Foreign workers drove unemployment higher in B.C.: C.D. Howe report

 

Low-skilled workers hurt by influx of overseas labour: C.D. Howe report

 

BY TARA CARMAN, VANCOUVER SUN APRIL 24, 2014

 

McDonald’s Canada said Wednesday it will be putting its use of the temporary foreign worker program on hold while conducting an audit by a third party to ensure there have been violations or abuse of workers — foreign or Canadian.

Photograph by: KAREN BLEIER , AFP/Getty Images

Changes to the temporary foreign worker program that made it easier for employers to hire from abroad in recent years were a factor in rising unemployment rates in B.C. and Alberta, according to a C.D. Howe Institute report released today.

Low-skilled workers with some high school education were hardest hit by the changes, according to the report by Simon Fraser University public policy professor Dominique Gross titled Temporary Foreign Workers in Canada: Are They Really Filling Labour Shortages?

A change to the program between 2007 and 2010 accelerated rising unemployment levels by 4.8 percentage points in B.C. and 3.1 percentage points in Alberta, the report said. The reason for the difference was B.C.'s much higher unemployment rate for construction labourers during that time period.

To measure the effect on unemployment, Gross compared rates in B.C. and Alberta with provinces that did not have easier access to temporary foreign workers. She also did a comparison with Saskatchewan and Newfoundland, which represent other resource-dependent economies.

"... There was no obvious shortage of labour, especially of workers with low skills levels, in the two western provinces ... and making it easier for employers there to access TFWs did increase the unemployment rate among domestic workers," Gross wrote.

"This suggests that ... by lowering employers' constraints on hiring TFWs, the federal government reduced the incentives for employers to search for domestic workers to fill job vacancies."

The program has been in the spotlight amid a series of controversies, most recently involving allegations that some fastfood franchises are favouring temporary foreign workers over Canadians.

Employers in B.C. and Alberta have used the program the most. In 2007, the two provinces received authorization to bring in more temporary foreign workers than the rest of Canada combined.

The following year, B.C. and Alberta received 94,000, more than double the total for the rest of the country. The number of low-skilled foreign workers hired in the two provinces in 2008 was five times what it was in the rest of Canada. The number dropped off in 2009, largely in response to economic conditions, but picked up again in 2010 and continued to grow, the report said.

The sudden surge was the result of a federal government pilot project in the two provinces between 2007 and 2010, largely in response to demands from employers who wanted easier and faster access to temporary foreign workers, Gross wrote.

The project involved speeding up the Labour Market Opinion process, which is an authorization some employers must obtain from the federal government before hiring a foreign worker, and is designed to ensure Canadian workers will not be displaced as a result.

Under the pilot project, which started in September 2007, the time it took for an employer to get an LMO was shortened from about five months to five days. It was initially limited to 12 occupations in the two provinces, but was expanded in January 2008 to include 33. Of those, 12 were in low-skilled categories that required either some high school or no formal education, the report said.

The project ended in 2010, but B.C. and Alberta continued to hire temporary foreign workers by the tens of thousands.

The federal government put the program under review after a number of media reports suggested employers were using the TFW program to fill jobs for which qualified locals were available. It also eliminated the accelerated LMO and another policy that allowed employers to pay foreign workers slightly more or less than the median wage, required employers to post jobs for a longer period and introduced a $275 LMO processing fee.

That fee, however, is nowhere near high enough to create an incentive for employers to hire more locals, the report said. Because the normal market mechanism to correct labour shortages is to raise wages, other countries, such as the U.S., impose steep fees of up to $2,300 on employers wishing to hire foreign workers, part of which is used to train domestic workers, Gross noted. In Singapore, companies must pay industry-specific monthly levies based on the number of foreign workers employed.

"High specific and possibly time-dependent fees would create incentives for employers to raise wages while searching for domestic workers," the report argued, noting that the fees could be scaled to the size of the firm in question. Higher fees for foreign workers would also encourage employers to do more to encourage interprovincial migration to fill jobs, Gross added.

The government should also consider imposing caps on the program or limiting its use to specific sectors known to have low unemployment, as is done in the U.S. and U.K., she said.

The federal government will review the report and its recommendations, Citizenship and Immigration Canada spokeswoman Sonia Lesage said in emailed statement, adding that the program is under review to ensure Canadians are given first chance at available jobs.

"Future changes regarding the temporary foreign worker program will be made as necessary."