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The Wage Effects of Restricting Temporary Foreign Workers: Evidence from Canada’s 2014 TFWP Reforms

Author

Listed:
  • Chen, Wen-Hao

    (OECD)

  • Fang, Tony

    (Memorial University of Newfoundland)

Abstract

This study examines the labor market impacts of Canada’s 2014 reforms to the Temporary Foreign Worker Program (TFWP), which introduced stricter limits on hiring low-skilled foreign workers. Using a difference-in-differences framework with Labour Force Survey data from 2005 to 2019, we compare wage outcomes for domestic workers in TFW-intensive occupations to those in similar low-skill jobs unaffected by the reforms. Robustness checks— including event study analysis, propensity score matching, placebo tests, and additional validation with Census data (2006, 2011, 2016)—consistently show that the reforms led to a statistically significant increase in wages for affected domestic workers. The estimated impact ranges from 3.7% to 4.5%, suggesting that restricting access to temporary foreign labor modestly improves wage outcomes for low-wage Canadians. These findings offer timely insights amid renewed policy efforts to tighten immigration, highlighting the potential benefits of targeted reforms while cautioning against broader restrictions that could undermine labor market responsiveness and sectoral needs.

Suggested Citation

  • Chen, Wen-Hao & Fang, Tony, 2025. "The Wage Effects of Restricting Temporary Foreign Workers: Evidence from Canada’s 2014 TFWP Reforms," IZA Discussion Papers 18240, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp18240
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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