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July 2014, Volume 21, Number 3

Canada, Mexico

Canada plans an Express Entry process beginning in January 2015 to allow skilled foreigners with Canadian job offers and foreigners selected for the Provincial Nominee Program to quickly receive immigrant visas. Foreigners seeking immigrant visas will register online with Citizenship and Immigration Canada, which assesses all applicants in the pool and invite those who have skills in short supply or Canadian job offers to move to the front of the queue for immigration visas.

TFWP. The Temporary Foreign Worker Program began as a pilot in 2002 and has since expanded in response to what employers say are labor shortages. In order to hire migrant workers, employers must receive a Labor Market Opinion from Service Canada to certify that Canadian workers are unavailable at the prevailing median wage rate for the job before they can employ temporary foreign workers. Unions say that the LMO often is a formality that opens the door to guest workers.

Some 25,000 Canadian employers hired 386,406 temporary foreign workers in 2013, more than triple the 109,662 in 2003. Almost 60 percent of temporary foreign workers are in Canada for more than one year. Two-thirds of temporary foreign workers do not need an LMO, since they are, for example, intra-company transfers or they arrive from Mexico or the US with NAFTA visas.

In April 2014, Canadian workers at several McDonald's restaurants in Victoria complained that their hours were reduced because their employer gave more hours to Filipino guest workers. Some of the Filipinos were admitted as food service supervisors at C$12.36 an hour, while the Canadians were deemed food counter attendants and paid C$10.25, prompting speculation that the higher job classification for the Filipinos improved their chances of eventually obtaining immigrant visas. It was not clear if the Filipinos paid for their Canadian jobs.

The government responded by temporarily halting the admission of foreign workers under the TFWP for restaurants in April 2014. McDonald's said that four percent of the 85,000 employees in its Canadian restaurants are foreign workers, while Tim Hortons, which has over 3,500 doughnut and coffee shops in Canada, said that temporary foreign workers account for five percent of its 90,000-strong Canadian workforce.

The C.D. Howe Institute released a study in April 2014 concluding that migrants admitted under the TFWP had increased unemployment among Canadians in Alberta and BC. The number of guest workers in Canada admitted under the TFWP rose from 101,000 in 2002 to 338,000 in 2014. The government requires employers to pay foreign workers at least the median wage for the occupation in which they are employed, and charges C$275 for each employer application.

The government countered that only 55,000 foreign workers entered Canada at the behest of a particular employer in 2013, including 34,000 farm workers. Canadian TFWPs include the Seasonal Agricultural Worker Program, the Live-in Caregiver Program, the Stream for Lower-skilled Occupations, and the Stream for Higher-skilled Occupations.

The government on June 20, 2014 proposed major reforms to the low-skill TFWP. Henceforth, only employers in areas with unemployment rates below six percent can hire migrants, employers must pay higher fees to receive a LMO (from C$275 to C$1,000), and employers can have a maximum 30 percent low-wage foreign workers in 2014, 20 percent in 2015, and 10 percent after 2016 if the employer has 10 or more employees (low-wage is defined as less than 10 percent of the provincial media).

The government says that 31,000 new foreign workers entered Canada in 2013, and that 15,000 are expected in 2017 after these changes are fully effective.

Employment Minister Jason Kenney said: "the temporary foreign worker program is only used as a last and limited resort... Canadians always come first, employers [should] redouble their efforts to hire Canadians for available jobs and ensure that this program works in the best interests of the Canadian economy."

New employer surveys, including one that will interview 100,000 employers a year to learn about their job vacancies and another that will interview 100,000 employers a year to learn about wages paid, aim to provide a better picture of labor supply and demand.

In response to employer complaints of labor shortages in Prince Edward Island lobster processing plants, Kenney said that raising wages or making jobs more attractive is better for Canada than having employers "pick up the phone and call a labor recruiter on the other side of the world and having someone fly in from a developing country." The unemployment rate in PEI averaged 11 percent between 2005 and 2014, but PEI seafood processors whose labor forces are 50 percent or more migrants say they cannot find local workers.

The government is dividing TFWPs into two groups. Those that do not require a labor market test will be known as international mobility programs, while those that require LMOs or labor market impact assessments will be known as TFWPs. The government says it will post the names of employers approved to hire migrant workers and those who have violated TFWP rules, and will likely reduce the maximum stay of low-skilled migrants from four to two years.

The SAWP and the Live-in Caregiver Program are exempt from the new rules. There are about 100,000 workers employed in Ontario agriculture, including 16,000 SAWP workers and 3,000 foreign workers admitted under the low-skill TFWP who work year-round on mushroom farms and in greenhouses.

The federal government is responsible for operating the TFWP, but provincial governments enforce labor laws. Manitoba is the province that is considered to have a model enforcement program, requiring employers who hire migrant workers to register, inspecting workplaces with migrants, and barring employers who have serious labor law violations from getting more migrants.

Prince Edward Island and the other three Atlantic provinces are losing people to western Canada, where jobs are plentiful and wages are high. In 2013, the federal government changed the (un)employment insurance program to make it harder for the jobless to turn down jobs that pay wages similar to what they used to earn, prompting out-migration to western Canada's oil-fueled provinces.

Mexico. The North American Free Trade Agreement (NAFTA) continues to be controversial in the US almost two decades after it went into effect January 1, 1994. Supporters note that trade and investment have expanded the economies of the three NAFTA countries, enabling the GDP of Canada, $1.8 trillion in 2012, Mexico, $1.2 trillion, and the US, $16.2 trillion, to top $19 trillion or a fourth of the world's $72.7 trillion.

NAFTA was the first FTA between adjacent industrial and developing countries. By locking Mexico's new free trade and investment policies into an international agreement, the Mexican government hoped that NAFTA would attract foreign investors and create jobs for a Mexican labor force increasing by up to a million a year. Trade and investment increased. Canada-US two-way trade was over $2 billion a day in 2013, while Mexico-US two-way trade exceeded $1 billion a day.

Mexico, whose labor costs are 60 percent of US costs in vehicle manufacturing, has become the world's eight-largest producer and fourth-largest exporter of vehicles. Autos and auto-parts represent 20 percent of Mexico's manufacturing industry.

The Financial Times compared India and Mexico in a June 4, 2014 article, noting that output per worker rose only one percent a year in both countries since 1980. Mexico's GDP was 30 percent of US levels in both 1990 and 2012.

Mexico appears caught in a middle-income trap, and the major explanation for lagging productivity growth in Mexico and thus slow growth in Mexican incomes is the large informal sector in Mexico. Over 40 percent of Mexicans work in firms with fewer than 10 employees. These often family-owned small firms absorb family members and relatives who cannot find formal sector jobs, but usually have limited access to low-cost credit to expand and increase productivity.

There was a Mexico-US migration hump between 1995 and 2007, meaning that migration and trade increased together. There were several reasons for more Mexico-US migration, including adjustments in Mexico as its economy restructured, a demand for Mexican workers in the US, and ineffective enforcement against unauthorized migration. There was also path dependence in both Mexico and the US that made it easier for especially rural Mexicans to find economic opportunity in the US rather than in Mexico.