How Canada became a hotbed for low-wage foreign labour

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Just under a decade ago, the Temporary Foreign Worker program was reeling from a string of controversies – over unpaid wages, the displacement of Canadian workers and the exploitation of migrants.

Justin Trudeau, then the leader of a Liberal Party in third place, penned an op-ed in the Toronto Star in 2014 that outlined a fix for the program. For one, he said it needed “to be scaled back dramatically over time, and refocused on its original purpose: to fill jobs on a limited basis when no Canadian workers can be found.”

But since Mr. Trudeau’s Liberals have come to power, the country has doubled down on its use of foreign labour. At the end of 2021, more than 775,000 people from abroad had temporary work permits, an increase of 92 per cent from 2015, and 600 per cent from 2000.

The TFW program accounted for about 82,000 permit holders, having peaked in 2009. The rest came from the International Mobility Program, which has seen explosive growth over the past two decades.

Following a series of policy decisions, the use of temporary foreign labour is poised to grow even more. This past spring, Ottawa expanded the scope of the TFW program, largely to help employers access more low-wage labour, and for longer.

The move was aimed at alleviating labour shortages and was applauded by business lobby groups. Recent figures show employers are ramping up their use of the TFW program to fill job vacancies.

But many economists and labour groups panned the decision for several reasons: It could help companies to hire cheap labour, rather than make productivity-enhancing investments. There’s also a greater potential to suppress wages, and employers may rely more on workers with weak labour rights and little mobility.

“When you have temporary foreign workers, they’re under contract with their current employer, and they have no right to go anywhere else,” said Mikal Skuterud, an economics professor at the University of Waterloo. “That means they can be exploited very easily.”

The changes

In April, the Liberals announced a slew of changes to the TFW program.

Notably, employers in most industries could hire up to 20 per cent of their work force through the low-wage stream of the TFW program, up from 10 per cent. In seven sectors with chronic labour shortages – including hospitals, construction and hospitality – the cap was moved to 30 per cent for one year.

Ottawa scrapped the limit on how many low-wage positions employers in seasonal industries (such as fish and seafood processing) could hire, and those workers can now stay for up to 270 days a year, up from 180.

Before hiring a TFW, a company must submit a Labour Market Impact Assessment, showing a need for foreign labour and that Canadians or permanent residents are not available to fill the job. As part of the recent changes, LMIA approvals will now be valid for 18 months, up from nine.

If a company is offering a wage to a temporary foreign worker below the provincial or territorial median hourly wage, then it must apply for an LMIA under the low-wage stream. Among the provinces, the median hourly wage ranges from $21.63 in Prince Edward Island to $28.85 in Alberta.

Who uses the TFW program?

The TFW program is largely used to find farm workers.

From 2017 to 2021, employers received approval for more than 312,000 positions in the program’s agricultural streams, compared to 93,000 positions approved in the high-wage stream and roughly 89,000 low-wage approvals, The Globe and Mail found in an analysis of data from Employment and Social Development Canada (ESDC). The global talent stream, which launched in mid-2017 as a pipeline for tech talent, was tapped for about 15,000 jobs.

While farms tend to be the largest users of the program, another company stands out: Amazon.com Inc.

The tech giant was approved for 2,181 jobs from 2017 to 2021, the fourth most of any company in that span. About 90 per cent of those positions were software engineers and designers. The company solely used the high-wage and talent streams of the program.

In its use of the TFW program, Amazon differs greatly from its big-tech peers. The Globe’s analysis shows that Shopify Inc. received approval for about 360 positions over five years, Google Inc. for 60 and Meta Platforms Inc.’s Facebook for just three.

The figures do not reflect how many people were hired through the TFW program. After an LMIA approval, foreign workers must get the required permits to start employment in Canada. The ESDC numbers cover the first part of the process: employer demand. (ESDC removes employers of caregivers and business names that include personal names from its public data set of positive LMIAs.)

Meika Lalonde, an immigration lawyer in Vancouver who’s worked with companies seeking labour through the high-wage stream, said businesses are inclined to fill positions they’re approved for. It’s “administratively burdensome” to file an LMIA, she said, and costs $1,000 per worker. From 1973 to 2013, there was no application fee. The added cost acts as a “big deterrent” to companies filing for positions they’re hesitant to fill, she said.

Federal records show Amazon was actively lobbying the government to “ensure the availability” of high-skilled tech workers before the expansion of the TFW program.

Amazon and others will benefit from the overhaul: The duration of employment for workers hired through the high-wage and global talent streams was extended to three years from two.

In a statement to The Globe, Amazon said its high-skilled corporate tech roles, including software engineers, are primarily filled by domestic candidates. When it chooses to hire skilled immigrants, the company says it works closely with its employees to help get them permanent residency.

Who hires low-wage TFWs?

Cooks are highly sought after in the TFW program. From 2017 to 2021, employers received approval to fill more than 20,000 cook positions, making it the No. 3 role of TFW demand, behind general farm workers and greenhouse workers. Food service supervisors – such as shift managers at fast-food restaurants – clocked in at No. 5, with nearly 15,000 approved positions. Most of these hospitality roles were in the low-wage stream.

Northland Properties Corp., a Vancouver-based parent company of several hotel and restaurant chains, is the top pursuer of temporary foreign labour for restaurants, The Globe’s analysis shows. Among Northland’s various brands, including the Denny’s restaurant chain, the company received the go-ahead to hire more than 600 workers in food services from 2017 to 2021 – all at low wages.

