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Canada’s record-high intake of temporary foreign workers is sparking debate as 1.4 million Canadians remain jobless. The program, initially for seasonal and low-wage jobs, now heavily impacts young job seekers, with youth unemployment rising to over 14%. Critics argue the influx stifles wage growth and innovation, while economists call for program reforms to better support local workers.
In 2023, the Canadian government approved a record-breaking 240,000 temporary foreign workers, nearly double the number from just two years ago. While this influx of labor has been welcomed by many businesses, it is sparking concern among economists and Canadian job seekers alike, especially as 1.4 million Canadians remain unemployed.
A Program’s Evolution
Originally designed to fill positions in agriculture and other seasonal industries, Canada’s Temporary Foreign Worker (TFW) program has expanded significantly in recent years. The program, once capped at 10% of a business’s workforce, was intended to be a last resort when no qualified Canadian could be found to fill a job vacancy. However, in response to a growing labor shortage exacerbated by the pandemic, the Canadian government raised the cap to 20% across the board and up to 30% for select industries in 2022.
This change has led to a surge in temporary foreign workers, particularly in low-wage sectors such as food service, retail, and construction. For instance, the food service industry’s use of temporary foreign workers has skyrocketed, with hiring up nearly 5,000% since 2018. In Ontario, Tim Hortons increased its intake from 58 foreign workers in 2019 to over 700 last year.
The Impact on Canadian Workers
The expansion of the TFW program has sparked debate about its impact on Canadian workers, particularly the youth. The unemployment rate for young Canadians has spiked from 9% to over 14% since 2022, with many struggling to find entry-level jobs that were once considered stepping stones into the workforce. In Toronto alone, the number of young people aged 15 to 24 looking for work has increased by 50% in the past two years.
Economists argue that businesses might be favoring temporary foreign workers over young Canadians due to their greater maturity, life experience, and lower likelihood of demanding higher wages or better working conditions. This preference is believed to contribute to the stagnation of wages in low-wage sectors, where the average pay has increased by just 50 cents since 2010, despite inflation.
A Flawed System?
Critics of the TFW program highlight the challenges in enforcing its rules. Employers are required to conduct labor market tests, proving they have made efforts to hire locally before bringing in foreign workers. However, these requirements are often seen as subjective and difficult to enforce, leading to a 97% approval rate for foreign worker applications. Audits have revealed numerous instances where businesses have misrepresented job details to hire cheaper labor from abroad, resulting in millions of dollars in fines.
Further exacerbating the issue, the government removed a key safeguard in 2022. Previously, applications from the food and retail sectors were automatically rejected if the local unemployment rate was above 6%, a threshold meant to protect local workers. With this rule now gone, cities like Toronto, where unemployment has been above 6% for most of the past two years, have seen a significant influx of temporary foreign workers.
The Broader Economic Implications
The reliance on temporary foreign workers has broader implications for Canada’s economy. Some economists argue that the program reduces the pressure on businesses to invest in productivity-enhancing technologies and processes. Without the need to attract domestic workers by offering higher wages, businesses may be less motivated to innovate and improve efficiency. This stagnation could have long-term consequences for Canada’s labor productivity, which is already lagging behind other developed nations.
The Road Ahead
In response to growing concerns, the federal government has made some adjustments to the TFW program in recent weeks and promised further changes. However, it remains unclear whether these tweaks will be enough to address the underlying issues. Some economists believe the solution lies in more drastic measures, such as cutting the low-wage stream of the TFW program altogether.
As Canada grapples with a complex labor market, the debate over the TFW program highlights a broader question: Should the focus be on preserving marginally profitable businesses, or on raising wages and improving job prospects for Canadian workers? The answer could shape the future of work in Canada.
