Despite their claims, companies that hire temporary foreign workers are unlikely to save much money in the long term.
The growing use of the federal government’s temporary foreign workers program has led to much discussion about the social costs of outsourcing entry-level jobs to non-Canadians, as well as speculation about how these companies can mitigate the reputational damage caused by their actions.
The companies involved say they can’t find Canadians who are able or willing to perform the required tasks, although some observers argue that these companies are simply unwilling to pay market prices for skilled workers.
Interestingly, there appears to be an assumption underlying these discussions that these companies benefit, either strategically or financially, from being able to avoid hiring permanent entry-level employees. This assumption is, in fact, debatable.
Although companies will say they hire temporary foreign workers to reduce their operating costs, these arrangements may be more expensive than one might think when all the true costs are taken into account. A revolving door of employees means that companies accrue costs due to lost productivity every time new employees start (over and over again). The firm must also incur legal and management fees associated with finding and hiring intermediary agencies that can recruit the new workers; if this must be done overseas, this process will be more complicated and expensive to arrange. Overall, the payroll costs may go down, but many of the HR costs remain.
Aside from short-term costs, there are other, longer-term opportunity costs that should be taken into account. By hiring foreign temporary workers, companies fail to build a “pipeline” or internal labour market of employees who can work their way up. Someone hired as an entry-level worker and treated well is in a good position to eventually become an effective manager because he or she has learned the business from the inside out. Companies that fail to retain their entry-level workers have lost the opportunity to create a cadre of well-rounded employees who can move on to mid-level management positions, especially as an organization expands into new areas.
The workers hired through the temporary foreign worker program are often dedicated and hard-working individuals who are going to great lengths to find employment that matches their skills. Unfortunately, by definition, they’re only employed by the company for a limited amount of time. By the time these workers are trained on local practices and gain significant experience, they’re forced to leave. Any innovations or process improvements they’ve developed in the time they worked at the company walk out the door with them. Of course, given their newly earned experience, they’re now likely to be hired by the firm’s competitor.
If a company is relying too heavily on temporary foreign workers, it may be symptomatic of a more serious organizational problem. Organizations not willing to recruit and train entry-level workers may not be providing adequate training for employees in other roles. If a company can’t develop a strategic plan for the recruitment and selection of local employees, they may not have the capacity to develop other strategic planning functions. Many firms face substantial shareholder pressure for immediate returns on investments, but a short-term focus may cost investors in the long term.
The temporary foreign worker program is counterproductive. It’s too focused on filling short-term gaps in the labour market, and it discourages Canadian firms from taking the steps necessary to be innovative and competitive. If the government is truly committed to training, developing and supporting working Canadians, it will cancel the foreign temporary worker program and remove this disincentive to investing in Canadians. The government, instead, can help create a skilled work force by providing adequate funding for Canadian colleges and universities.
Catherine Connelly is a Tier II Canada Research Chair in Organizational Behaviour at McMaster University’s DeGroote School of Business.