What Are They Worth?

Temporary Foreign Workers in Canada
Written by Jessica Ferlaino

Temporary foreign workers have been used by some countries for many years to give employers rapid access to a broader labour market. Since 1973, when Canada introduced the TFWP to address short-term labour shortages for skilled workers, agricultural workers and live-in caregivers, Canada has increasingly come to rely on temporary foreign workers.
As of April 1, 2015, tens of thousands of temporary foreign workers have no choice but to leave Canada as their work permits have expired, and changes to Canada’s Temporary Foreign Worker Program (TFWP) have come into effect. These changes to TFWP stand to alter the economic landscape in Canada though the degree of the impact is still relatively unknown.

Legislative amendments in Canada have ultimately replaced the flawed and flexible Temporary Foreign Worker Program with a faulty and inflexible program that will affect unemployment levels across the country. The changes leave a labour gap in the Canadian economy and create an increasingly inequitable employment program for low-wage, low-skilled temporary foreign workers.

In 2002, Canada’s TFWP was changed, opening the program to low-wage, low-skilled labour, making these workers more accessible to Canadian employers. The government expanded this program over the years, easing hiring conditions and expediting the approval process for employers, with pilot projects taking place in Alberta and British Columbia.

Unemployment levels were higher during the pilot projects, inciting fears that recent changes to the program could have the same result in provinces with lower unemployment levels, such as Alberta, British Columbia and Saskatchewan, in which Canadians are not willing or available to fill the low-wage, low-skilled positions previously filled by temporary foreign workers.

Between 2002 and 2012, the number of temporary foreign workers in Canada tripled, increasing from 101,000 workers to 338,000 though there was little empirical evidence to prove that shortages in the Canadian economy existed. In 2012, close to half of these employees’ skills were not recorded, leaving the government with scant information about the work being done and the economic impact they had.

Contrary to the common misconception that temporary foreign workers are taking jobs from Canadians, temporary foreign workers only comprised 1.74 percent of Canada’s workforce by the end of 2013. A large proportion of the workers were in low-wage jobs, and unemployment levels remained relatively unchanged over that period though significant gaps in data exist in this context.

If recent legislative changes to Canada’s TFWP result in a labour shortage in Canada, it could pose a real threat to productivity and ultimately cause wages to rise as employers will be forced to do so in an attempt to attract Canadian workers to the available low-wage opportunities.

This is especially true of the agricultural sector in which the need for temporary foreign workers is great, and labour shortages threaten to limit productivity, especially during the harvest. Labour shortages at farms, feedlots and packing plants are expected to worsen, as the more onerous application process and shorter work seasons make it ever more difficult to find available labour.

There are two streams of temporary foreign workers in Canada. The first stream requires employers to provide a Labour Market Impact Assessment (LMIA), which is a timely and involved process to prove that domestic labour shortages exist, validating the need for temporary foreign workers. The second stream consists of workers who are LMIA-exempt, labourers from free trade zones for example.

Many believe that the problem with Canada’s TFWP occurred when the government moved from a small and effective program that filled actual shortages in the economy, to a larger, harder to monitor program. The expanded program not only increased the number of temporary foreign workers in Canada, but created a backlog of permanent residency applications.

Canada’s TFWP has come under scrutiny as of late since several companies were found to be manipulating labour market data to take advantage of the program. In 2013, allegations were made against a number of major corporations. Companies such as Royal Bank of Canada and McDonald’s were accused of falsifying information and LMIA to secure low-wage temporary foreign workers. As a result, legislation was changed.

Employers are held to a number of standards when seeking temporary foreign workers, ensuring that all efforts to find Canadian workers have been exhausted first. There must be an onus on providing genuine job offers, equitable wages and working conditions. In addition, there is the responsibility to provide return airfare, proof of medical insurance and other forms of support for the visiting worker.

Recent changes to the legislation have altered the hiring conditions imposed upon employers, introducing a more onerous and expensive application process. These changes have complicated the recruitment and retention of employees and forced temporary foreign workers to return to their home countries in advance of the required waiting period to complete applications for permanent residency.

