For the past two months, Cassis Bistro, a favorite French restaurant in Calgary, was about to lose its French head chef. He was not planning to leave voluntarily but because the government of Canada put a moratorium on the Temporary Foreign Worker Program (TFWP), thus banning foreign workers from restaurants and other service industries in Canada. The moratorium was finally lifted last week, when Employment Minister Jason Kenney introduced a modified program. The new program will cut the number of temporary foreign workers by a half over the next three years, to a less that 0.1% of the Canadian workforce. Also a 10% cap of foreign workers in any workplace will be imposed by 2016. (For more details, see Andrew Coyne’s National Post column).

While the head chef can now stay and I will continue to enjoy the same delicious meals at Cassis, the modifications to the TFWP are hardly an improvement. The program, in both its original and modified version, is a violation of business owners’ right to liberty and therefore harmful to everybody, Canadians and foreign workers alike.

The TFWP was introduced in 2002 to meet the increasing demand for workers in the low-skilled and low-wage service sector. The demand has been especially high in my home province of Alberta, fuelled by the growth of the oil industry and the oil sands development in particular. For example, restaurants and hotels have been unable to hire a sufficient number of Canadians, especially in the booming oil towns in Northern Alberta. The TFWP has allowed businesses to hire foreign workers fast, without the usual bureaucracy and long wait times for work permits.

Earlier this year, Canada’s public radio CBC, true to its egalitarian philosophy, interviewed two Canadian waitresses who claimed that they had been displaced by foreign workers who were willing to work for lower wages and longer hours. This started a public outcry against foreign workers that Minister Kenney himself characterized as “hysteria,” a review of the TFWP by the government, and modifications to the program “to put Canadians first.”

Ironically, Minister Kenney argued that the Temporary Foreign Worker Program and its reduction were necessary to avoid “distortions” in the labor market. Such a rationalization, even by a politician, is flabbergasting. The only distortions of markets are government interventions, such as the TFWP and now its downsizing. The only markets not distorted are free markets, and only they are consistent with the interests of business firms and of workers everywhere.

In free markets labor is free to move where it can get the best compensation and firms can move wherever they can create the most value by producing and trading goods and services. “Protecting” Canadian jobs by preventing people from other countries from working here (or by preventing Canadian companies from offshoring their production) in fact hurts Canadians. Companies that have to pay arbitrarily high wages due to government protectionism cannot remain profitable and will go out of business, leading to lost investment and “protected” employees losing jobs. Companies in service industries (which cannot substitute lower-cost imports) will transfer some of their higher costs to customers who do not have alternatives if they want to eat at restaurants, have their hair cut, or their teeth cared for, etc. Ever wonder why services (not to speak of products) are more expensive in Canada than in the United States? Because the government “protects” the labor market (as well as the markets for goods, services, and capital) from “distortions” instead of letting people trade freely, negotiating value for value.

What about employees who lose their jobs to those willing to work for less pay, such as the two waitresses that CBC unearthed from somewhere, touting them as a manifestation of a systemic inequity and abuse in the Canadian labor market? Losing a job and the adjustment it requires—reducing expenditures temporarily, finding a new job, possibly relocating somewhere else—can be stressful. However, there is no such thing as guaranteed job or a guaranteed wage level. If there were, companies could not be competitive and create the products and services we need and want. And companies protected by regulation would transfer costs to consumers as higher prices.

Businesses should be free to hire whoever will help them to create most value for their customers and shareholders, regardless of nationality. The role of government is to protect us, not against competition, but against initiation of physical force. In such a system, we would trade freely with each other, maximizing prosperity and well-being.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad.Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

4 COMMENTS

  1. Thanks Jaana.

    Do I read that agriculture will be exempted from the new rules? Government is pandering to a favoured industry, which does have a long history of using temporary workers from outside the country. (Examples, include vegetable and flower farms on the Saanich Peninsula and fruit orchards in the Okanagan, though the latter get many young people from Quebec each summer.)

    As for outsourcing overseas, indeed that happens – even Japan is putting labour-intensive automotive assembly work into SE Asia while keeping the high-precision/high tooling cost work such as engines and transmissions in Japan. (Albeit they also assemble in the US – their most productive highest-quality plants in the world. There are particular reasons why Communist China and Japan buy into the US, besides politics.) And of course Mexico, aided by NAFTA – Ford’s most reliable car is assembled in Mexico.

  2. The slicing and dicing of rules can get comical. Recent Ford Crown Victoria models (the big rear-drive car) were classified as furring by US rules because a high proportion of their parts were made outside of the Canada-US automotive free-trade zone – transmissions in Germany, many parts from Mexico, some from UK, etc.

    (That’s of course an automotive free-trade zone exclusive to the Detroit-three manufacturers, pre-dating NAFTA. There were legal challenges by Japanese makers – IIRC not successful, and perhaps a recent one targeting Chrysler whose majority owner was outside the US. (Fiat controlled Chrysler, but the two companies are merging, their official HQ may end up in Detroit.)

  3. I partly agree and partly disagree with this article. It is very important to control organizations misusing the temporary foreign worker program, thereby affecting job chances of Canadians. I agree, the existing workers should be considered with sympathy about the situation, but new workers should be controlled. It affects temporary immigration for sure, but in Canada, Canadians should be given higher priority and no organization should be allowed to break that priority.

    • Apologies for the tardy reply (I am a part-time blogger …). I am a supporter of free markets, including the labor market, and free immigration, for reasons I articulate in many of my posts. But briefly, the role of the government is to protect individual rights against the initiation of physical force and fraud. By interfering with the businesses’ hiring decisions (among other things), the government is initiating physical force and thus violating individual rights.

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