A high-profile lawsuit was filed against Denny’s in 2011 by dozens of temporary foreign workers from the Philippines, who sought compensation for lost wages, reimbursement of travel costs and punitive damages. Northland, which is owned by the billionaire Gaglardi family, settled with the workers for $1.4-million in 2013.

It’s not only fast-food chains looking to the program. McEwan Enterprises Inc., owner of several posh restaurants, including Bymark in downtown Toronto, was approved for 42 positions last year via the low-wage stream: 36 cooks and six food-service supervisors. In December, McEwan Enterprises reached a settlement with a landlord and exited creditor protection, following years of financial losses that worsened during the COVID-19 pandemic.

Agriculture workers generally earn low wages, as well. Their pay is dictated by the commodity and jurisdiction of employment. Starting wages can be as low as $11.81 an hour for many labourers in Saskatchewan.

The controversies

Migrant workers in Canada were especially vulnerable to COVID-19.

For example, there was a coronavirus outbreak at Scotlynn Sweetpac Growers, a vegetable farm in Ontario, in late May, 2020. Testing revealed 196 positive cases out of 216 workers. Of those, three people were hospitalized.

Juan Lopez Chaparro, a seasonal worker from Mexico, ultimately died. While Mr. Chaparro was bedridden for several days before hospitalization, he was not isolated from others. Anywhere from eight to roughly 50 workers lived in the farm’s bunkhouses, allowing the airborne virus to spread easily.

Twenty-seven charges were laid against Scotlynn and its proprietor, Scott Biddle. Scotlynn pleaded guilty to one count of failing to take reasonable precautions to protect employees. In July, it was fined $125,000 by the Ontario Court of Justice, plus a 25-per-cent surcharge.

Essential but expendable: How Canada failed migrant farm workers

Like many farms, Scotlynn is heavily dependent on foreign labour. Between 2017 and 2021, it received approval for nearly 1,800 hires through the TFW program, the seventh most of any employer in Canada, The Globe’s analysis shows. Around 400 of those positions were approved in the fourth quarter of 2021 – after the fine was levied.

Before the pandemic, the TFW program was a frequent source of controversy. In 2014, for instance, an employee of a McDonald’s franchise in Victoria alleged local job applicants were being passed over in favour of foreign workers, leading to a federal probe of the franchisee’s work practices.

The TFW program was driving up unemployment rates in Alberta and B.C. as it displaced local workers, the C.D. Howe Institute said in a 2014 report.

Jason Kenney, then employment minister for the federal Conservative Party government, suspended the restaurant industry’s access to the TFW program in 2014. The moratorium was lifted less than two months later as the government unveiled new regulations for the program.

Those changes included limiting TFWs to 10 per cent of a company’s work force and refusing LMIA applications for low-wage positions in retail and hospitality in regions with an unemployment rate of 6 per cent or higher.

The Liberals changed both rules in April.

The economic impacts

Labour advocates say foreign workers are ripe for exploitation – in large part, because the lure of permanent residency makes them less likely than Canadian-born workers to complain.

“The appeal of the TFW program to employers is much more than wages. It is the economic value of permanent residency status to the employee,” said Prof. Skuterud. “Employers recognize that, and in some ways they are profiting off this economic value of PR status.”

Lower-skilled temporary foreign workers have usually had higher rates of transitioning to permanent residency than higher-skilled workers, according to a recent study from Statistics Canada. (The study encompasses all temporary foreign workers, not solely those from the TFW program.)

Migrant workers are “fully aware that the less they complain, the more likely they are to make that successful transition,” Prof. Skuterud said.

Wages are another point of contention. With a rush of new labour supply in low-wage industries, employers can avoid raising wages to recruit workers or investing in new technologies to improve productivity, a perennial concern for the Canadian economy.

“How’s this really helping productivity?” asked Andrew Griffith, a former director-general at the federal immigration department. “The government is making it easier for [companies] to bring in more workers and just keep doing the same thing with more labour, rather than trying to really invest in productivity.”

Today’s labour market

The surge in temporary foreign labour has been mostly driven by the International Mobility Program. It includes everything from company transfers from abroad to postgraduate work permits for international students.

Crucially, the IMP does not require employers to file an LMIA that demonstrates a need for foreign labour, and this helps fuel the program’s growth.

At the end of 2021, the number of work permit holders in the two programs (TFW and IMP) was equivalent to 4 per cent of total employment in Canada, having risen from less than 1 per cent in the early 2000s.

That’s not the extent of foreign labour, either. In recent years, postsecondary institutions in Canada have ramped up their intake of foreign students, who mostly don’t need work permits to secure jobs while they study.

The number of international students with T4 earnings – that is, employment income – has skyrocketed to 354,000 in 2019, from 22,000 in 2000, according to Statscan. Their labour participation rate jumped to 50 per cent from 18 per cent. International students at Canadian colleges are the largest pocket of supply, accounting for about 174,000 workers, or half of foreign students with earnings.

And they’re set to become an even bigger part of the labour force. In October, the federal government announced that most international students will be allowed to work more than 20 hours a week off-campus while class is in session, marking a temporary removal of the cap on work hours.

Several economists have said foreign students increasingly form the backbone of low-wage labour.

“Where I start to get concerned is you’re seeing the emergence of diploma mills” in postsecondary education, said Mike Moffatt, an assistant professor at Western University’s Ivey Business School and a senior director at the Smart Prosperity Institute. “What we’re basically bringing in a lot of is, essentially, temporary foreign workers under student permits to work fast-food jobs and things like that.”