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Temporary Foreign Workers in Canada: Are They Really Filling Labour Shortages?

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  • Dominique Gross

    (Simon Fraser University)

Abstract

Since easier access to a large supply of foreign labour might generate undesirable incentives on the part of both employers and prospective workers, a Temporary Foreign Worker (TFW ) program requires careful design. Failure at any stage of the process – at time of hiring, during employment, or at the end of the contract – is likely to create significant negative effects on domestic workers and, in the medium term, on the temporary foreign workers themselves. When choosing between domestic and foreign workers, employers are naturally concerned about labour costs and labour productivity. Therefore, a key design feature of any TFW program is the hiring conditions it imposes on employers – conditions that must deal with regional or occupational labour market shortages. Between 2002 and 2013, Canada eased the hiring conditions of TFWs several times, supposedly because of a reported labour shortage in some occupations, especially in western Canada. By 2012, the number of employed TFWs was 338,000, up from 101,000 in 2002, yet the unemployment rate remained the same at 7.2 percent. Furthermore, these policy changes occurred even though there was little empirical evidence of shortages in many occupations. When controlling for differences across provinces, I find that changes to the TFWP that eased hiring conditions accelerated the rise in unemployment rates in Alberta and British Columbia. The reversal of some of these changes in 2013 is welcome but probably not sufficient, largely because adequate information is still lacking about the state of the labour market, and because the uniform application fee employers pay to hire TFWs does not adequately increase their incentive to search for domestic workers to fill job vacancies.

Suggested Citation

  • Dominique Gross, 2014. "Temporary Foreign Workers in Canada: Are They Really Filling Labour Shortages?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 407, April.
  • Handle: RePEc:cdh:commen:407
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    References listed on IDEAS

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    Cited by:

    1. Michel Beine & Serge Coulombe, 2018. "Immigration and internal mobility in Canada," Journal of Population Economics, Springer;European Society for Population Economics, pages 69-106.
    2. Bredtmann, Julia & Martínez Flores, Fernanda & Otten, Sebastian, 2016. "Remittances and the brain drain: Evidence from microdata for Sub-Saharan Africa," Ruhr Economic Papers 654, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    Economic Growth and Innovation;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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