IRPP TFW Roundtable 2012

HIGH-SKILLED
TEMPORARY FOREIGN WORKERS
AND INTERNATIONAL STUDENTS


Arthur Sweetman
Department of Economics
(arthur.sweetman@mcmaster.ca)

Annual Flow of Temporary Residents
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
Year
Foreign workers Foreign students Humanitarian population Other
Aside: Note effect on refugee flows of safe 3
rd
country
agreement with US.
Effective Dec 29, 2004
TFW-Entries Without LMO
(Source: CIC)
Yearly sub-status
%
Professional 12,513 6.6
Intra company transferee 5,524 2.9
Trader and investor 58 0.0
Business visitor 416 0.2
NAFTA* 18,511 9.7
Professional 386 0.2
Intra company transferee 284 0.1
Trader and investor 7 0.0
Business visitor 15 0.0
Other FTA** 692 0.4
International agreements 2,839 1.5
Provincial agreements 2,517 1.3
GATS*** 327 0.2
Workers - International
arrangements
24,886
13.0
Number
2011
International experience Canada 54,898 28.8
Reciprocal employment 2,510 1.3
Exchange professor 1,767 0.9
Reciprocal employment 59,175 31.0
Intra-company transfers 7,352 3.9
Significant benefit 4,571 2.4
Entrepreneur/self-employed 462 0.2
Emergency repairs 468 0.2
Employment benefit 12,853 6.7
Spouse/common law partner of a
foreign worker
9,128
4.8
Spouse/common law partner of a
foreign student
1,621
0.8
Spouse/common law partner 10,749 5.6
Post-graduate employment 858 0.4
Post-doctoral fellow and award 3,431 1.8
Research, educational, training 5,424 2.8
Research and studies related 9,713 5.1
Charitable or religious work 1,960 1.0
Repair and service equipment 0 0.0
Other Canadian interests 1,960 1.0
Workers - Canadian interests 94,450 49.5
1) Trend or Cycle?
2) How relevant,
how much protection, is the LMO?
30
35
40
45
50
55
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Percent of TFW with an LMO
BUT, also groups NOT labelled TFWs
- Official TFWs underestimate total temporary foreign
workers with work permits
- Even students with LMOs not classified as TFWs (small)

Work permits without LMO 7,040
Work permits with LMO 141
Students with work permits 7,181
Students without work permit 91,197
Foreign students 98,378
With work permits 10,320
Without work permit 14,991
Refugee claimants 25,311
With work permits 853
Without work permit 58
Other humanitarian population 911
Canadian Experience Class (CEC)
introduced in 2008
Increases access for
Foreign students in Canadian post-secondary
institutions
High-skilled Temporary Foreign Workers
New skilled trades stream (just announced)

In part, following other countries example
esp., Australia & New Zealand
11
3 legged stool
PNP
CEC
FSWP

Diversification
Some Details

Temporary Foreign Worker precursor
Until recent announcement only high-skills TFWs
eligible
High skill defined by job actually obtained in Canada;
in contrast, points system defined high skill as
prediction based on characteristics
If no success, then TFW permit expires and departure
Definition of high skill is expanding
Employer driven (major shift in policy)
Recent announcement of skilled trades version
13
Requirements:
French OR English language ability
Points system is French AND English
Higher standards for higher skilled applicants (new)
Standard health & security checks
Plus
1. TFW: min 2 years FT Cdn work experience in 3 year,
BUT, recent reduction to 12 months in 36 month period
2. Foreign student: (paying foreign student fees) with 2
years of FT Cdn schooling, plus 1 year FT post-graduation
work experience
Work can be any of
Managerial
Professional
Technical/skilled trades (differs from skilled worker)
It can be QUITE difficult to evaluate occupational status


14
Government Labour Market Opinion (LMO)
for TFW entry is supposed to protect the
domestic labour force
Unclear how effective it is
Recent administrative changes have weakened it
and related protective features
Motivated by industrys call for lower-cost and
higher skilled labour

15
Almost no immigrants yet under the
new program, but can look at previous
CEC-like immigrants
(under the old system)
Only have pre-CEC data, so ask:
How do CEC-like immigrants with pre-immigration
TFW and foreign student experience fare in the
Canadian Labour Market?

Compare esp. to Skilled Worker category
Does this new selection criteria do better than the points
system?

Predictions for new CEC based on previous
CEC-like immigrants
In all specifications the CEC-like immigrants
never have statistically significantly poorer
outcomes than Skilled Worker Principal
Applicants (best outcomes under the old system)
Sometime MUCH better
However, there are certainly caveats given the
limited range of the analysis, and definition of
entry, etc.
TFW side appears to have higher returns to pre-
immigration labour market experience


17
Who are TFWs? (from Warman 2010)
18
Recent
Immigrants TFWs
US 0.021 0.159
Central/South America 0.084 0.126
West/South/North Europe 0.151 0.205
Eastern Europe 0.121 0.054
Africa/Middle East 0.121 0.141
Asia 0.498 0.310
Other 0.004 0.005
Males from 1991, 1996 & 2001 Census data.

Clearly, major differences in the source regions of immigrants and TFWs.
Also, TFWs predominantly males.

For new CEC, not clear which TFWs will apply (are eligible) to immigrate.
19
But, who immigrates? (LSIC)

Temporary
Foreign
Workers Students Other
Males
US, UK,
West/North Europe 30.3 9.2 4.6
Asia 50.4 51.8 62.6
Other countries 19.3 38.9 32.8

Females
US, UK,
West/North Europe 44.7 12.3 4.1
Asia 33.9 41.5 64.4
Other countries 21.3 46.2 31.5

Policy Sample
Hope: Canadian education/work experience
solves labour market outcomes decline
Foreign students in Canadian post-secondary
institutions and TFWs have Canadian skills

Hopefully can make transition into Canadian
labour market more smoothly/quickly
Likely to be fewer difficulties with experience,
language, credentials, networks, etc.
Also, foreign student entries may lower entry
age, given baby boom retirements

20
Fear: Wage/employment competition
with existing population
Among the range of plausible designs for a
Canadian immigration system, the CEC is likely to
have somewhat larger immediate (short run)
displacement effects (e.g., bidding down
domestic wages)
If there are any such net effects, recent immigrants
and others with skills/ characteristics similar to TFWs
are plausibly more negatively affected
Of course, the underlying TFW programs may also
have displacement effects of their own
22
Recent changes increasing fear side
For higher skilled groups, some concerns

Not concerned about traditional SAW & live-in-
caregiver programs on this front

As fast & flexible, esp. with 15% below the
average being the target, gets going we may
need some costs to protect the domestic
workforce and permit some earnings growth
Aspects of TFW program seems designed to
stall or prevent worker earnings growth
Of course, as is well known
The median earnings of Canadians employed on a
full-time basis for a full year changed little during
the past quarter century, edging up from $41,348
in 1980 to $41,401 in 2005 (in 2005 constant
dollars). (Statistics Canada, Daily, May 1, 2008)

Equally importantly, if recent immigrants are
most like TFWs, then they may be most
negatively affected
The average wages (price of labour) of new
immigrants has been declining for decades
which economists usually associate with over
supply, although we all know the situation is more
complex
Should we be concerned about competition from
certain TWF streams aggravating this trend?
Policy Proposal:
Could a LMO application fee
help assuage these fears?

Currently LMO process is free to applicant
Though costly to taxpayer
Perhaps introduce cost-recovery fee for
employers
Maybe two stage fee: normal and fast

The End