Deregulation of the Temporary Foreign Worker program allowed many employers to increase temporary foreign worker hires. It’s been so successful that many young Canadians can’t find summer jobs.
Ramon Ferreira/Toronto Star illustration using Dreamstime images
Justin Trudeau’s government radically transformed Canada’s temporary foreign worker program. Young people and low wage workers are paying the price
Traditionally, if a company can’t find someone to work for $17 an hour, they either need to raise wages or do without that position. However, the federal government has now provided a third option: temporary foreign workers.
Deregulation of the Temporary Foreign Worker program allowed many employers to increase temporary foreign worker hires. It’s been so successful that many young Canadians can’t find summer jobs.
Ramon Ferreira/Toronto Star illustration using Dreamstime images
If you know a young person who struggled to find a summer job they are not alone. This has been the worst summer on record for youth employment outside of the pandemic. Many factors — from a weak economy to a population boom of young people — are at play with one of the largest being the federal government’s 2022 decision to deregulate the low-wage stream of the temporary foreign worker program.
On April 4, 2022, a mere 13 days after the Liberals and NDP signed their Supply and Confidence Agreement, the federal government announced arguably the largest deregulation of the Temporary Foreign Worker program in Canadian history. The program’s low-wage stream, which allows employers not in the agricultural industry (they have a separate stream) to bring in workers and pay them wages under the provincial median (currently $28.39 in Ontario), was radically transformed. The government removed the rule that employers could only bring in workers in some low-wage occupations if the local unemployment rate was less than six per cent allowing firms in areas of high unemployment to access the program. Companies had been limited to having only 10 per cent of their workforce be low-wage temporary foreign workers; this was raised to 20 per cent. In seven sectors, including accommodation and food services, this was raised to 30 per cent.
The government argued that the plan was necessary to reduce labour shortages, noting that "much of the unmet demand is in low-wage occupations." Accommodation and food services were cited as having the largest shortages. Business groups, such as the Canadian Federation of Independent Business, applauded the move, particularly the removal of the six per cent rule and raising the cap for low-wage employers. Companies responded by rapidly expanding the use of the program. The number of approvals for the low-wage program more than doubled in 2022 alone rising from an estimated 30,000 to more than 80,000. The total number of temporary foreign worker positions approved in all streams rose by 52 per cent in 2022 alone to 227,000. A Bloomberg report found that Tim Hortons' franchisees in Ontario hired 714 temporary foreign workers in 2023, up from just 59 in 2019.
While this deregulation worked as intended, it came at the expense of low-wage workers in Canada, as it reduced employment opportunities and suppressed wages. To bring in a temporary foreign worker, employers must show that there are no qualified domestic applicants at the “prevailing wage.” A coffee shop owners’ inability to find workers at the current wage is plausible in places with low unemployment. However, the government’s reforms allowed employers in high-unemployment areas to access the program as well. But the term “prevailing wage” is important here. In a capitalist society, if a company cannot find someone to work for $17 an hour, they either need to raise their wage to attract more workers or do without. But the federal government has given them a third option, temporary foreign workers, which prevents employers from having to offer raises to attract new workers.
Liberals and New Democrats once understood that the low-wage temporary foreign worker program works by suppressing wage increases. When the Conservative Harper government deregulated the program, Liberal MP Scott Brison asked in the House, “Does the minister recognize that some economists are linking the growth in the number of low-skilled temporary foreign workers under the Conservatives with higher youth unemployment in Canada and wage suppression for Canadian youth?” And Liberal leader Justin Trudeau called on the Harper government to “reverse its wage-suppressing policies and fix its broken program.”
Between the increase in the number of temporary foreign workers and international students, young workers are having to compete harder for jobs, and many are coming up empty-handed. The employment rate for 15- to 19-year-olds dropped from 55.3 per cent in July 2022 to 46.4 per cent this July, the lowest July on record outside of the lockdown year of 2020. The trend for 20- to 24-year-olds is similar, with this summer being the worst non-pandemic year for employment since 1997. Had the employment rates for these groups stayed at 2022 levels, an additional 200,000 15 — to 19-year-olds and 80,000 20-to 24-year-olds would have jobs this summer. The economists that the Liberals cited in 2014 were right then, and they are right today — deregulation of the low-wage temporary foreign worker stream suppresses wages and increases youth unemployment.
The federal government must phase out the non-agricultural low-wage stream of the temporary foreign worker program. The harms it causes to workers far outweigh the benefits to corporations.
Mike Moffatt is the Senior Director of the Smart Prosperity Institute and co-host of the podcast The Missing Middle.
