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Employment Minister Jason Kenney is reflected on a screen during a news conference with Immigration Minister Chris Alexander in Ottawa, June 20, 2014. (CHRIS WATTIE/REUTERS)
Employment Minister Jason Kenney is reflected on a screen during a news conference with Immigration Minister Chris Alexander in Ottawa, June 20, 2014. (CHRIS WATTIE/REUTERS)

Don DeVoretz

New foreign-worker rules a solution in search of a problem Add to ...

Don DeVoretz is a professor of economics at Simon Fraser University

Employment Minister Jason Kenney has incorrectly responded to recent policy studies and negative media coverage, which had cast a shroud of economic doom over Canada’s very successful temporary foreign worker (“TFW”) program. Mr. Kenney has raised the processing cost to potential employers and limited the geographical scope of the unskilled portion of the program to areas with less than 6 per cent unemployment. Furthermore, unspecified changes now loom for the live-in caregiver program. These efforts to curtail the TFW program underestimates the economic benefits derived from TFW’s, including the less skilled, while overstating the costs imposed by their presence.

The economic success of any immigration program requires that net economic benefits flow to the welcoming country from the increased presence of migrants. In addition, all labour market policy interventions result in some economic actors gaining benefit while others may lose. A policy intervention can be judged a success if the aggregate gains outweigh the losses. For those individuals who suffer the costs of a policy intervention, some of the realized economic gains can compensate their loss. In short, one does not curtail an economically successful labour market policy such as Canada’s TFW program when a portion of these benefits can be redistributed to offset any losses incurred by a minority of Canadian residents.

Canada’s TFW program has a long, successful history and, unlike elsewhere, has not produced a legacy of undocumented workers. Two categories of lower-skilled TFW workers clearly impose no costs on resident Canadians who in turn enjoy substantial benefits, namely seasonal agricultural workers and live-in caregivers. A third group, restaurant and hospitality TFWs also generate significant economic activity that is of net benefit to resident Canadians – mostly in Alberta. Wisely, Mr. Kenney has left the historically successful seasonal agricultural worker program alone. However, he has promised a review of the equally successful live-in caregiver program and as noted has incorrectly restrained the hiring of restaurant TFWs in areas with lower unemployment rates.

Each of these lower-skill TFWs produce a service and/or a good that may never have been produced in their absence. Agricultural workers have been instrumental in the development of a robust, export-oriented wine industry in Ontario and British Columbia. Live-in caregivers benefit many Canadian families, since few Canadians engage in this type of work and the family employer is then able to enter the Canadian labour market. The presence of these two types of TFWs produces economic benefits for Canada in terms of faster industry sector growth and increased government tax revenue.

How are economic benefits generated by the unnecessarily maligned hospitality and restaurant TFWs? These benefits arrive in two forms. First, the vast majority (70 per cent circa early 2014) of these TFWs reside in Alberta, where the restaurant and accommodation sector have the largest and fastest growing job vacancy rate of any industry in Canada. The province’s labour market is characterized by high wages and low unemployment. Unless unemployed workers migrated from the rest of Canada to work for minimum wage in Alberta’s hospitality and restaurant sector, many of Alberta’s existing hotels and restaurants would not be in business. Since low-priced restaurants provide a benefit to Albertans the loss of these restaurants would deprive Albertans of an important economic benefit.

Given the benefits provided by Canada’s lower-skilled TFW’s, why has the public’s perception of the program been negatively skewed? First, rare and isolated abuses of TFWs have been reported by the media. The solution to these transgressions is to fine the offending firms, and not to curtail a successful TFW labour program. What of the more fundamental research produced by C.D. Howe institute which claims unemployment effects owing to the TFW program? Aside from the questionable methodology of analyzing in the aggregate a diverse skill-based TFW program, and a pilot program offering accelerated TFW placement that is not a current government policy option, one must question why employment effects were cited as the sole criterion of the economic success or failure of Canada’s TFW program. Clearly a more encompassing appreciation of the net economic benefit accruing to Canadians would have led to more balanced conclusions about Canada’s current TFW program.

Canada in 2014 has the world’s most comprehensive TFW program for which the economic and employment benefits to Canadians far outweigh the costs. The costs have been primarily associated with isolated instances of Canadians denied jobs in industries using the program. The policy solution to these negative effects is new government regulations that financially penalize employers guilty of this abuse. Mr. Kenny’s has rather chosen to focus his policy initiatives on the unskilled portion of the TFW program through an unemployment criteria and higher processing costs which will ironically not affect Albertan employers, given their low unemployment rate and powerful economy. In a sense, Mr. Kenny has attempted to shut down a portion of the TFW program in the rest of Canada which, to a large extent, does not exist.

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