There's evidence that the government's Temporary Foreign Worker Program nudges the unemployment rate higher in some sectors of the economy and parts of the country, think-tank C.D. Howe says in a report released Thursday.

The Canadian government program allows companies here to employ non-Canadians to fill job openings that can't be filled by a Canadian worker.

The program grew from 101,000 people in 2002, to as large as 338,000 across the country 10 years later.

Canadians are first in line for available jobs. - Spokeswoman for Employment Minister Jason Kenney

Pitched as a way to keep Canada's economy humming in the face of so-called critical shortages in Canada's labour market, the program has fallen into disrepute in recent months as a number of large Canadian companies have been accused of abusing the program to hire cheaper, foreign workers at the expense of Canadian workers.

In its report, the non-partisan C.D. Howe Institute looked at a number of examples, but focused on what impact the program had on the labour market in British Columbia and Alberta — two provinces which have employed more temporary foreign workers than the rest of the country combined, in every year since 2007.

Skills gap alleged

"A lot of the shortages we saw very, very specific, often rural and remote areas with the difficulty in attracting workers there," C.D. Howe's senior policy analyst, Colin Busby, said in an interview. "The government doesn't really have the types of information necessary to declare the severity of these labour shortages."

The program saw such exponential growth over the past decade in part because the government repeatedly loosened the requirements of what employers and job openings could qualify. Fast food giant McDonald's has recently pledged to re-evaluate its use of the program following a CBC investigation that found abuses. Other iconic Canadian companies, such as Tim Hortons and Royal Bank, have also re-evaluated their policies in the wake of controversy related to their foreign worker employment programs.

For part of the time period in question, the unemployment rates in B.C. and Alberta were seven and five per cent, respectively — lower than the Canadian average at the time and as such possibly a suggestion that employers were indeed having a hard time finding workers.

But the report found the two provinces saw their unemployment rates change by a larger amount than the rest of Canada, both when unemployment was decreasing before 2007, and when the jobless rate started increasing after that

"On average, the variation in the unemployment rate during the whole period was 2.3 percentage points in the rest of Canada and 6.2 percentage points in Alberta and British Columbia," the report says, "which suggests the [program] potentially accelerated the rise in unemployment by about 3.9 percentage points in the two provinces between 2007 and 2010."

Restraints imposed

In the face of criticism, some new restraints have recently been imposed on the program to better crack down on some of the alleged abuses, and late Thursday Employment Minister Jason Kenney issued an immediate moratorium on use of the program in the food services sector.

Before that development, however, a spokeswoman for Kenney, Alexandra Fortier, issued a statement pointing out that Statistics Canada "has clearly stated that 'the effect of temporary foreign workers on the employment estimates is negligible,' representing two per cent of overall employment."

Indeed, Ottawa has taken steps to remove a lot of the loopholes that were open to abuse, including allowing on-site inspections to ensure compliance to the rules, requiring employers that legitimately use temporary foreign workers to have a plan to transition to a Canadian workforce over time, and ensuring that foreign workers are paid wages comparable to what Canadian workers would receive.

"We have made reforms to the Temporary Foreign Worker Program to ensure that Canadians are first in line for available jobs and to ensure that employers do not take advantage of foreign workers​," Fortier said. "The … program remains under ongoing review."

New rules also require a $275 fee per job application, in addition to paying the roughly $150 cost of a visa. And the government insists it's keeping a close eye on the program. But while C.D. Howe welcomes some of the changes made, it says more are needed.

More changes needed

"[Those] changes raise the cost of hiring [temporary foreign workers]," C.D. Howe says, "but it is worth considering that the fee is remarkably low compared with what the United States charges.

"Although the fee might cover administrative costs, it is hardly large enough to provide a strong incentive for employers to search for domestic workers to fill job vacancies — it is far lower, for example, than the cost of relocating a domestic worker from another province," the paper says.

Despite the findings, the report stops well short of calling for a halt to the program, but rather wants to see more changes implemented to discourage abuse.

"Although there are clear benefits to the economy if short-term excess labour demand is filled as quickly as possible, the costs of a weakly designed Temporary Foreign Worker Program can be quite high," the report says.

"Ideally, a Temporary Foreign Worker Program program offers employers access to an indispensable temporary workforce until domestic workers become available. Employers thus should regard such foreign workers as available only for a short period, and not attempt to use the program as a way to circumvent the search for and hiring of domestic workers."