You are here

Temporary foreign workers and the Canadian labour market

TitleTemporary foreign workers and the Canadian labour market
Year of Publication2015
AuthorsBrochu, P., Gross T., and Worswick C.

The growth in the number of temporary foreign workers in Canada between 2000 and 2013 is well documented and represented a significant shift in focus towards temporary sources of foreign labour supply. The goal of our paper is to better understand the economic implications of Temporary Foreign Worker (TFW) programs as well as understand the underlying reasons for the well documented abuses of the program (uncovered in 2014) by employers. To the best of our knowledge, no research has been carried out on the underlying reasons why an employer might prefer to hire a temporary foreign worker over a domestic worker at the going wage rate in the domestic labour market. As such, we have developed two competing models, a job search model with endogenous job destruction and an efficiency wage model. Our preliminary analyses of these models indicates that firms may choose not to hire a qualified domestic worker and then falsely claim to the government that no suitable domestic worker is available so as to be allowed to hire a TFW. In equilibrium, the firm is prepared to do this because the TFW will exert either higher effort and/or be less likely to leave the job than would a domestic worker. Given that temporary residents can be identified in both the Canadian Census Master files and the Labour Force Survey, we plan to test these theoretical predictions. We have already secured access to both sources of data and have completed setting up the data for estimation.

Document URL