Canada's Temporary Foreign Worker Program Revised, Fewer LMIAs Approved
26 Oct 2024
On October 21, the Canadian government announced new reforms to the Temporary Foreign Worker Program (TFW) to help stabilize the labor market and protect foreign workers. The main reforms include adjusting the wage thresholds for high and low wage streams, introducing additional protections for foreign workers, and prioritizing hiring nationals. These reforms are in response to Canada's unemployment rate and job market conditions, and are aimed at stabilizing the labor market by making the overused temporary foreign worker program fair and transparent. Let's take a closer look at what's in store.
First of all, the unemployment rate in Canada is 6.5% as of September 2024, and the youth unemployment rate is even higher at 13.5%, which is the main factor that led to the reform of the temporary foreign worker program. In addition to the fact that vulnerable groups in Canada, such as youth, Aboriginal people, women, and people with disabilities, are at a disadvantage in the labor market, the unemployment rate of Aboriginal people is 7.7%, which is higher than the non-Aboriginal unemployment rate of 4.5%, and the employment rate of people with disabilities is 15% lower than that of people without disabilities.
The most notable change is the increase in the wage threshold for foreign workers coming to Canada in high-wage streams. Starting November 8, 2024, foreign workers applying for the High Wage Stream will need to be paid at least 20% more than the median wage in each province or territory to qualify. This will represent a wage increase of $5 to $8 per hour over the current threshold, which means that existing high-wage streams will fall into the category of low-wage streams, resulting in fewer jobs meeting the high-wage threshold, but a relative increase in low-wage jobs, and greater restrictions on hiring through the LMIA.
In order for Canadian employers to hire foreign workers, they must prove through a labor market impact assessment (LMIA) that they cannot find Canadians to fill the job. However, in addition to the restrictions on unemployment rates that prevent LMIA approvals for the low-wage stream, the reform is expected to move more than 34,000 jobs from the high-wage stream to the low-wage stream, resulting in up to 20,000 jobs that may not receive LMIA approval.
In addition, employers seeking to hire foreign workers through the low-wage stream have additional obligations. For the low-wage stream, employers must meet requirements such as providing foreign workers with housing, providing return airfare, and giving priority to hiring workers who are already in Canada. In addition, employers are limited to hiring 10% of their total workforce through the low-wage stream, with a maximum of 20% allowed in certain high-demand industries. Employers are particularly restricted from hiring foreign workers through the low-wage stream in regions with unemployment rates above 6%, a policy that can be interpreted as a measure to protect local labor markets.
Requirements for employers will also be further tightened. From October 28, 2024, the process for employers participating in the foreign worker program to prove the legality of their business by submitting a certificate from an external accountant or lawyer will be abolished. Instead, information sharing with provincial and territorial governments will be enhanced, with a focus on preventing illegal hiring or program abuse through an employer registration system. This is expected to increase the transparency of the temporary foreign worker program and effectively weed out unsuitable employers.
The reforms are intended to achieve two goals simultaneously: protecting the Canadian labor market and increasing protections for foreign workers. While the higher wage threshold is likely to contribute to higher wages for Canadians, it may also come at an additional cost to employers. It remains to be seen how effective the government's policies to increase employment for youth and vulnerable groups will actually be. The government is willing to make further adjustments as the labor market evolves to build a sustainable labor policy, and it will be important to keep a close eye on the unemployment rate and employment situation in Canada during this process.
On October 21, the Canadian government announced new reforms to the Temporary Foreign Worker Program (TFW) to help stabilize the labor market and protect foreign workers. The main reforms include adjusting the wage thresholds for high and low wage streams, introducing additional protections for foreign workers, and prioritizing hiring nationals. These reforms are in response to Canada's unemployment rate and job market conditions, and are aimed at stabilizing the labor market by making the overused temporary foreign worker program fair and transparent. Let's take a closer look at what's in store.
First of all, the unemployment rate in Canada is 6.5% as of September 2024, and the youth unemployment rate is even higher at 13.5%, which is the main factor that led to the reform of the temporary foreign worker program. In addition to the fact that vulnerable groups in Canada, such as youth, Aboriginal people, women, and people with disabilities, are at a disadvantage in the labor market, the unemployment rate of Aboriginal people is 7.7%, which is higher than the non-Aboriginal unemployment rate of 4.5%, and the employment rate of people with disabilities is 15% lower than that of people without disabilities.
The most notable change is the increase in the wage threshold for foreign workers coming to Canada in high-wage streams. Starting November 8, 2024, foreign workers applying for the High Wage Stream will need to be paid at least 20% more than the median wage in each province or territory to qualify. This will represent a wage increase of $5 to $8 per hour over the current threshold, which means that existing high-wage streams will fall into the category of low-wage streams, resulting in fewer jobs meeting the high-wage threshold, but a relative increase in low-wage jobs, and greater restrictions on hiring through the LMIA.
In order for Canadian employers to hire foreign workers, they must prove through a labor market impact assessment (LMIA) that they cannot find Canadians to fill the job. However, in addition to the restrictions on unemployment rates that prevent LMIA approvals for the low-wage stream, the reform is expected to move more than 34,000 jobs from the high-wage stream to the low-wage stream, resulting in up to 20,000 jobs that may not receive LMIA approval.
In addition, employers seeking to hire foreign workers through the low-wage stream have additional obligations. For the low-wage stream, employers must meet requirements such as providing foreign workers with housing, providing return airfare, and giving priority to hiring workers who are already in Canada. In addition, employers are limited to hiring 10% of their total workforce through the low-wage stream, with a maximum of 20% allowed in certain high-demand industries. Employers are particularly restricted from hiring foreign workers through the low-wage stream in regions with unemployment rates above 6%, a policy that can be interpreted as a measure to protect local labor markets.
Requirements for employers will also be further tightened. From October 28, 2024, the process for employers participating in the foreign worker program to prove the legality of their business by submitting a certificate from an external accountant or lawyer will be abolished. Instead, information sharing with provincial and territorial governments will be enhanced, with a focus on preventing illegal hiring or program abuse through an employer registration system. This is expected to increase the transparency of the temporary foreign worker program and effectively weed out unsuitable employers.
The reforms are intended to achieve two goals simultaneously: protecting the Canadian labor market and increasing protections for foreign workers. While the higher wage threshold is likely to contribute to higher wages for Canadians, it may also come at an additional cost to employers. It remains to be seen how effective the government's policies to increase employment for youth and vulnerable groups will actually be. The government is willing to make further adjustments as the labor market evolves to build a sustainable labor policy, and it will be important to keep a close eye on the unemployment rate and employment situation in Canada during this process.