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Apr 29 2013

New TFW rules are politics, not good policy

Today, Federal Immigration Minister Jason Kenney announced that the Government of Canada was tightening the rules for companies wishing to use Temporary Foreign Workers (TFWs) in their businesses.  I found out about this when Joan Crockett, another Calgary MP, tweeted:

 

 

JoanTweet

 

Now, this isn’t the only change to the regulations. Kenney also announced:

  • Employers will also have to show they have a training and recruitment plan to transition to an all-Canadian workforce.
  •  temporarily spiked a pilot project that provided accelerated labour market opinions
  • new fees for labour market opinions and foreign worker permits

Here is the problem.  Alberta and Saskatchewan have unemployment rates below 5%.  Considering the welfare state in Canada and the lack of market forces in education to drive young people towards the jobs the economy is creating, 5% unemployment is essentially full-employment.  There are lots of people who choose not to work, and many more who have failed to gain the skills the economy is demanding.

Is there significant unemployment in other parts of Canada?  Yes, but this isn’t going to fix that.  This will simply increase the cost of doing business in Alberta and Saskatchewan.  Unless the government also makes it more attractive for the unemployed in Ontario, Quebec or Atlantic Canada to move west (i.e. by making it less attractive to be on the dole).

But the bigger problem is that the education system in Canada has failed miserably to respond to the market.  We continue to flood the market with university graduates with worthless liberal arts degrees, while we continue to be short of accountants, engineers, and skilled tradespeople.

The old TFW program had a rule that stated that companies could pay TFWs no less than 85% of the prevailing wage for a job in Canada.  This margin was intended to consider that the cost of finding and importing foreign labour was nontrivial, and that the total cost of hiring a TFW would not exceed the cost of employing a Canadian.   With the new rule, TFWs will cost substantially more than Canadians – except that there are not enough Canadians willing to do the work.  Companies will still need TFWs – but they will be forced to go through a more expensive and lengthy LMO process to hire them – but they will hire them.  And this will drive costs for business up by 15-25%.

In some industries, this will destroy the economics of the business.  Major capital projects, which are extremely sensitive to capital costs, labour costs and time will suddenly look less attractive.  Those dollars, instead of being invested in Canada, will move elsewhere.

Now you might ask why the Government of Canada would do such a thing – damaging the very businesses that the Conservative party supposedly is friendly with.  The answer is obvious.

In recent weeks, the Royal Bank of Canada got into some PR trouble when it admitted to planning to outsource jobs to an Indian subcontractor, and was using the TFW program to help transition the work out of Canada.  This did not go over well in suburban Canada, and the Conservatives are particularly sensitive to this at the moment because of the supposed appeal of Justin Trudeau to those same voters.

The problem is, these policies won’t help those voters get jobs.  It will damage the competitiveness of Canadian business and drive up unemployment.   Political foolishness.

Canada needs leaders like Margaret Thatcher, who actually stood for something other than simply attaining power.  I thought Stephen Harper could be that guy.  I was wrong.

FYI – I’ve sent this directly to Minister Kenney to express my displeasure.

 

 

 

 

 

 

 

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3 comments

  1. W R

    The old TFW program had a rule that stated that companies could pay TFWs no less than 85% of the prevailing wage for a job in Canada. This margin was intended to consider that the cost of finding and importing foreign labour was nontrivial, and that the total cost of hiring a TFW would not exceed the cost of employing a Canadian.

    The 15% (high skill) and 5% (low skill) wage variance was put into place to placate employers who complained that the LMI wage Service Canada used as the base wage for a TFW was too high and in some cases exceeded what they paid Canadians. To get approval to use the wage variance in the normal LMO process, the employer had to “prove” (and believe me that proof was negligible) to Service Canada that they employed ONE Canadian in the same job, making the same wage for which they were seeking a TFW. Then along came the ALMO process. Totally attestation based. Employers and their representatives were then automatically doffing 15% of the top because no proof was required. There is also a little known piece of the program whereby employers can apply to cut TFW wages even further.
    I will concede that that there are some labour shortages in certain high skilled trades and professions and for that the TFWP has a place. However, the so called “labour shortage” is by and large a colossal scam. Someone has yet to explain to me what benefits there are to the economy and what new skills are being introduced to the Canadian labour market by hiring thousands upon thousands of TFWs to pour coffee and serve doughnuts. Or for construction labourers that “must speak Punjabi”
    Simply put, the mantra has become “If I build it, the government will supply the workers”.
    This is not how you grow an economy. No consideration is given to the actual sustainability of a business or to paying a fair market wages to workers. The TFWP is a program which gives the employer unfettered access to foreign labour. The program sets the wage (based on limited data) and in the case of the wage variance allows the employers to cut those wages. There is no enforcement mechanism or monitoring of basic program guidelines. Service Canada takes everyone’s word that they’re behaving themselves and treating their workers properly (how quaint). All one has to do to qualify for the program is advertise the job for 2 weeks say no one applied, have high turnover or say you can’t find a Canadian that is willing work at the government wage. That’s not a labour issue it’s a retention issue and if you want to retain workers you have to pay them more. That’s the cost of doing business in a market where workers are in high demand. The market will eventually sort out wages. The laws of supply and demand apply to the workforce too. Or is that for those “other” capitalists?
    I won’t even comment on the conduct of recruitment agencies, most of which are run by foreign nationals. The TFWP is a license to print money.
    I for one welcome the new guidelines there a good “first step”.

    1. Taliesyn

      The problem with your view is that you view the Canadian market as isolated from the rest of the world. The current labour shortage in Alberta and Saskatchewan is very real (e.g. the free market is paying more than minimum wage for no skill jobs). If we force business to pay ever more to lure unwilling Canadians across the country, to pay to retrain workers rather that putting that onus on the workers themselves, our industries will be uncompetitive compared to foreign operations. If I can get a better return opening a factory in the US or India than Canada, I should do that. Canada must try to outcompete the rest of the world. Capital projects cannot afford to pay 10-15% more for labour – the economics don’t support that and the investments won’t happen. Forcing small business to pay $15/hr to serve coffee is ridiculous. They are forced to raise prices which makes all customers poorer while getting no added value.

      We need to consider Canada as part of the global market, and remember that increasing wages too fast isn’t helping anyone in the long term.

  2. Cynical Bard

    So how does one have a program to train workers when no workers will apply for the job.

    The original long comment seems to reflect the idea that any business is a bottomless pit of money, and can affordf to pay any amount for wages, and of course never has to raise their prices.

    We have seen examples of governments trying to stimulate the economy. Take th issue of green jobs, where we will all have good jobs with renewable power, yadda yadda. Spain is a good example. An internal study, by a Spanish economist shows that every “green job” created destroyed two regular jobs. Spain now has 27% unemployment . Will more green jobs fix that problem.

    Ontario is rushing down that same road. And the Feds will not answer a question about he energy efficiency of ethanol production, at least not showing enough details to know if they actually did a study.

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