Temporary foreign worker program could be distorting labour market needs: report
May 8, 2013 by Diana Mehta
Canada’s temporary foreign worker program was under renewed scrutiny Tuesday as a new report suggested the increasingly controversial system “could be distorting” the natural supply and demand of the country’s labour market.
The study from the University of Calgary’s school of public policy suggests Canada isn’t facing a wide-scale labour shortage but rather is experiencing a “serious mismatch” between the skills of its residents and the demands of the labour market.
Kevin McQuillan—lead author of the study titled “All the workers we need: debunking Canada’s labour shortage fallacy”—said improving the balance in the labour market does not require an increase in the workforce.
“The (temporary foreign worker program) is sometimes being used to fill jobs with foreign workers in regions that already suffer from relatively high unemployment rates,” he said.
“Temporary foreign workers could be distorting the labour market forces that would bring together more Canadian workers and jobs.”
McQuillan suggested an improved immigration policy—that could adjust intake levels with labour market needs and reduce the number of temporary foreign workers brought in—as part of the solution.
While stressing that he supported immigration and understood employers’ desires to keep costs down, McQuillan said the temporary foreign worker program shouldn’t be used primarily to fill low-skilled, low-paying jobs.
“Looking at ways to make those jobs more attractive to Canadian workers is one of the first things we want to do before we rely too heavily on the temporary foreign worker program,” he said.
“I think (the program) is a good backstop in situations where we do have a booming economy and we have critical needs that need to be filled. I don’t think we’re in that situation now.”
In 2012, some 213,516 people entered Canada via the temporary foreign worker program, more than three times the number admitted a decade ago.
Meanwhile, the Canadian Manufacturers and Exporters association said last month half its members report difficulty finding qualified workers, and expect the problem to worsen in the next five years.
Tuesday’s report conceded there are worker shortages in specific industries and certain regions, but argued that young Canadians need to be encouraged to pursue an education and careers in fields where jobs are available.
McQuillan said this could be done through government funding into educational institutions with programs that match labour market needs and tuition pricing that charges more for study in a field where there is already an excess of labour.
He also suggested the government should find ways—such as a tax break—to entice Canadian workers to move from high-unemployment regions to provinces where workers are needed.
Statistics Canada’s labour market survey placed the unemployment rate at 7.2 per cent in March.
One observer commenting on Tuesday’s report said the use of temporary foreign workers to fill low-skilled jobs, particularly in areas of the country experiencing slower economic growth, would be concerning.
“It could depress wage growth for less skilled workers and maybe middle-skilled workers,” said Christopher Worswick, an economics professor at Ottawa’s Carleton University.
If companies couldn’t easily hire a temporary foreign worker, they would either leave the position unfilled or raise wages to attract a Canadian to the job, Worswick explained.
“This should be a program which facilitates high growth areas primarily where wages might have to grow very high in order to supply the workers.”
Economist Robert Fairholm agreed, saying the program was beneficial when it worked the way it was meant to.
“You can see how it could be of benefit if the people who are coming in are providing skills that we just don’t have here,” said Fairholm, a partner at Toronto’s Centre for Spatial Economics.
“It appears that, although some of the intent of the program is to improve things, they’ve allowed a huge loophole for employers to get cheaper labour. That would clearly distort the normal demand (and) supply interaction in the labour market.”
Fairholm added that a constant influx of temporary workers also reduced employer incentive to train domestic workers.
The Conservative government was recently forced to admit that the temporary foreign worker program is due for an overhaul.
Under the proposed changes, employers will no longer have flexibility to set the wages for foreign labour, putting an end to a rule that allowed businesses to pay foreign workers up to 15 per cent below median wages, if that’s what they were paying Canadians.
The Conservatives also called for a temporary freeze to a program that fast-tracked the ability of some companies to bring in workers from outside Canada through what’s known as an accelerated labour market opinion.
The two key changes are part of a larger overhaul of the program that also includes stricter rules for applications, new fees for employers who apply and a promise of stricter enforcement.
The program has become increasingly contentious as Canadians have reacted to the way in which it has been used by some large employers.
In April, it was revealed that the Royal Bank (TSX:RY) contracted an external supplier to provide IT assistance, which resulted in the bank outsourcing some Canadian jobs. Questions were raised about how the supplier brought its own employees into Canada under the temporary foreign worker program so they could be trained at RBC branches.
Last year, a mining firm came under scrutiny for being approved to bring in foreign labour by claiming the ability to speak Mandarin was an essential requirement of the job.
—The Canadian Press