The Decibel - Why Canada is cutting back on temporary foreign workers

Episode Date: August 29, 2024

The government has announced that they are cutting down on the numbers of low-wage temporary foreign workers being admitted into the country. The new rules will reverse pandemic-era changes to the program, which led to a sharp rise in numbers. The announcement also comes on the heels of a UN report calling the program a “breeding ground for contemporary forms of slavery.”The Globe’s economics reporter Matt Lundy breaks down what’s driving the change, and how it will impact businesses and workers.Questions? Comments? Ideas? E-mail us at [e-mail]

We no longer need as many temporary foreign workers. We need Canadian businesses to invest in training and technology and not increasing their reliance on low-cost foreign labour. Earlier this week, Prime Minister Justin Trudeau announced that the government is making changes to Canada's Temporary Foreign Worker, or TFW, program. It's not fair to Canadians struggling to find a good job, and it's not fair to those temporary foreign workers, some of whom are being mistreated and exploited. The government expanded the program in 2022 to meet demands for workers after the disruption of the pandemic. But since then, the labor market has changed, and a recent UN report said that the program

is a breeding ground for modern slavery. So today, The Globe's economics reporter Matt Lundy is here. He'll explain what changes are coming to the temporary foreign workers program, the reasons why the government is doing this now, and the impact it will have on businesses and workers. I'm Mainika Raman-Wilms, and this is The Decibel from The Globe and Mail. Matt, thank you so much for being back on the podcast. Thanks for having me on. So before we get into this, I think we should just establish, like, what exactly is Canada's Temporary Foreign Worker Program? This is a program where employers can find people to fill jobs when there are no Canadians or permanent residents available.

There are primarily four aspects of the program. There is agriculture, that's traditionally what it's been used for over decades. But there's also a high wage stream, a low wage stream, and something called global talent, which is to find tech workers primarily. Okay. And how many temporary foreign workers are actually in the country now, do we know? So at the end of last year, there were about 190,000 valid permits through the program. Five years earlier, end of 2018, there were only about 56,000. So we're talking about an increase of 237% over five years. Where are these workers coming from? Really all over. When it comes to agriculture, we're talking about primarily Latin American countries and the Caribbean, but other parts

of the world as well. So the top five countries for work permits at the end of last year were India, Philippines, Mexico, Guatemala, and France. Okay. So this week, the government announced some changes to this program. So Matt, what did we hear? What do they want to change? There were three main changes here. One is that most employers will now only be able to hire up to 10% of their staff through the low wage stream of the program.

Previously, the limit was 20%. And this actually brings the rules back in line with what they used to be before this huge expansion of the program. Previously, the limit was 20%. And this actually brings the rules back in line with what they used to be before this huge expansion of the program in 2022. Another change is that when local unemployment rates are 6% or higher, employers will no longer be able to use the low wage stream for most jobs. There are exceptions to a lot of these rules in healthcare, construction, and in food production. So farms and food processing, because those are areas deemed critical by the government. And then finally, if you're hired through the low wage stream, the maximum duration of employment will be one year where previously it was two years.

Okay. So that's interesting, like the unemployment one, right? If unemployment is high, maybe there's another option, someone else who needs a job as opposed to bringing in another worker then. Yeah, exactly. So that one to me is a pretty significant change. One, because it's actually a tighter rule or a stricter rule than existed previous to 2022. Another thing is that right now in Toronto, Calgary, Edmonton, Ottawa, the unemployment rate is higher than 6%. So when these rules go into effect near the end of next month in September, we're going to see a lot of employers in low wage sectors that are going to basically be cut off from hiring new people through this program. Okay. And all of these changes, are these specifically then for the low wage stream of this program?

Yeah, the recent changes have really focused a lot on the low wage stream, including what we saw this past week. But there could be more coming. The government said on Monday that they're doing a 90-day review of the program where they said we could do changes to the high wage stream as well. And it's important to note that the government has been making continual changes to the program this year. Just last week, they approved a request from the Quebec government to temporarily stop processing low wage applications for the program just for the city of Montreal. So we're seeing these announcements all the time on TFWs. We're going to come back to this, kind of what we can look ahead to, because it does sound like there's things moving pretty quickly here. But I guess let's talk about this current decision a little bit more here, Matt. We established that these

are in the low-wage stream of the program. Can you just give us some examples? What jobs would that include? The big ones in the low-wage stream are really connected to food. Cooks are a huge source of demand through the low wage stream. You have food counter attendance. The fast food sector really relies in a big part on this program, I would say. But there's other stuff too, like cleaners, sort of lower level construction jobs, labor jobs, general labor, food processing jobs. So we really see it in a bunch of areas now. So, Matt, what is behind the government's decision to announce these new restrictions? Do we know, I guess, what the rationale is here?

