Transcript: Mike Moffatt

My conversation with the Canadian economist

One of the big stories this summer was immigration. Canada has had a decades-long, bipartisan, pro-immigration consensus — but in recent months, that has collapsed. And one of the most contentious parts of our system is now the Temporary Foreign Worker program, which was deregulated during 2022 in the midst of pandemic labour shortages. My guest on the program this week was just in Halifax at the Prime Minister’s cabinet retreat, making the case that the low-wage, non-agriculture stream of this program should be “entirely abolished.”

Mike Moffatt is a Canadian economist. He’s Senior Director of the Smart Prosperity Institute, and the co-host of The Missing Middle podcast.

This is an edited transcript for paid subscribers. You can listen to the interview for free here.

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TH: It's nice to have you on — and it's a big week to have you on. I want to start today by talking about the context for the story that we're going to get into today. Canada had a decades-long, bipartisan, pro-immigration consensus, and this has recently collapsed. Immigration has become a big story in the Canadian media. It's something I've covered on my podcast. I know you and Cara Stern have talked about it on your podcast, The Missing Middle. This collapse is a result of massive increases in the numbers of people coming to our country, which is putting pressure on our systems, including housing. The latest issue, that we'll focus on today, is the large increase in temporary foreign workers — and what that is doing to wages for low-skilled workers and unemployment rates for certain demographics. But let's start here today, by setting the stage for our listeners in Canada and around the world. As you've pointed out in the past three and a half years, Canada's population has grown by 3 million people, a few thousand people more than the entire 1990s. Tim Sargent, speaking on The Hub podcast, notes that we are an outlier for the developed world in terms of our rapid population growth. In broad terms, how has the Canadian immigration system functioned in the past, and what has changed in recent years?

MM: We can divide the immigration system into two components. The first is what we call permanent residency. That is somebody coming in from overseas, and going to be living in Canada for the rest of their lives. That has a target on it. We have basically a target number of people that we try to bring in every year. Historically, that had been about 250,000 a year. Over the last decade, that has risen to about 500,000. And that was a planned increase. We can debate whether or not that's a good idea or a bad idea, but we saw that one coming. 

But the other part of the system is what we call non-permanent residents. These are people who are here on a time-expired visa. The term non-permanent is a little bit of a misnomer, because oftentimes visas will expire and then they'll get another one and so on. So, they can be here for a very long time. On that, there's no cap. There's no limits or anything like that. Historically, going up until about a decade ago, the numbers were pretty flat. Some years we'd have a few extra thousand; some years the population actually declined by a few thousand. It all kind of netted out. 

But over the last decade, we've had substantial increases in that. That comes from things like temporary foreign workers. It comes from international students, which is actually one of the largest cohorts. Our colleges and universities have decided to pay the bills by bringing in lots and lots of international students — to the point at which last year we had an increase of around 700,000 non-permanent residents. So, that's actually become the bulk of our population growth. Not the permanent side; it's this non-permanent side. 

But it affects housing, it affects the job market, it affects all of these things. Because everyone needs somewhere to live. Most of the folks coming in are in their 20s and 30s. They want to work, they want to contribute to the economy, and so on. And because of the unplanned nature of that, it just kind of spiralled out of control. We never made sure that we had not just the housing, but the healthcare, the jobs and so on, to make sure that the people coming over would have a successful time in Canada.

TH: Let's hone in on the Temporary Foreign Worker program. You have made the case in the media that this needs to be upended. You've written in The Toronto Star and The Hub. And then this week as we are taping, you just made the case at the Liberal cabinet retreat in Halifax. I want to read a passage from your remarks to Justin Trudeau and his cabinet: “The TFW program, particularly the low-wage non-agricultural stream, suppresses wage growth, increases youth unemployment, creates the conditions for the exploitation of foreign workers, and reduces productivity, as it disincentivizes companies from investing in productivity-enhancing equipment.” A lot of points in that one sentence. You're really packing a punch there. Can you unpack that for us?

MM: Absolutely. There's four streams of the Temporary Foreign Worker program. But I think that the most problematic one is the low-wage stream, which allows companies to bring in temporary foreign workers and pay them less than the median wage of a province. Here in Ontario, that's less than $27 an hour. What we've seen is a lot of convenience stores and coffee shops and things like that bringing in temporary foreign workers. They like to have them. They would rather have a 40-year-old from overseas who is more experienced, who is willing to not just work but work overtime, rather than hiring a teenager, like a 17 or 18-year-old, who might have to miss a shift to go to a baseball game or write an exam at school. 

But what that essentially does is all of these companies are allowed to bring in these temporary foreign workers. It prevents young people from getting a job. It prevents existing workers from getting a raise. If we look at Canada versus Australia, for example, our fast food restaurants here tend to have twice as many people working at them as the fast food restaurants in Australia. Part of that is in Australia, their restaurants have invested in additional equipment, machinery, technology, so you don't need multiple people making the coffee, making the fries, that kind of thing. 

Here, [when] the store starts to get busy and expand, they don't think, “Let's invest in technology to try and become more productive.” They say, “Let's just go and get another temporary foreign worker.” It's actually problematic for the workers as well. Because how our system works is when they come over, their employment is tied to that specific employer. So if they lose their job, not only are they losing their job, they're sent home. They're essentially deported. So it creates the conditions where those workers will do whatever the employer asks them because they know if they push back, they're headed back home. It's a very exploitative system. It's very problematic. I get why employers like it, but it's really not doing favours to either the international workers or our workers here in Canada.

TH: What did you tell Cabinet with regards to the housing issue in particular?

