A temporary foreign worker feeding cattle at the MCF Leclerc Farm in Trois-Rivieres, Que.Andrej Ivanov /The Globe and Mail
When University of Waterloo economist Mikal Skuterud ponders the triangular relationship between immigration, technology and productivity, he finds himself thinking about Norway, where his family is from. It’s a place that doesn’t import low-skilled workers to do jobs Norwegians don’t want to do. That kind of work is mainly done by technology. The country’s fish processing industry is famously and thoroughly automated, as are places like supermarkets. “Low-wage jobs like you see in Canada literally don’t exist,” he says. “Even cashiers. The grocery store is completely self-checkout. It’s almost like there’s no employees in a lot of the stores.”
Norway, not coincidentally, invests in a widely accessible vocational training system closely aligned with labour market needs. It also happens to have one of the most productive economies in the OECD—a measure widely regarded as a proxy for a country’s standard of living. Industries (and economies) that are highly productive tend to invest in labour-saving technologies, which allow them to increase their revenues and earnings per worker. (Automation can exacerbate income inequality, but technology also fosters new forms of higher-skilled work.)
Canada’s productivity, in turn, ranks in the middle of the pack among OECD countries, well behind the U.S. and all the other G7 economies except Japan. Over the decades, experts have debated the root causes of our lagging productivity, with culprits ranging from resource dependence to an excess of U.S. branch plants to an inability to grow global tech companies.
Shoppers use the self check out of a Lobalws Superstore in Toronto.Christopher Katsarov/The Globe and Mail
But Skuterud’s observation raises another possibility: Are Canadian firms less likely to invest in technology, training and equipment that could increase productivity and reduce their reliance on low-skilled labour because it’s easier and less costly to hire low-wage foreign workers? And if so, does Canada’s politically besieged temporary foreign worker (TFW) program and its cousin, the international mobility program (IMP)—which allows foreign students to work while studying in Canada—contribute to Canada’s stagnant productivity?
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The TFW program dates back to the mid-1960s—a period when the federal government began issuing work permits to seasonal farm workers for entirely pragmatic reasons and our labour productivity was growing at a healthy clip. Ottawa later expanded the program to include caregivers and health care workers. In recent decades, it’s allowed employers to bring in high-skilled workers and low-skilled non-agricultural workers, while permitting international students to secure temporary work visas. The upshot is that the numbers have jumped significantly—to 845,000 in 2021 from 356,000 in 2011, according to a 2024 Statistics Canada report—with the bulk of that growth coming from students with work permits.
“Many will agree that, with some caveats—the old seasonal agricultural workers program maybe being one – TFW/IMP workers serve as a disincentive to employers to invest in productivity-enhancing technology/capital equipment,” says Arthur Sweetman, a McMaster University labour and health economist.
In places with low or no immigration, the converse seems to be true. “You can go to countries that are developed and have high living standards, like Japan and South Korea, where they virtually ban any type of immigration. And what you see is that those guys do invest more in those machines,” says McMaster economist Pau Pujolas.
There’s been plenty of scholarship over the years demonstrating that high-skilled immigrants benefit their firms and the economy in general—and not just in Canada. For instance, a 2021 study on entrepreneurship, innovation and immigration published by the conservative Cato Institute cites research showing that immigrants tend to be more entrepreneurial than U.S. citizens and drive increases in patent registrations.
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While Canada used to prioritize high-skilled immigrants, that’s no longer the case. Many TFWs work in industrial settings, like food processing and construction, which crave low-skilled employees to address post-pandemic labour shortages. “The crux of our immigration challenge,” says Skuterud, “is that historically, we’ve said we’re going to have a ‘human capital’ model, where we’re focused entirely on prioritizing the skills of immigrants. In recent years, we’ve moved away from that toward a system that’s more concerned with current labour market needs that tend to be lower-skilled jobs.”
Mexican and Guatemalan workers pick strawberries at a strawberry farm in Pont Rouge, Que.Jacques Boissinot/The Canadian Press
For employers contending with hiring problems, the incentives are powerful: They can pay TFWs less than Canadian workers and don’t worry too much about investments in training. These employees also tend to work longer hours, have lower rates of absenteeism and are less likely to be laid off, as a 2023 federal government survey found.
In a 2025 paper in the Canadian Journal of Economics, Skuterud and his co-authors, University of Waterloo’s Matthew Doyle and Carleton University’s Christopher Worswick, examine the economics of Canadian immigration levels since the 1960s. They argue that the recent skills mix among temporary workers doesn’t make sense according to the long-standing logic of Canada’s immigration system, which foregrounds economic benefits: “Our analysis suggests that Canada is not well positioned to leverage heightened immigration to increase GDP per capita owing primarily to weak capital investment and quantity-quality trade-offs in immigrant selection.”
A study by the Bank of Canada and Western University released earlier this year comes to a similar conclusion. It found that between 2015 and 2024, temporary workers have become “younger, less experienced and more likely to migrate from lower-income countries,” while the share in skilled occupations has declined. The net result is that, in the aggregate, Canadians’ wages would have been about 0.7% higher if the skills profile of TFWs hadn’t shifted over the past decade. “Assuming that newcomers’ wages largely reflect their labour productivity,” the study’s authors concluded, “these results have important implications for Canada’s productive capacity and thus potential output.”
Whether Canadian firms’ growing reliance on low-skilled TFWs has measurably dragged down Canada’s productivity is difficult to say. The total number of temporary residents with work permits is actually quite limited—only 4% of Canada’s total labour force, according to a 2021 evaluation conducted by Employment and Social Development Canada. “People perceive the temporary foreign worker program as a big threat to jobs, when in reality, numbers are relatively small,” says Pujolas. What’s more, economists say it’s almost impossible to empirically demonstrate that Canadian firms that lean on this kind of employment instead of buying labour-saving technologies are pulling down Canada’s overall productivity metrics and, if so, to what degree. “It is really hard to credibly measure the foreign worker effect on productivity,” says Sweetman.
Skuterud’s take on the TFW program’s future is that Canada shouldn’t throw the policy baby out with the political bathwater. “The real worry I have,” he says, “is that you’re seeing political parties posturing on immigration policy in a way that’s not really about policy.”
A rational reading of the use and growth of the program indicates that the government should adjust the policy levers so Canada’s use of temporary workers supports, rather than undermines, the broader health of the economy. In other words, return to a system that puts a preference on high-skilled workers, including those who want to eventually become permanent residents, because there’s clear evidence that that kind of immigration delivers all sorts of benefits to the economy and the labour force, as well as Canadian society.
Federal policy makers should also reflect on whether the government simply made it too easy for Canadian employers, immigration consultants and international job recruiters to use these programs to deal with their HR headaches. As Skuterud says, “if you ease the access, what tends to happen over time is the numbers just grow and grow and grow.”
The numbers ballooned, then there was a big pull-back for largely political reasons. At this juncture, Ottawa should turn to the emerging data and economic analysis to figure out how to reset our immigration policies so they no longer trigger unintended consequences for Canadian companies forever on the prowl for the points of least resistance.