Canadian business leaders are warning of closings and a big spike in prices for consumers after the Conservative government announced a sweeping overhaul of the temporary foreign workers program.

The government of Alberta is also expressing "grave" concerns that the new rules will hurt the one province that is driving the economy.

(What is the Temporary Foreign Worker Program? Read The Globe's easy explanation)

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The changes announced on Friday by Employment Minister Jason Kenney and Immigration Minister Chris Alexander essentially terminate the program for most low-wage jobs in regions with more than 6-per-cent unemployment. The threshold largely limits the program to Alberta and Saskatchewan and a few small pockets elsewhere. But even in regions where the program is still allowed for low-wage jobs, employers will face much higher fees and a cap that limits foreign employees to 10 per cent of their work force.

"This is an appalling over-reaction," said Dan Kelly, president of the Canadian Federation of Independent Business, which has supported the Conservative government's economic approach in the past. "This will be a serious knock on this government's small-business credentials to have taken the kind of move that they just did."

Restaurants Canada, which represents restaurant owners, predicts the formula, combined with new $1,000 user fees, will force some restaurants to close, while others will need to raise prices to cover higher wages.

"I think there are going to be business casualties," said Joyce Reynolds, Restaurants Canada's vice-president of government affairs. "Are Canadians prepared to pay double what they pay now for a steak?"

Friday's announcement was dramatic in terms of the scope of policy changes. Taken as a whole, the changes are a direct response to critics who say employers have become over-reliant on the program and are not doing enough to find Canadian workers. The $1,000 fees – more than three times the current $275 – will be used to finance stronger enforcement of the rules and better labour market information, another area that has had Ottawa on the defensive.

The Conservative government is calculating that the vocal objections of business groups will find little sympathy with voters, who have spoken equally loudly against the program. Mr. Kenney sided on Friday with critics, who have long said the program has, in some cases, suppressed wage growth.

Friday's changes split the program into two, including a smaller TFWP for low-skilled positions with a new screening process that will ensure employers try harder to hire Canadians. Other parts will be renamed the International Mobility Program, which is largely for higher-paying jobs and inter-company transfers that will continue to be exempt from requirements to search for Canadians first.

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Mr. Kenney said employers who cannot find people for low-wage jobs have a simple option: Pay more.

"This has to be a last and limited resort," he said of the program. "It cannot be a business model."

The minister pointed to newly released statistics showing that 1,123 employers relied on temporary foreign workers last year for more than 50 per cent of their work force. A government report released on Friday said these numbers clearly show that the program is no longer being used as intended.

The Alberta reaction was swift and negative.

"We have some grave, grave concerns about the economic impacts in our province, in Alberta, with our unique labour situation," Kyle Fawcett, the province's Minister of Jobs, Skills, Training and Labour, said in an interview.

Foreign investors with capital to spend are judging Alberta now on two fronts: whether they can get the province's abundant oil and gas products to markets, and whether the work force is stable and affordable. With proposed pipeline projects such as Keystone XL and Northern Gateway held up by regulatory delays and environmental concerns, Mr. Fawcett said more uncertainty on the labour front is unwelcome. His department estimates the province, which has generated most of Canada's new jobs, will be short 96,000 workers by 2020.

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"We are driving the economy right now in this province, and I would hate for Alberta to be penalized, and have those impacts start to impact the national economy," he said in an interview.