The way that they have framed it is that the labor market is changing. And it certainly is. Like that the labor market is changing. And it certainly is. The unemployment rate is rising. It's nearly two percentage points higher than it was a couple of years ago. We have a lot of people who are struggling to find jobs right now. Young people especially are really struggling in this labor market. What is the unemployment rate? The national unemployment rate is 6.4%. That's up nearly two percentage points from a record low a couple years ago. And for youth, that's 15 to 24. It is 14.2%. That is the most we've seen in over a decade, not including the sort of early parts of the pandemic. So the government has said,

well, circumstances have changed. So we need to tighten up this program. I would say that some people, especially economists, have taken issue with this framing because a couple of years ago when they opened up the program a lot more, people did not buy the rationale for expanding the TFW program then. Okay, let's get into that then, because you did mention earlier that it was expanded in 2022. How did they talk about why they were doing that then? Yeah. Two years ago, we had a massive number of job vacancies in the country as we were emerging from pandemic restrictions. We had about a million open jobs. We had record low unemployment. And employers were saying, we can't find people to work. So the government said, all right, we're going to allow you to hire more temporary

foreign workers as a higher percentage of your staff. They'll be in the country longer in some sectors, certain roles where if the unemployment rate was over 6%, you weren't allowed to hire them. You can hire them now, such as like cashiers in retail or at a grocery store. These are a lot of rules that were thrown to the side or expanded so that employers could be helped out. Now, the criticism at the time was that labor shortages are an opportunity. It's not necessarily a problem to be solved. If a company can't hire someone, maybe they need to raise their wages,

or maybe they need to invest in the company and enhance their productivity in that way. And then there's this other massive concern with the TFW program that is worth noting. If you come into the country on that work permit, it is a closed work permit. You are tied to that employer. If you are in a bad situation, let's say you weren't paid overtime. Let's say it was an abusive situation, you can't just quit the company as easily as you would if you're a Canadian or permanent resident. Yeah. So if they want to stay in the country, they have to stay with that employer then.

Yeah, they do. I mean, there are certain abuses or fraudulent things that you may just put up with because if you want to stay in the country, your fortunes are sort of tied to this employer. There is a process for which you can get an open work permit, but people put up with a lot of bad situations, as we know, in the TFW program. The government actually maintains a website of companies that have been punished through the program for various reasons. There are hundreds of companies listed there. Yeah, I mean, just to that point, I mean, there was even a UN report that came out a few weeks ago talking about the dangers of this program. I mean, this report concluded that Canada's temporary foreign workers program is a, quote, breeding ground for contemporary forms of slavery, end quote. The special rapporteur received reports of underpayment and wage theft, physical, emotional and verbal abuse, excessive work hours, women reported sexual harassment, exploitation. There's really a whole range of things that people are at risk for here.

And those are the things that we know about. Like the government does not have the resources to check all companies for compliance. They do complete a number of inspections per year, like getting into the thousands, but they are not able to check every company that they're abiding by these rules. So it's pretty safe to say that some companies are getting away with pretty terrible behavior. We'll be back in a minute. Matt, coming back to the changes in this program, let's talk about how these changes have been received. So first off, the business community, how have they reacted to the news? I would say it's a mixed response. They have largely said, let's get rid of misuse or fraud in the program by all means. Let's tighten up some

regulations in that respect and make sure that people are complying. But they don't like how often the rules are changing and that there's this really uncertain business environment. It seems like every few weeks there's a new announcement on the TFW program that makes it more restrictive for employers. Of course, there are some areas of the country where it can be challenging to hire. Maybe workers there are quite old or you have an older population. It's a more remote location where you don't have a lot of options. So they tend to like this program as you would expect. And do we know how workers themselves who are in this program or maybe advocates for these workers, do we know how they've responded to these changes?

Yes, the Migrant Workers Alliance for Change, they responded to the recent news on Monday. Primarily their response is about like, hey, let's not blame immigrants or temporary foreign workers for a lot of the issues that we're seeing in Canada. The government has definitely said we're trying to tamp down on temporary residents in Canada because of the housing issues that we're facing. We have rising unemployment. We want Canadian teens to be able to find a job. And they're saying, like, let's not blame newcomers or temporary residents for the issues that we're seeing. And I think that's absolutely fair. And really, the focus here should be on government policy and the way that that hasn't worked.

Let's talk about the politics at play here, Matt. As you said, the federal government has kind of changed the program, tweaked it every once in a while. We talked about some of the reasons behind why the government might make these changes. But can we talk about the politics at play here? Are there political reasons for why they're making these decisions? not a good look that employers are using this program so much and not just in like rural and remote areas, but we're talking about fast food outlets, let's say in downtown Toronto, or seen this huge growth of administrative assistants that are being found through this program, like entry level office jobs. And when so many people are struggling to find work right now, it does raise questions about, man, why is this program growing so much? How can employers possibly not

find people in the domestic population? So politically, I think it's something that has really snowballed in the last few weeks. And for the government, they really had to get out and do something about it. Yeah, the government is taking a lot of heat on people not being able to find a job or not being able to find housing. Maybe this plays into some of their thinking here. Yes. And I think even more broadly, the government has really been gung ho on strong population growth to support the economy. And lately, things have changed a fair bit where one, they want to reduce temporary residents to 5% of the population. They're currently at 6.8%.

