Canada’s Temporary Foreign Worker Program has come under fire in the past few weeks for increasing the jobless rate among Canadians. Critics say that the program has resulted in the firing of Canadian workers, and lower wages and exploitation of foreign workers. Even harsher criticism has hinted at the potential development of a illegal labour force in Canada, since these workers have no support system and are vulnerable to abuse. Some companies, particularly fast food chains, have allegedly been abusing the program to hire foreign workers at lower salaries than Canadians. McDonald’s reports that only 4% of its over 85,000 staff in Canada are foreign workers, but it is one of the companies at the heart of the allegations; the company recently put a hold on hiring temporary foreign workers. Tim Horton’s and the Royal Bank of Canada have also been implicated.

Canada’s TFW program was created in 1973. The program was designed to allow companies to find only employees in key occupations, industries, or regions with proven labour shortages: in this case skilled workers, seasonal agricultural workers and live-in caregivers. Foreign workers, because they do not have permanent residency in Canada, were intended to fill short-term labour shortages while employers found local candidates. In 2002, the program was changed to cover all types of low-skilled workers through a pilot project for occupations requiring lower levels of formal training. Employers must have an approved Labour Market Opinion from Employment and Social Development Canada that shows:

  • the job offer is genuine
  • the wages and benefits are comparable to what would be offered to a Canadian worker
  • the employers has conducted reasonable efforts to hire and train Canadians for the job
  • the foreign worker is filling a labour shortage
  • the employment of the foreign worker will directly create new job opportunities or help retain jobs for Canadians
  • the foreign worker will transfer new skills and knowledge to Canadians, and
  • the hiring of the foreign worker will not affect a labour dispute or the employment of any Canadian involved in such a dispute

Since 2002, additional conditions were imposed for low-skilled workers, including the payment of return airfare by the employer, proof of medical insurance coverage for the duration of the job contract, support from employers to find suitable accommodation, and registration under the relevant provincial workers’ compensation regime. Before 2002, companies were required to pay TFWs the median wage for an occupation in a specific region; changes that year resulted in employers being able to pay high-skilled TFWs 15% and low-skilled TFWs 5% less than the median wage, as long as the wage remained above the minimum wage. Companies that hire workers through intra-firm transfers or from a country with an international agreement (e.g. the North American Free Trade Agreement) do not require an LMO and do not need to search for domestic workers first. Also, some provincial programs do not require LMO applications. In 2007, the length per permit for temporary foreign workers was extended from one to two years. Between 2007 and 2010, the Expedited Labour Market Opinion (E-LMO) pilot project allowed BC and Alberta employers faster and cheaper access to temporary foreign workers, initially for 12 occupations, but in 2008 this was extended to 33 occupations. In 2011, the length of time that temporary foreign workers could live in Canada was extended to four years.

A report from Canadian think-tank C.D. Howe asked the question, “Are temporary foreign workers really filling labour market shortages?” Dominique M. Gross, author of the report, says that the program grew from 101,000 workers in 2002 to 338,000 by 2012. In Alberta and British Columbia, the report says that the program potentially raised the unemployment rate by about 3.9% from 2007-2010. In 2008, employers in the two western provinces hired more than five times the number of confirmed low-skilled TFWs through LMOs than employers in the rest of Canada.

Between 2002 and 2013, Canada eased the hiring conditions of TFWs several times, supposedly because of a reported labour shortage in some occupations, especially in western Canada. By 2012, the number of employed TFWs was 338,000, up from 101,000 in 2002, yet the unemployment rate remained the same at 7.2 percent. Furthermore, these policy changes occurred even though there was little empirical evidence of shortages in many occupations. When controlling for differences across provinces, I find that changes to the TFWP that eased hiring conditions accelerated the rise in unemployment rates in Alberta and British Columbia. –Dominique M. Gross, Temporary Foreign Workers in Canada: Are they Really Filling Labour Shortages?

In short, the report says, there was no shortage of labour in either province from 2007-2010, particularly of low-skilled workers. Other provinces experiences similar unemployment trends even without the E-LMO pilot.

Employment and Social Development Minister Jason Kenney has already announced changes to the program, allowing on-site inspections of employers to ensure compliance to the rules, requiring that employers have a plan to transition to a Canadian workforce over time, and ensuring foreign workers are paid salaries comparable to Canadian workers. The flexibility of wage setting around median values has been eliminated, employers now must advertise all positions for four weeks, and English and French are the only possible required languages unless another is shown to be essential. A $275 fee per application and $150 visa fee have also been introduced for employers. This week, Kenney announced that the fast food industry would be banned from using the TFW program. This makes sense because these jobs do not require skills, and the jobless rate among Canadian youth, who would normally fill these jobs, has been high for years–in 2012, 13% of those aged 15-29 were not in education, employment or training. On April 8, a Victoria high school student was called in for an interview at a McDonald’s location; he had previously been rejected for the job when the manager said he would be hiring 11 temporary foreign workers.

However, these changes may not be enough: the C.D. Howe Report notes that in the US, part of the high $2325 fee used to hire a single foreign worker is used to train domestic workers; the fees in Canada are much lower than the cost of relocating a domestic worker from another province. Other countries also place a cap on the number of TFWs that may enter each year; in France, Italy, the UK, Spain and the US, TFWs are limited to very specific industries and occupations with very low unemployment rates. This makes it easier to monitor the availability of domestic workers in those in those sectors. Better labour market information is also needed to ensure that labour market shortages actually exist.

The Conservative and Liberal governments strongly backed the Temporary Worker program in order to satisfy industry claims of labour shortages, but now Kenney says that employers should respond to general skills shortages by increasing salaries, wages, benefits, and training. Canada has allowed companies to hire abroad for highly skilled engineers, millwrights, nurses, and others for decades; we have other immigration streams that allow these workers to enter the country and obtain permanent resident status at the same time. The problem is that these streams are overflowing with talented, university-educated employees, making waiting lists up to a decade long. Over fifteen years of research shows that poor links between immigration and labour markets prevail: once these highly-skilled, well-educated permanent residents enter Canada, they are unable to find work in the very industries that need them. Long application times and poor links between work experience and actual employment are but two of the reasons that applicants and employers alike turn to other streams that offer them quicker results–like the Live-in Caregiver and Temporary Foreign Worker Programs.

During Kenney’s tenure as Citizenship and Immigration Minister, he was charged with fixing this broken system. And he did–by forcing everyone who had a current application in the system to withdraw their applications and try again, by raising the minimum amount required for investor immigrants to $800,000, by adjusting the points system for skilled workers to emphasize language skills and by introducing new requirements for refugees and asylum seekers. Every move he made was controversial. The federal government announced on April 22 that they will be creating an Express Entry system to allow skilled immigrants to fill open jobs for which there are no Canadian candidates. Under this new system, applicants would submit an Expression of Interest indicating their skills, education, and work experience, and these would be matched by provinces, territories, and employers. Where there’s a match, applicants under the Federal Skilled Workers, Federal Skilled Trades, Canadian Experience Class, and Canadian Business Class Programs would be offered Express Entry. A valid job offer would guarantee that the applicant qualifies for permanent resident status.

There are no quick fixes to these problems, but clearly both TFWs and Canadians are suffering because of the loosening of program restrictions in the past decade. Employers are the only winners in this game: they get cheaper labour, more vulnerable workers who are willing to work under less favourable conditions, and do not have to be concerned about the long-term consequences of their hiring practices.

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