I'd like to thank the committee for the invitation to speak today on its study of small and medium-sized businesses.
The last two years have been a difficult time for small businesses in Canada. Our businesses across this country received unprecedented government support through the wage subsidy, rental subsidies and the Canada emergency business account—or CEBA—loans. Business supports, in fact, represented the largest government spending category during the pandemic, with worker supports coming in second and health care expenses coming in a distant third.
Now the problem for businesses isn’t applying for government supports but rather finding employees to help customers who are lined up out the door. It is important to point out, though, that there remains a very clear relationship between the wages offered for new jobs and the job vacancy rates. That is to say that a business offering higher wages for positions will have fewer of those positions remain open.
Furthermore, workers in hard-hit sectors like food and accommodation, who were laid off in the initial months of the pandemic, weren’t idle. Instead, they used CERB benefits to move into other sectors that remained open and needed workers. The net result is that when the economic reopening happened in earnest in the fall of 2021, those workers were no longer available to fill previous positions, because they were already employed elsewhere, likely for higher wages.
Expansion of the temporary foreign worker program has been the most recent federal government answer to high job vacancy rates. Specifically, the government allocated new funding to process more applications faster; workplaces can now have 20% of their workforce composed of temporary foreign workers, up from 10%; workers can be kept much longer, up to 270 days; and temporary foreign workers will be allowed in areas with unemployment rates that exceed 6%.
The danger of this expansion is that we will suppress workers' wages, which would otherwise have risen to attract new workers. Workers' wages have risen 3.9% in the past year, well behind inflation, which has stood at 6.8% over the same period. More temporary foreign workers will work to suppress those wage gains, particularly for low-wage workers.
For temporary foreign workers who come to Canada to work, the program as structured creates dangerous power imbalances between the employer and the employee, favouring the employer. The basic workers' rights that Canadians enjoy are either explicitly or effectively denied to temporary foreign workers. For example, the basic right to change a job in order to obtain better wages or better conditions is denied, and complaints about workplace treatment can easily be met with extradition. Keeping wages low by importing workers who have been stripped of basic workplace rights is inconsistent with the government’s strategy for an inclusive labour market.
For Canada, as a country that welcomes a diversity of immigrants, a better approach to obtaining new workers would be to accelerate the process of accepting new Canadians. These new Canadians could and should be drawn from the pool of temporary foreign workers who would prefer to live in Canada permanently. Without the rights suppression inherent in the temporary foreign worker program, new Canadians are freer to bargain for higher wages and better working conditions, and generally do.
There is no doubt that higher wages will render some low-margin employers incapable of competing in a postpandemic world. Higher business debt following the pandemic will further pressure some businesses as interest rates rise, but the reality is that business bankruptcy rates were far lower during the pandemic than they were prior to the pandemic, entirely due to federal supports.
A well-functioning economy is one that experiences the renewal of businesses, such that some close and new ones take their place. The closure of one business frees up resources in the form of space, workers and equipment for new businesses that may be more viable. This is a desirable and necessary feature of our economy.
For some businesses, there may not be a viable path forward, and for those businesses we need to accelerate and not delay bankruptcies to settle obligations and hopefully allow entrepreneurs to go on to start new businesses in the future. We should encourage an off-ramp, as it were, for businesses that are no longer viable as wages rise.
Thank you. I look forward to your questions.