things that needs to be done to promote entrepreneurship is definitely a valorization of wealth creation by the business community. It is thanks to the efforts of our entrepreneurs that we can prosper in a sustainable manner and improve our overall quality of life. Québec should provide more support to its entrepreneurs and wealth creators, notably by refraining from systematically opposing any form of economic development project. There would also seem to be a need for some major communication work. The valorizing and promoting of entrepreneurship and private enterprise must enrich public discussion, and initiatives in this regard must be resolutely sustained.

Launch a Prosperity Campaign – Québec would benefit from setting up a “Prosperity Campaign” to explain and valorize the role of businesses in the wealth creation process. The aim of this campaign would notably be to explain the relationship between economic growth and the standard and quality of living, to publicize Québec’s assets and riches, to explain the advantages of exploiting our natural resources, to explain the role of entrepreneurs in the wealth creation process and, ultimately, to better inform the public about the major societal issues.

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QUÉBEC IN ACTION

Québec needs a strong and united voice from the business community in representations to the government and in public debates. A voice that will get people to listen to the concerns of wealth creators in our society, and a voice that proposes long-term solutions to make our economy more productive and competitive.

CONCLUSION

Over the 2014-2017 span, the Employers Council will aim to be the point of convergence of Québec employers’ solidarity. Through its leadership, it will strive to mobilize the business community and all employers to advance the issues deemed crucial for the future of our society, in an effort to create prosperity conditions by ensuring:

A qualified, abundant and cost-competitive labour force

Intelligent regulation

Healthy public finances and competitive taxation

A sustainable economy

Massive mobilization To achieve this, our proposals will need considerable public support. In fact, the proposals not only concern employers, they also affect our society as a whole.

Along with mobilizing the employers’ community, the Quebec Employers Council will be seeking to rally all of the social players. It is by allying for prosperity – with our partners in government, and other social groups – that we can join together to implement the most promising conditions for the enrichment of our society.

Because, after all, it’s our quality of life that is at issue.

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This publication may be consulted on the website of the Quebec Employers Council at: cpq.qc.ca

Legal deposit

Bibliothèque et Archives nationales du Québec

Library and Archives Canada

2nd quarter 2014

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1010 Sherbrooke Street WestSuite 510Montréal (Québec)H3A 2R7

Tel.: 514 288 5161 1 877 288 5161Fax: 514 288 5165

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