Now, LMIA-exempt workers are a part of the newly formed International Mobility Program, and employers of LMIA-exempt workers are being held increasingly accountable. Employers are required them to submit the job offer and all necessary requirements to Citizenship and Immigration while a robust employer monitoring system is implemented to ensure the program is operating in Canada’s best interest.

As of July 2015, employers can have no more than twenty percent of the workforce as low-wage temporary foreign workers, with that number expected to be reduced to ten percent by July 2016. The end goal is to ensure that jobs are available to Canadians, emphasizing the temporality of the TFWP and welcoming a new cycle of workers every four years, when necessary.

Employment Minister Pierre Poilievre is in favour of the recent changes and is encouraging businesses to increase wages as an added incentive to attract domestic workers if there are difficulties in filling positions. He emphasizes the importance of remembering that these workers are only meant to be a temporary, as opposed to a comprehensive, solution.

Many people remain sceptical about changes to Canada’s TFWP, as blanket legislation will have a varied impact on unemployment rates and the availability of domestic workers on a province by province basis. Without comprehensive data and the necessary LMIA, the inflexibility of the legislative changes will have inconsistent results across Canada.

In 2012, employers failed to provide the government with assessments for sixty-eight percent of the temporary foreign workers in Canada. Without this necessary data, the presence of temporary foreign workers can impact job availability, keeping wages artificially low. It may result in undesirable working conditions for temporary foreign workers who are filling low-wage, low-skilled jobs in Canada.

The ability to monitor the labour market, collecting necessary data and precise labour market information from LMIA is both costly and time consuming. It is, however, necessary in order to make the right decisions in the best interest of the country as well as the workers.

Temporary foreign workers help to avoid losses of output and provide a short-term solution to labour shortages. Yet, without an adequate understanding of the labour market needs in Canada, taking into consideration provincial contingencies, any legislative changes will fall short as it is difficult to assess the actual market impact of temporary foreign workers on the economy.

Many critics of the TFWP are calling for a less exploitative and easier path to permanent residency for temporary foreign workers. They would like to see this eventually result in citizenship for those who have come to contribute to the Canadian economy, specifically in provinces with labour shortages where temporary foreign workers have been used as a means to rebalance the economy.

There have been significant changes over the past several decades, and Canada’s TFWP has seen improvements, though much work remains in order for the program to adequately support the Canadian economy in a more meaningful way while ensuring temporary foreign workers are not exploited in the process.

The Canadian Federation of Independent Business (CFIB) is worried that recent changes to legislation is sending temporary foreign workers away in droves and complicating the application process. It is concerned that many sectors of the economy will suffer, with hotel rooms not being cleaned and lines forming in fast food restaurants, as low-wage jobs will remain unfilled.

The program, which is criticized for being inherently flawed, not only illustrates the challenges associated with temporary foreign workers, but highlights the failure to invest in a comprehensive solution to labour shortages in Canada. There is a need to find new ways to increase the participation of underrepresented populations in Canada.

Through additional government support, better LMIA data can be attained and used to attract and train domestic labour from traditionally underrepresented populations in Canada, such as First Nations communities. This could alleviate some of the concerns associated with labour shortages and further strengthen the economy.

Adopting temporary foreign worker programs can have a clear benefit to an economy if well designed and supported. Inversely, poorly designed programs can be detrimental to the economy and for those who participate in it.

Changes to Canada’s legislation have intended to support the economy by filling temporary labour shortages until a permanent, domestic worker can be found. However, as a country, it has come to rely on these workers to fill low-wage and low-skilled positions without securing a permanent solution.

The most recent changes to Canada’s TFWP target low-wage, low-skilled temporary foreign workers. These workers appear to be satisfying a real need in the Canadian economy, specifically in western provinces where unemployment is low, though more empirical evidence is required to support these findings. Western Canada is where two-thirds of the temporary foreign worker reduction is expected to happen.

Just as the laws of supply and demand dictate, wages are likely to rise and a real strain will be placed on the economy as a result. Though the weakened state of the oil and gas industry in Canada will lessen the impact of labour shortages in provinces like Alberta, no real comprehensive solution has been found and provinces that have traditionally enjoyed low rates of unemployment could be the hardest hit.



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