The program can not only slow wage growth, but actually cause wages to fall
Christopher Worswick is a professor of economics at Carleton University and an external fellow of the Centre for Research and Analysis of Migration, University College London. Canada’s Temporary Foreign Worker Program is once again in the news, with politicians of different persuasions pushing for major changes.
B.C.’s NDP Premier, David Eby,Mr. Poilievre has argued that the TFW program is causing a surge in youth unemployment. Realistically, it is likely too small to have such a large impact. But combined with expansions under the Trudeau government of both the International Mobility Program and especially the international student program, it is plausible that it has had an important impact. The increase in the number of temporary residents able to work in Canada is likely making it significantly more difficult for younger Canadians to find employment.In response to the original TFW program controversy under the Harper government, Pierre Brochu, Till Gross and I explored the labour market implications of this program in ain the Canadian Journal of Economics. In our model, workers exert higher work intensity – resulting in higher productivity – in situations where the wage paid is higher than their next best alternative. For Canadian citizens and permanent residents, the alternative to a Canadian job is likely another job in Canada with a similar wage. In contrast, a temporary foreign worker may much prefer the job in Canada to what they would have in their home country, since a temporary foreign worker is not allowed to move to another job in Canada. Consequently, a temporary foreign worker will have higher work intensity and may be prepared to tolerate illegal activities by their employer, such as unsafe work conditions and holding back part of their wages. The TFW program can not only slow wage growth, but may actually cause wages to fall. Employers should anticipate the higher work intensity of temporary foreign workers and offer a lower wage when initially advertising the job to Canadians, because failing to fill the position means they can hire a temporary foreign worker yielding higher expected profits for the firm. Our theoretical analysis also predicts a higher unemployment rate in the presence of a TFW program, which is especially worrisome as the Canadian economic outlook worsens. Our empirical evidence suggests that temporary foreign workers work longer hours, have lower rates of absenteeism and are less likely to be laid off than other workers, which are all consistent with the theoretical predictions. Opinion: The temporary foreign worker program has never been easy to defend. But it should be reformed, not scrapped In contrast, permanent immigration programs do not have these issues, as the rights of permanent immigrants are nearly identical to those of Canadian citizens. Consequently, the Canadian labour market can be expanded through permanent immigration rather than temporary foreign workers, so curtailing or even eliminating the TFW program need not limit the number of foreigners being welcomed to Canada. This is a key point. Being against a temporary foreign worker program need not mean that one is against immigration. The TFW program was controversial under both the Harper government and the Trudeau government. In both cases, the government of the day ultimately bent its will to employer lobbying to make the program larger until an understandable public backlash ensued. The result is that the TFW program’s brand is severely damaged and should be retired. In its place, smaller, targeted programs would make sense. Two, in particular, are worth considering. Retaining a separate agricultural temporary visa program has merits. These types of jobs are unique in that they are geographically remote and seasonal by nature. Filling them with Canadian citizens or permanent residents may require large increases in wages, putting many farm enterprises at risk. Having a standalone global talent temporary visa program would also benefit the Canadian economy so long as the earnings are above the Canadian average. Such a program should be limited in size to minimize any negative effects on wages of higher-income Canadians. The program could prioritize the highest-earning jobs, as has been suggested for the
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