We have 2.8 million temporary residents as of April 1st. That's double the number from two years ago. 1.9 million of them have work permits. So it's not just a TFW program thing going on. You have international students who graduated, they have postgraduate work permits, you have asylum seekers with work permits. There's a lot of temporary foreign labor in the country that isn't necessarily through the TFW program. They're really looking at so many different ways, including with the TFW program, to bring those numbers down because they

are seeing some stresses in areas like housing. And Canadians who have been generally very pro-immigration for a long time are looking at how fast the growth is and thinking that it's unsustainable. What have the other political parties said? I'm thinking of the opposition conservatives, maybe the NDP. How are they viewing this? Well, obviously, they slammed the government following Monday's announcement. The conservative leader, Pierre Poiliev, he's said that the floodgates have been opened with TFWs under the former immigration minister, Sean Fraser, who's now housing minister. And yeah, he said the reason why you can't find a home or why your teenage kid can't find a job right now is because of these policies.

The NDP, for its part, has said that they want to see broader changes in the program as well. You know, it's really that low wage stream that is attracting a lot of attention. Some people think that it should be pretty much abolished outright. What is the argument for abolishing it outright? Well, I think there's a something close to a consensus on the agriculture side that Canadians have largely stopped working in these jobs for decades now. Whereas in the low wage stream, it's a way to keep wages lower. You have indentured servitude from migrant labor, basically, in places like fast food that, you know, you're propping up potentially some bad employers here who can offer higher wages

and whose existence really is tied to this program. If you can't be viable as a business without a steady stream of low paid foreign labor, well, maybe you shouldn't be in business in the first place. You talked about how there's a few changes happening here. The government also hinted that they might be making changes to the number of people who can become permanent residents in Canada, too. What do we know about that? Those were comments on Monday, you know, partway through the Liberal cabinet retreat in Halifax. The prime minister said that they're looking at permanent resident numbers as well. So next year, Canada is slated to admit 500,000 permanent residents. Same for 2026. They put out this plan every fall.

It's like a three-year plan basically for immigration. This year's is going to be different because for the first time, they're going to announce targets for temporary residents. And then, like the Prime Minister said, they're considering on the permanent resident side, possibly reducing that number. And that is a huge change for this government because year after year, that number has typically grown. And I mean, it really is a reflection of how much pushback they've been seeing on their immigration policies that they would even be considering this. It is such a big difference from their standpoint. So it sounds like from what you're saying, kind of that action is telling you how much

heat that they're getting on the other side of things then here. Yeah. I mean, I was surprised on the permanent resident side. I thought they would mostly focus on temporary residents and then leave those permanent residents numbers unchanged over time. The fact that they're talking about scaling back both aspects of migration into Canada suggests to me that they're really feeling the heat here on the affordability file and how that interacts with immigration. To be going back on something that they have been espousing for the

last eight, nine years about strong immigration being crucial for the future of the country, for demographic reasons, for labor reasons. This is a big departure for them. Yeah, they talked a lot about how it's crucial to economic growth too, right? Because our population is, we don't have a high birth rate, so our population isn't growing so much there. We grow by immigration. So this is huge if they're thinking about actually changing that.

Absolutely. This is like a foundational part of their policies that Canada needs to grow fast. And to cut back on that, I was somewhat shocked by those comments. So Matt, just before I let you go here, what are you watching for next? Like, could we see more changes come down here? And when might we see those? I think we will absolutely see more changes over the fall and when might we see those? I think we will absolutely see more changes over the fall. Usually they put out their three-year immigration plan around November 1st. So that would be a date to watch. We are going to see a more fleshed out plan for temporary

migration at that time, along with maybe the permanent resident numbers being lower. Now with the TFW program, I think there's going to be more changes. There's this 90-day review. They're possibly looking at the high wage stream. They have floated ideas like higher application fees for employers who are trying to access it. Right now, it costs $1,000 for each position that you seek through the program. If I was trying to hire 10 people for a fast food restaurant, my application would be $10,000. It's not that cheap to use the program.

Like it might be cheap once the labor is in and you have solid labor for a certain amount of time, but there are administrative costs. They're talking about jacking those up as well. So I think that this file, it's very live. It's going to be changing a lot. I would expect in the next three months, quite a few announcements. Matt, thank you so much for being here today and taking the time to speak with me. Thanks for having me. That's it for today. I'm Mainika Raman-Wilms. This episode was produced by Kevin Sexton. Our producers are Madeline White, Rachel Levy-McLaughlin, Michal Stein, and Ali Graham. David Crosby edits the show.

Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you soon.