Supply chain issues are not quite over yet: Stifel’s Ben Nolan
Prime Minister Justin Trudeau’s government is opening up Canada to an increase of temporary foreign workers in a controversial experiment aimed at easing strains on the nation’s overheating economy.
Starting Saturday, the federal government will loosen limits on hiring low-wage employees from abroad, changes that could bring in thousands of additional migrant workers.
The move adds to an intensive effort to ramp up immigration to fill record-high levels of job vacancies as the country faces one of its tightest labor markets in decades.
Critics warn, however, the changes will suppress wages and undermine incentives for companies to make productivity-enhancing investments, while broadening a program that’s been accused of leaving foreign workers vulnerable to exploitation.
“The challenge is striking the balance between filling the labor-market need and ensuring that workers have protection within the program itself,” Employment Minister Carla Qualtrough said in a telephone interview.
As of April 30, the government will allow employers to increase the share of their workforce that comes from the so-called Temporary Foreign Worker Program if they can show that no workers in Canada want the jobs. In sectors suffering from major labor shortages -- including manufacturing, retail, hotels and food services -- the cap will increase to 30 per cent of their workforce for low-wage positions. The cap for other sectors will increase to 20 per cent. Both limits are rising from 10 per cent currently.
The new rules add to changes implemented earlier this month that permanently removed any foreign-worker caps on “seasonal industries” such as seafood processing, while allowing the workers to stay in Canada longer.
The ramp-up of the foreign worker program comes as employers nationwide struggle to find staff, with the unemployment rate falling last month to the lowest level since at least the mid-1970s. The lack of available workers is stoking inflation and is one of the main reasons why the Bank of Canada is racing to curb inflation with aggressive interest rate hikes.
Since September, overall employment in Canada rose by 2.4 per cent, outpacing the 0.8 per cent increase in the working-age population and highlighting the potential imbalance between labor supply and demand, according to Statistics Canada. All of the nation’s employment gains over the past decade have come from workers not born in the country.
“There’s nobody to hire right now,” said Marie-France MacKinnon, a vice president at the Canadian Meat Council, whose recent survey showed more than 10,000 vacancies for butchers, a five-fold increase from 2018. “It’s not just us, because there’s a variety of sectors right now that are facing the same dilemma.”
Canada’s regular immigration system, though, is already teetering under ambitious targets, forcing the government to allocate billions simply to process and settle new permanent residents. Trudeau has pledged to bring in more than 1.3 million newcomers over the next three years -- a record.
The temporary worker program currently represents a small share of the country’s non-immigrant foreign labor force, which totals about 600,000 people -- mostly working foreign students currently in Canada and other international worker programs. Last year, just over 100,000 temporary permits were issued. The bulk went to men from Latin America and the Caribbean doing lower-skill work.
Canada has sought to keep the program small because it’s extremely controversial. The residency status of these workers is tied to their employment with a specific company, which could expose them to exploitation. Miles Corak, an economics professor at the City University of New York and a former adviser to Trudeau, said in a Twitter post the loosening of rules was “shameful,” describing the program as something “pretty close to indentured servitude.”
Many of these workers will tolerate poor working conditions because they see their employment as a path toward permanent residency, according to Mikal Skuterud, a professor in labor economics at the University of Waterloo.
“These workers will put up with almost anything because they’re desperate to make this transition. They have much lower rates of absenteeism. They accept lower wages,” Skuterud said in a telephone interview. “From an employer’s point of view, this is huge profits that can be made off the backs of these workers.”
There’s also a strong economic case against the program, he said. Relying on foreign workers prevents Canada from dealing with its “serious productivity challenge,” forgoing an opportunity to increase competition for workers that would raise wages, according to Skuterud.
Qualtrough, who was a human-rights lawyer before entering politics, said the government has taken a number of steps to beef up support for workers. That includes providing more information to them about their rights and consulting with worker representatives. Another example is requiring unionized companies to pay migrant workers the same wage, she said.
“I’m very mindful of worker protection,” Qualtrough said.
“This is a relatively small piece of the workforce,” she said. “We’re not leaning into this and saying, this is how we’re going to address labor shortages in Canada. It’s one piece of a broader approach to a really pressing issue.”
Businesses insist that with the economic recovery outpacing the ability of employers to hire, there’s little choice but to tap into a supply of foreign labor. Many of these jobs are shunned by Canadians because of potentially dirty working conditions or remote rural settings, like farm harvesting or the slaughter and butchering of animals.
“They’re finding that either no one’s applying, or sometimes they’ll have people that show up for a day and then they don’t stay,” said Janet Krayden, a workforce specialist at the industry association Mushrooms Canada. “That’s because the jobs are rural. It also involves handling of live plants or animals -- things might be a little smelly. It could be uncomfortable. And so those are the ones that are the most difficult to fill.”
Qualtrough acknowledged gaps in the labor force are getting in the way of essential economic functions. “Right now, we need to feed the country,” she said.