Foreign worker program needs overhaul: economists

Prohibiting restaurants from using temporary workers won’t fix flawed system, professor says
Dominique Gross, professor at Simon Fraser University: big changes are needed to rein in Canada’s Temporary Foreign Worker Program

Jason Kenney’s abrupt move to ban restaurants from using the Temporary Foreign Worker Program (TFWP) won’t fix the program’s many flaws.

That’s the opinion of a professor at Simon Fraser University (SFU) who recently published a study showing the program may have accelerated the rise in unemployment rates in British Columbia and Alberta.

“That’s a political response – it’s not an economic response,” Dominique Gross, who teaches at SFU’s School of Public Policy, told Business in Vancouver.

“I think he wanted to give a strong signal to all the industries in Canada that he could be very tough.”

Kenney, Canada’s minister of employment and social development, announced the moratorium on April 25. The new rule followed allegations that McDonald’s (NYSE:MCD) and Tim Hortons (TSE:TSI) franchises had abused the program.

The federal government is now investigating the owner of three McDonald’s locations in Victoria after Canadian employees complained their shifts were cut back and local job seekers were turned away. Late last year, the RCMP opened an investigation into the alleged mistreatment of temporary foreign workers at a Tim Hortons franchise in Fernie.

It’s not the first time Kenney has had to do damage control for the controversial program. In 2013, he introduced several restrictions and a new application fee following media stories about Royal Bank of Canada replacing Canadian IT employees with temporary foreign workers.

While employers argue they still need temporary foreign workers in order to run profitable businesses, economists who have studied the program say there is a real risk that it is skewing the labour market and keeping wages artificially low for low-skilled jobs.

In her study, Gross detailed how several changes to the program made it easier and faster for employers to bring in temporary foreign workers. Low-skilled occupations were added in 2002. In 2007, TFW permits were extended to two years from one, and in 2011, they were extended again to four years. During a pilot program in place from 2007 to 2010, the amount of time it took to get a Labour Market Opinion (LMO) – proof that the employer had tried but was unable to find a Canadian worker for the job – was reduced from five months to five days.

The result? Between 2008 and 2012, use of the program skyrocketed, especially in B.C. and Alberta. In 2012, the federal government approved 99,315 TFW positions for B.C. and Alberta, compared with 57,685 for the rest of the country.

Gross found that the influx of workers may have accelerated the rise of unemployment rates in B.C. and Alberta by as much as 3.9 percentage points between 2007 and 2010.

Restaurants still need the program, argues Mark von Schellwitz, a vice-president of Restaurants Canada. Von Schellwitz said fast-food restaurants in some regions of B.C. and Alberta have had difficulty finding Canadian workers, especially to fill undesirable night shifts. Counter attendants are the most common food service jobs filled by temporary foreign workers, followed by cooks.

“In 2006 and 2007, in certain regions of B.C. and especially in Alberta ... we had businesses curtailing their hours, shutting down certain shifts,” von Schellwitz said, arguing that would reduce job opportunities for Canadians.

It’s easy to see how a fast-food franchisee would be attracted to using the TFWP, said David Green, a professor at the University of British Columbia’s Vancouver School of Economics.

“This is an industry where a choice has been made over time to operate this on a low-skilled, high-turnover model,” Green said, noting that national chains like Tim Hortons advertise standard prices, leaving little room for business owners to raise prices to cover rising labour costs.

“[They’re] going to be the ones that really want to take advantage of a program that allows them to get workers at low wages with no turnover.”

That feature of the TFWP – workers’ residency in Canada depends on their employment with the employer who applied for the LMO – can lead to wage suppression, Gross said.

“They will work very hard here to avoid being sent back home. The alternative for them back home is no job or a wage that is much lower. …. That also leads to the fact that they may be exploited.”

She sees similarities between Canada’s current TFWP and guest worker programs in Europe in the 1970s and ’80s. There, certain occupations eventually became associated with temporary foreign workers.

“By having access to a large amount of workers from the world, the wage is less likely to increase for those occupations,” she said. If the wage doesn’t increase, local residents will be less inclined to take those jobs.

Green warned against vilifying fast-food franchise owners, who responded as might be expected to a government policy that benefited them. But the idea that Canadians are being denied job opportunities because a new fast-food restaurant can’t open or an existing one can’t operate a night shift is incorrect, Green said.

“The MPs and civil servants in Ottawa hear these words, ‘I’m going to have to shut my store down,’ and they panic: this is job destruction,” Green said. “But it’s not – the reason it’s happening is exactly because there’s more demand for those workers somewhere else.”

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