MM: I looked on the housing side and I said, “We have to focus on both the demand and the supply side.” On the demand side, a lot of that demand comes from population growth. Temporary foreign workers, just like everyone else, need a safe and comfortable place to call home. So that adds to our housing needs. It's not that those temporary foreign workers are going out and buying homes, but rather investors go out and buy homes and then rent them out to numbers of temporary foreign workers. So I said, “Look, we got to make sure that we are aligning our population growth with our housing growth.”

There's a lot more that we can do on the housing supply side to create more supply. We should do those things. But we need to buy ourselves some time. You had mentioned earlier those statistics about the 1990s. In the last three and a half years, we've added as many people as we did in the 90s. But we built an extra 900,000 homes across the country in the 90s relative to today. 

The point I was making to cabinet is: We have got to buy ourselves some time to build those extra 900,000 homes. Then, once we've done that, once we've started to realign housing and population growth, I think then we can start to go, “Okay, maybe we can increase these immigration targets.” But until that point, I think we've got to scale back. In particular, we need to scale back the temporary foreign worker program because it's just so problematic in so many ways.

TH: I agree with you on that. I'm just curious, what route do you think the government should have taken? So, go back a few years, there's these labour shortages during the pandemic. The businesses are clamouring. What should the government have done instead?

MM: I do think they had a justification in 2022. I think they took it too far. I would have liked to see them tell business, “We will help you invest in technology. We will help you in training, and train some kids.” They decided not to do that. They decided to deregulate the temporary foreign worker program, which I think was a mistake.

I think the bigger mistake is by about 2023 or so, that need had largely gone away. But the federal government kept that deregulation in place. So, because those rules started to apply to 2024, we've actually had the worst summer on record for teenage summer jobs in Canadian history — outside of 2020, which was the lockdown year. We're just slightly better than the lockdown year.

I think there were really two mistakes. The first one being kind of justifiable that, yeah, these coffee shops, convenience stores, really did have a problem in April 2022. I wouldn't have gone the route they did, but I can understand why they did it. But I think the bigger mistake was not making these changes sooner and dialling it back once it became clear that the unemployment rate was going up and people in their 20s and teenagers were starting to have trouble finding jobs.

TH: On that point, we saw recent reporting from Matt Lundy in The Globe and Mail, that Canadian employers continue to ramp up recruitment of low-wage workers through this program. We also saw a Toronto Star investigation this week, revealing the government was fast-tracking TFW applications by directing officers, I believe, to skip steps that guard against fraud. How do we measure the impact of this on the next generation of Canadians, on young people who are really just getting their start?

MM: It is really difficult, and part of the issue here is that we don't have great data from the government. The government hasn't spent a lot of time studying what past deregulations of this does. We know, again, this summer if employment had been at previous rates, we'd have an extra 200,000 teenagers across Canada who would have a summer job today. We can't blame all of that on temporary foreign workers. Economic conditions are different. There are some differences. 

But I think that the reporting of Matt Lundy and others are particularly important because it's starting to raise questions. Another one that Lundy came up with in the high-wage stream is the number of administrative assistants coming through the Temporary Foreign Worker program has gone from about a hundred in 2016 to over 3,500 a last year. Interestingly enough, a lot of those administrative assistants are getting hired by immigration agencies. You're just like, “What's going on here?” None of this really makes sense. So I think we should be asking questions, particularly at a time when we know from The Toronto Star that the federal government was not enforcing the rules as strictly as they should be.

TH: The argument that is often made by industry, and was repeated by Immigration Minister Marc Miller on your podcast, is that some of these jobs are ones that no Canadian particularly wants to do. And yet, your Missing Middle co-host Cara Stern dug into the data of who has been approved to bring in workers. One of the locations, I believe, was a Dairy Queen near Fanshawe College in London. How valid is the argument that no Canadians want these jobs — and that therefore business must bring in outside labour?

MM: I find the argument problematic. I'm sure in some cases there are, or there's no Canadians that are really qualified to do some of these things. I think part of that might apply to parts of the agricultural stream of the Temporary Foreign Worker program, which was the original stream going back to the 1970s. I think the one where I think most Canadians hear that and go, “Yeah, it makes sense to bring in seasonal agricultural workers for the harvest.” It's like, “Okay, that's fine.”

But some of these other ones — this idea that there's nobody who will work at the Dairy Queen by a college, or nobody who will work at Tim Horton's, or work as an admin assistant for $30 an hour? I just find that hard to believe. If that's the case, I actually think we have bigger problems as a country than temporary foreign workers. If it's true that Canadians are just turning their nose up at these jobs at a point in time where the job market is so bad.

But I have trouble believing it, just because I know so many teenagers and folks in their 20s who are desperate to work because they need the money. Because rents are so high in college and university towns. Tuitions are high. They're having real trouble paying for their degree, paying for their diploma. So I think they probably think it's a little insulting to be told that they're lazy and they're just at home eating avocado toast and playing PlayStation, when you hear of these kids who apply for lots of jobs. One example of that, the CNE, the big fair in Toronto, had [37,000] people apply to it this year for a couple thousand jobs. The previous year it was only [18,000]. So I look at things like that and go, “Really?” When you see the long lines of job fairs to be told that no, people in Canada don't want to work? I don't believe it.

TH: Interestingly, you pointed out that in 2014, when Stephen Harper was prime minister, Justin Trudeau criticized him for the number of TFW workers in the country saying this was depressing wages. Now, I know you can't say anything about what happens at a cabinet retreat (and we should also point out that the work you do there is pro bono). But we can talk about what is said publicly. The press put a question to Marc Miller about your argument that the TFW program is suppressing wages, and he said, “It's the opinion of one person.” And then employment minister Randy Boissonnault said that “some of the rhetoric out there is downright unhelpful.” He then drew attention to rural inns who can't find enough workers. What did you make of that response?