Thank you, everyone, for giving me this opportunity to present to the committee and answer any questions you may have.
As I see it, the recent increase in youth unemployment in Canada is concerning and is likely due to, first, the recent weakening of the Canadian economy in response to the U.S. tariffs imposed and the threats of new ones and, second, the recent rapid expansion of the Canadian population driven mainly by an unprecedented increase in the temporary resident population of younger individuals.
When we think about this using basic economic supply-and-demand arguments, the labour supply curve of the lower-wage service sector of the Canadian economy shifted out dramatically just prior to the labour demand curve shifting in due to a weakening of aggregate demand in Canada. These two effects should each lower wages for this segment of the labour market, and given that these workers are close to the minimum wage, either effect could lead to higher youth unemployment.
It is difficult to know how to attribute weight or importance to each of these potential causes. However, the second cause is no doubt important, and certainly the flow of temporary residents in and out of the country is within the federal government’s control, so I will focus my comments on this policy area.
The expansion of the temporary resident population was due mainly to growth in three subcomponents: the temporary foreign worker program; the international mobility program; and the international student population.
I've taken some comments from a recent Globe and Mail opinion piece that I wrote on this topic.
In response to the original temporary foreign worker program controversy under the Harper government, Pierre Brochu, Till Gross and I explored the labour market implications of this program in a 2020 article in the Canadian Journal of Economics. In our model, workers exert higher work intensity, resulting in higher productivity, in situations where the wage paid is higher than their next best alternative.
For Canadian citizens and permanent residents, the alternative to a Canadian job is likely another job in Canada with a similar wage. In contrast, a temporary foreign worker may much prefer the job in Canada to what they would have in their home country, since a temporary foreign worker is normally not allowed to move to another job in Canada. Consequently, a temporary foreign worker will have higher work intensity and may be prepared to tolerate illegal activities by their employer, such as unsafe work conditions and a holding back of part of their wages.
The TFW program can not only slow wage growth but may actually cause wages to fall. Employers should anticipate the higher work intensity of temporary foreign workers and offer a lower wage when initially advertising the job to Canadians, because failing to fill the position means they can hire a temporary foreign worker, yielding higher expected profits for the firm. International mobility programs and international student programs have similar issues, so the surge in numbers in all three programs is likely to have hurt the employment prospects of younger Canadians.
In contrast, permanent immigration programs do not have these issues, as the rights of permanent immigrants are nearly identical to those of Canadian citizens. Consequently, the Canadian labour market can be expanded through permanent immigration rather than temporary foreign workers. Curtailing or even eliminating the TFW program need not limit the number of foreigners being welcomed to Canada.
International students working off campus may be a greater threat to youth employment prospects than temporary foreign workers. The surge in the past five years in international student numbers, especially at the college level in Ontario, coupled with relaxed rules on numbers of hours worked, has greatly expanded the supply of lower-wage service sector workers.
Canada needs to go back to stronger restrictions on hours of work off campus to limit the extent to which international students compete with lower-wage young workers. International student numbers need to be monitored more closely and ideally limited to post-secondary programs leading to earnings above the Canadian average after graduation, as these individuals are strong candidates for permanent residency as economic immigrants.
We should also consider eliminating the temporary foreign worker program especially in areas where these workers compete with younger Canadians. It could be replaced with higher permanent immigration. We should also look at the international mobility program to see if there may be components of this suite of visas that should be eliminated or capped.
Thank you.