(Reuters) – Canada will not allow restaurants to hire more temporary foreign workers until the federal government completes a review of a program designed to allow employers to hire foreigners to fill jobs for which no qualified Canadians are available.
The moratorium, which only affects food-service businesses, follows a decision by the Canadian unit of McDonald’s Corp earlier this week to suspend all job applications made under the Temporary Foreign Worker Program.
The government announced the moratorium in a statement late Thursday after starting an investigation into alleged abuses of the program within the food-services industry.
Jason Kenney, the minister for employment and social development, said officials are no longer processing new applications from food-service businesses and will stop restaurants hiring workers for unfilled jobs even if applications have already been approved.
Kenney said the government was considering unspecified reforms of the program to make sure employers recruit and train Canadians for jobs.
“Our government has been clear,” he said in the statement. “Canadians must have the first chance at available jobs.”
Tim Hortons Inc, which operates more than 3,500 doughnut and coffee shops in Canada, would not immediately comment on the impact of the moratorium on its operations, but it said that temporary foreign workers account about 5 percent of its 90,000-strong Canadian workforce.
IMPACT ON UNEMPLOYMENT
An easing of the program’s restrictions on hiring foreign workers over the past decade has contributed higher unemployment in some sectors in the provinces of Alberta and British Columbia, according to a report released by the C.D. Howe Institute this week.
Low-skill workers, such as those in the hospitality and service industries, have been hit particularly hard, Dominique Gross, the study’s author, told Reuters.
“The local workers were penalized by the fact that it was much easier to hire temporary foreign workers,” said Gross, a professor of public policy at Simon Fraser University in Vancouver.
Alexandra Fortier, a spokeswoman for Kenney, said Statistics Canada had deemed the effect of temporary foreign workers on employment to be negligible, representing 2 percent of overall employment.
Canada has already tightened restrictions on the program, which the C.D. Howe study said expanded from 101,000 foreign workers in 2002 to 338,000 in 2012. It no longer allows companies to pay foreign workers below the median wage for a given job and now charges a C$275 ($250) fee for each application.
But the study found those changes insufficient, noting that the fee was too low to serve as a deterrent to applications. Also, empirical labor market data on which to base decisions is lacking, it said.
“We recognize the need for better labor market information,” Fortier said. “That is why we are working with StatsCanada on ways to get more robust labor market information and are also working with provinces.”
C.D Howe’s Gross said continuous hiring of temporary foreign workers on short contracts keeps wages static, making domestic workers less likely to apply for jobs, and leading to more demand for foreign workers.
“If there is no incentive for employers to increase the wage to attract domestic people, then, of course, it won’t be easy to hire local people,” she said.
NO IMPACT ON FARM WORKERS
The moratorium announced this week has no effect on a temporary foreign worker program for the agricultural industry. The government said there were “proven acute labor shortages” in that industry, and unfilled farm jobs were short-term “by definition”.
The Canadian Broadcasting Corp reported this month that a McDonald’s franchise owner in Victoria, British Columbia, was bringing in foreign workers for three locations, while turning away seemingly qualified Canadian job-seekers and cutting the local staff’s working hours.
That was followed by similar media reports involving other McDonald’s restaurants in Western Canada.
The company has cut ties with the Victoria franchise-owner but has defended its broader use of the Temporary Foreign Worker Program, which it said it has used only as a last resort in markets where there are severe labor shortages.
McDonald’s said temporary foreign workers accounted for about 4 percent of its 85,000-member Canadian workforce.
McDonald’s is not the only company to face a backlash. Outside of food service, Royal Bank of Canada was harshly criticized last year following a CBC report that U.S. outsourcing company iGate Corp used temporary foreign worker visas as it worked to replace a few dozen staff at the bank’s Toronto investor services division.