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Sorcerer’s apprentices: Unpaid interns and temporary foreign workers

These are stories Report on Business is following Monday, April 28, 2014.

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Growing unease
Mounting controversy over the Temporary Foreign Workers program and unpaid internships highlights how the system as we knew it is breaking down, at least in some quarters.

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Here's how it's supposed to play out: We have the right to work for fair pay, while our kids are being schooled and trained to also work for fair pay.

But here's how it is playing out: Some companies instead want cheap or free labour in these exceptionally uncertain times.

This comes at a time when youth unemployment is raging at more than 13.5 per cent, and national unemployment is just shy of 7 per cent. More than 1.3 million people can't find work, about 385,000 of them young Canadians. Wage hikes, in turn, are running at just more than 2 per cent, compared to what Bank of Montreal research shows would normally be about 3 per cent at the current jobless rate.

First, let us not tar everyone with the same brush, and remember that investigations into alleged abuses have yet to be completed.

But to recap, federal Employment Minister Jason Kenney is cracking down on the TFW program, a scheme meant for companies that can't find Canadians with the right skills. (Like how to flip burgers.)

At the same time, the province of Ontario is moving against unpaid internships.

Where the TFW is concerned, Canada has shut down some parts of the program for now. McDonald's Corp., the fast-food company at the heart of the current controversy, though not alone, has suspended use of the scheme while an independent audit is conducted.

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At the same time, though, the CBC says that it got its hands on the recording of a conference call during which John Betts, the chief of McDonald's Canada, reportedly told franchisees that the "attack" on the fast-food chain is "bullshit."

In a statement, McDonald's did not address the comment in question, saying that it was a "confidential" call. It did, however, express its sincere "regret" if anyone was offended by the comments.

"McDonald's Canada has built a strong reputation for being open, honest and transparent in all our communications and dialogue with consumers," the company said, adding it moved quickly and aggressively to probe allegations and would not tolerate abuse of the system.

"We do not shy away from accepting responsibility and taking ownership in areas where we can do better. We recognize that we have work to do to make things right with regard to our use of the Temporary Foreign Worker program."

Then there's the issue of unpaid internships, which Toronto law professor David Doorey describes as "surprising complicated" given the issues.

"On the one hand, employers could easily exploit a law that permitted them to simply call people interns and thereby avoid employment standards laws," the York University professor said.

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"Also, unpaid interns could replace real jobs, which is not good for the economy," he wrote this weekend in his Law of Work blog.

"On the other hand, the state wants young people to gain work experience, and some employers who would not otherwise provide workers with experience to develop skills might allow interns to gain some experience by hanging around the workplace if they don't have to pay them. Therefore, the state is trying to write a law that protects against the first two 'bad' aspects of internships while permitting the third 'good' aspect. Try writing a law that does that."

While the issues are complex, "I suspect there are a lot of employees in Canada being improperly called 'interns' by their employers," he added.

Bank of Montreal's chief economist has yet another take on all of this.

"Over the 12 years from the start of 2002 (the beginning of the last cycle, and the low point for the C$) to the end of 2013, Canadian unit labour costs rose 98 per cent in US$ terms, while U.S. costs edged up 10 per cent," Douglas Porter said.

"Deconstructing that massive relative deterioration in competitiveness among its three factors reveals that 1) faster wage gains in Canada versus the U.S. accounted for 2 per cent of the move, 2) weaker productivity in Canada accounted for just over 28 per cent of the move, and 3) the surge in the Canadian dollar accounted for nearly a whopping 70 per cent of the move," Mr. Porter said in a research note to clients.

"Yes, weak productivity is a problem, but the currency has been the competitive killer."

Barrick-Newmont talks end
Merger talks between Barrick Gold Corp. and Newmont Mining Corp. are over, a development that could lead Barrick to launch a hostile bid for its American rival, The Globe and Mail's Rachelle Younglai reports.

Barrick had been trying to renew talks with Newmont, a source had said. But Barrick said today that Newmont's board of directors decided to "terminate" their discussions.

"Although Barrick believes the interests of shareholders are best served through the completion of this business combination, Newmont's board has determined that the interests of Newmont's shareholders are best served by remaining independent," Barrick said in a statement.

The companies, the world's two largest gold producers, have discussed merging at least two other times over the last two decades.

Pfizer rebuffedd
For AstraZeneca PLC, a takeover by Pfizer Inc. is too bitter a pill to swallow at this point in the game.

Pfizer, the American pharmaceutical giant, disclosed today that it approached its rival about the possibility of a merger valued at almost $100-billion (U.S.), but was rebuffed after "limited high-level discussions" that ended in mid-January.

So it went back late last month, and was again pushed away, having proposed a cash-and-stock bid of £46.61, or $76.62.

AstraZeneca said today, in response to the Pfizer announcement, that the offer "very significantly undervalued" the company and its outlook.

"AstraZeneca's share price has performed strongly and consistently since late last year as AstraZeneca has continued to deliver on its clearly stated strategy, in particular the strengthening of its diabetes franchise and the progression of its oncology pipeline," the company said.

Bank of America shares sink
Shares of Bank of America Corp. sank today after the U.S. bank suspended its $4-billion (U.S.) stock buyback plan and a hike in its quarterly dividend.

The bank today disclosed a "downward revision" to its regulatory capital amounts and ratios because of what it said was a faulty adjustment related to how it treated certain structured notes it got in its takeover of Merrill Lynch & Co. in 2009.

Bank of America said it alerted the Federal Reserve when it learned of the issue and, thus, suspended its capital plans at the request of the U.S. central bank.

It will resubmit plans, it added.

Among what it had planned was the stock buyback program and an increase in its quarterly dividend to 5 cents from a penny.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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