Don’t let temporary foreign workers drive down wages: Carney
TheStar.com- business/economy – Bank of Canada Governor also says Ottawa’s planned increase in tariffs on imported goods from dozens of countries is a revenue-generator for the federal government.
Apr 23 2013. By: Les Whittington Ottawa Bureau
Bank of Canada Governor Mark Carney warned the federal government not to allow temporary foreign workers to take jobs away from Canadians or drive down wages.
“One doesn’t want an over-reliance on temporary foreign workers for lower-skilled jobs,” the head of the central bank told the Commons finance committee.
Relying too much on temporary employees from abroad distorts wage adjustments that lead to Canadians getting better pay and delays changes that make companies more efficient, Carney said.
Facing a barrage of complaints about displaced Canadians, the Harper government is looking at how to overhaul the Temporary Foreign Worker Program to prevent abuses by businesses. Under new rules expected soon, companies will have to make more extensive efforts to hire Canadians before bringing in foreign workers. And more training of Canadians to take skilled positions will be required, officials say.
“The intent of the [government’s] review is to ensure that this is used for transition for those higher-skilled gaps that do exist,” Carney said.
In wide-ranging testimony, he also said Ottawa’s planned increase in tariffs on imported goods from dozens of countries is a revenue-generator for the federal government.
He told the committee there could be some benefit from Finance Minister Jim Flaherty’s move in the March 21 budget to raise tariffs on imports from 72 countries, such as causing Canadian manufacturers to be more efficient and competitive.
“Obviously, there is a wide range of costs, though, that will be associated with that policy,” he remarked.
The government has been heavily criticized for removing tariff preferences for the 72 countries, a move Flaherty said is being taken because many of the countries — such as China — are no longer in need of a break from Canada. But the New Democrats say the decision, which will increase federal revenues by more than $300 million annually, amounts to a tax on consumers.
Asked if it makes sense now to give China a tariff preference, Carney acknowledged the Chinese economy has become a major global powerhouse. But “at the same time, China has still just under 300 million people who live in what would be described as poverty,” he said.
Carney was reluctant to discuss the highly political tariff issue. He said, in general, Canada should pursue free-trade agreements and has “benefitted tremendously” from them.
In the Commons later, Flaherty defended the decision to end the preferential tariffs. It “was a foreign aid program designed in the 1970s to help developing countries,” he said, adding that until last month Canada was offering tariff breaks to “South Korea, Thailand and China — all of whom are developed economies.”
On the issue of higher prices in Canada than the United States for the same products, Carney said the price gap is shrinking because retail competition is increasing as more foreign companies set up on this side of the border. He said increased cross-border shopping is also contributing a bit to the closing of the Canada-U.S. price gap.
But Carney said the gap may never close completely because Canadian companies spend more on labour than their U.S. counterparts and because distributing products in Canada is more costly than in the U.S.
As the Bank of Canada said in last week’s quarterly report, Carney told MPs economic growth is projected to be a meager 1.5 per cent in 2013. The economy is then projected to grow by 2.8 per cent in 2014.
He told the committee that the keys to increased growth in Canada are improved business investment and a better export performance.
Carney has kept the central bank’s influential overnight rate at the very low level of 1 per cent since September 2010 in hopes of stimulating economic activity. And his latest hints indicate the bank doesn’t foresee an increase in rates until next year.
It was Carney’s last appearance before the Commons finance committee. He leaves the Bank of Canada this summer to take over the Bank of England.
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