Trudeau’s temporary resident cap risks economic harm, business groups say

(Bloomberg) — Canada’s independent business advocate says Prime Minister Justin Trudeau’s plan to reduce temporary immigration risks dire economic consequences, underscoring the pressures the government is facing as it tries to slow population growth.

Nancy Healey, who holds a government post knows as commissioner for employers, penned a letter to three of Trudeau’s cabinet ministers warning that a plan to cut temporary residents by 20 per cent over three years is likely to make it harder for firms to grow.

“In the context of the current and future labor shortages that Canada will experience, it is crucial not to reduce the labor pool,” she said in the Aug. 1 letter, which was signed by business groups including the Canadian Chamber of Commerce and Canadian Federation of Independent Business. “Such a reduction would have catastrophic economic consequences for companies and limit their growth potential.”

A surge in temporary residents — including international students, foreign workers and asylum seekers — pushed Canada’s population growth rate to 3.2 per cent, one of the world’s fastest. The influx of new arrivals exacerbated a housing shortage and helped sink Trudeau’s popularity.

The government is already implementing a cap on student visas, and businesses fear the government will next shrink the program that allows them to bring in temporary employees, said Healey.

Indeed, Employment Minister Randy Boissonnault told business groups on Tuesday he intends to limit their use of temp workers — a program that has drawn mounting criticism for allowing fraud and abuse.

The number of temporary foreign workers in Canada has continued to grow even as the unemployment rate rises — it reached 6.4 per cent in June, 13.5 per cent for the youngest workers. Temporary foreign workers have increasingly been recruited for low-wage, unskilled jobs, including in retail stores and restaurants.

Healey defended the program in the letter, calling it “much maligned despite the rigor that has characterized it for many years,” driven by “unsubstantiated anecdotes.” The system requires employers to advertise jobs to Canadians before seeking a foreign worker, to pay market wages and to take part in a compliance regime that protects against abuse, she said.

She urged the government to maintain the number of workers admitted under the program, speed up approval times and avoid increasing the $1,000 (US$727.5) fee for permit applications, already costly for small businesses.

Business groups have long raised alarm about Canada’s aging population and low birth rates, a phenomenon experienced by many advanced economies. Healey pointed to a Royal Bank of Canada report that said 46 per cent of projected structural labor shortages are in occupations that don’t need a university or college education, but instead require “occupation-specific” or on-the-job training.

“We need better paths for newcomers to come and stay in Canada,” Healey said in the letter. “It is clear that immigration streams that attach a job offer to the application result in improved outcomes.”

While business groups have a right to lobby the government, what’s good for businesses isn’t necessarily good for the economy, said Mikal Skuterud, a labor economist at the University of Waterloo.

Labor shortages are challenging for firms, but they can spur competitive wages and investments in equipment and technology — which is particularly important as Canada grapples with poor productivity, he said.

“I’m not saying it’s not difficult for businesses sometimes — for sure it is,” he said. “But the idea that this is some kind of an economic crisis the government has to respond to is really economic nonsense.”

With assistance from Randy Thanthong-Knight

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