Cheap foreign labour soars in Canada as young workers are left jobless

(Bloomberg) — It’s getting harder for young Canadians to find a job. A post-pandemic influx of cheap foreign workers in restaurants and retail stores may be making it tougher.

Michelle Eze started actively searching for work around Toronto in October, just as the youth unemployment rate in Canada began to surge. The 22-year-old public-policy graduate sought out teaching and restaurant service jobs to help pay the bills and support her parents, but struck out.

“I was struggling. I was searching on Indeed, looking everywhere, asking friends and like — nothing,” she said. “That was really demoralizing because I had the determination but I was seeing no results.”

Eze is still searching. Her difficulty underlines a disconnect in Canada’s labor market: Entry-level jobs for students and recent graduates are much harder to find as the economy weakens, yet the country has also imported hundreds of thousands of temporary foreign workers for jobs, many of them in the food and retail sectors.

That’s contributing to a soaring rate of youth unemployment. Two years ago, the jobless rate for people 15 to 24 years old was a little over 9%. Now it’s 14.2% — the highest level in more than a decade outside of the Covid-19 pandemic.

For younger immigrants — those who’ve landed in Canada in the past five years — the unemployment rate is around 23%.

An analysis of government data by Bloomberg News shows explosive growth in the number of temporary foreign workers in food and retail over the past five years. The number of them approved to work in those two sectors jumped 211% between 2019 and 2023.

The rapid surge is partly fueled by the increase in demand for immigration to Canada after pandemic travel restrictions eased. Many newcomers saw these temporary jobs as a step to help gain permanent residency, and many employers relied on the program when the economy reopened.

Business lobby groups have argued the temporary foreign worker program — originally designed to help farmers deal with seasonal labor needs — is critical to fill vacant positions.

But in cities like Toronto, the state of the labor market is undermining their case. Canada’s largest metropolis is hardly short of young, available workers. The region had more than 120,000 unemployed people aged 15 to 24 as of July — an increase of 50% in just two years, according to Statistics Canada data.

“We’ve noticed more youths are coming to us partially because of the influx of new Canadians,” said Timothy Lang, chief executive officer of Youth Employment Services, which helps young Toronto residents get training and find jobs. “Sadly, some companies will take people with more experience so they’re knocking some youths out.”

That’s the experience of 17-year-old Alexander Clarke, who has spent months applying to grocery stores, fast-food joints and clothing shops, but never heard back from any employers.

“I think they’re looking more for older people these days,” Clarke said. “A lot less youth are getting employed — like you see a lot of older people working at places, not people my age.”

In response to public pressure, Prime Minister Justin Trudeau’s government has rolled back some of its pandemic-era measures aimed at alleviating labor shortages. For example, it has curbed the number of hours that international students are allowed to work, and it’s promising tougher enforcement against businesses that abuse the system for hiring temporary foreign workers.

Still, under current rules, companies are permitted to bring in foreign workers even in areas with elevated and rising unemployment.

Canada allowed employers to bring in roughly 240,000 workers under the temporary foreign worker program last year, nearly double the amount in 2019. About a fifth of those positions were in jobs most common in restaurants and retail stores, such as cooks, food counter attendants and cashiers.

The share of these jobs grew significantly from before the pandemic, while the proportion of foreign workers doing agricultural work declined to 41% last year, from 54% in 2019.

Collectively, major restaurant and retail chains make up the biggest group of employers using the program to hire these types of workers, but their reliance on the system is impossible to quantify due to the rampant use of numbered companies in government data.

In Ontario alone, Tim Hortons hired at least 714 temporary foreign workers last year, up from 58 in 2019. But some 92% of those positions in 2023 were listed under holding companies that didn’t bear the franchise name.

The use of the program may not only be making it harder for youths to get jobs but also suppressing wages for the entry-level positions where they compete with foreign workers.

“In a sense what we’re doing is we’re subsidizing those activities by allowing them to bring in low-wage workers rather than make them pay a competitive wage,” said Christopher Worswick, economics department chair at Carleton University in Ottawa, who co-wrote a peer-reviewed report showing firms prefer temporary foreign workers due to their higher efforts for the same wage.

“Wages should go up until labor supply equals labor demand,” Worswick said. “Labor shortages should be filled by wage increases. The only thing stopping a wage increase is the profitability of the firm.”

©2024 Bloomberg L.P.