Monday, March 25, 2013

Opening The Gates

Ottawa hopes to fill the labour vacuum with a new foreign-worker program targeting skilled trades workers. This article appears in the April issue of Oilweek; photo from here
By Peter McKenzie-Brown
As 2013 began, the federal government loosened up regulations allowing temporary foreign workers to come to Canada. At first this seems odd, since both Canada and the United States have unemployment rates north of 7%. But when you look a bit deeper, the changes were necessary and even late.

Let’s begin by putting it all in context. Last June, Parliament’s Standing Committee on Finance reported that there would be a pre-budget consultation for Canadians to “share their priorities” in anticipation of the 2013 budget. Two of the Canadians to respond were the Canadian Association of Oilwell Drilling Contractors (CAODC) and the Petroleum Services Association of Canada (PSAC). Both said they needed more workers. In fact, the two groups were part of a coalition of nineteen Alberta business associations seeking ways to address labour shortages.

According to the CAODC submission, “The government needs to address the labour supply. (The petroleum sector) will suffer without a complement of skilled labour. (It) operates in one of the most expensive jurisdictions in the world. If the labour supply is not addressed it could have significant cost implications through unsustainable wages and inflation. The government needs to address market access.” For its part, PSAC tabled recommendations to “ease the process of hiring from foreign labour markets.” They and the other groups crying out for more foreign workers got their collective wish well before the budget was announced.

In response, the federal government’s first announcement of the new year unveiled a new Skilled Trades Program which “will address serious labour shortages that some regions of the country are facing, and will help grow Canada’s economy,” according to the minister responsible, Jason Kenney. He described the new policy as “long-overdue,” and “part of the government’s plan to build a fast and flexible immigration system that is responsive to the needs of Canada’s economy.” He might also have described it as a tempest in a teapot, since in the program’s first year the feds will accept no more than 3,000 applications – and those only from people in about 40 categories.

The program applies to contractors and supervisors in specific trades – for example, those with experience in oil and gas well drilling or in petroleum processing. Other categories include plumbers, pipefitters and heavy-duty equipment mechanics. The federal government began accepting applications on January 2nd, the day of the ministry announced the program.

For expert comment on the issues involved, Oilweek spoke to Peter Veress. Veress is president of Vermax Group, a privately held human resources firm, which has done a lot of work with temporary foreign workers. “Over the years we’ve recruited more than 2000 temporary foreign workers, according to Veress. “We make sure they get their temporary work permits and so on, but we also make sure that the companies understand their obligations to the workers. The rules are quite complex and somewhat onerous, and we want to make sure that the companies understand the implications of bringing foreign workers into Canada.”

Resource Economics and a Demographic Deficit
Veress describes Alberta and Saskatchewan as an anomaly in North America. “We’re in a very privileged place. There is a lot of economic activity, and unemployment is essentially zero. Anything around 4% is essentially zero.” He explains this anomaly in terms of resource economics. “Resource economies like those in Alberta and Saskatchewan can’t outsource their jobs the way you can outsource manufacturing, for example. Someone has to be here in the province to develop and produce from the resources. We need to have bodies on site to extract and produce oil sands, potash and those other resources. Furthermore, huge capital investments have to be made to get these projects up and running, and we need skilled people to do that. In some parts of Canada where we have unemployment, we still have shortages in skilled labour. Right across Canada, we still get requests for industrial mechanics and electricians from other parts of Canada and frankly, across the world.”

According to Veress, there are two other reasons other than Canada’s resource economy behind the country’s labour shortages. One he calls a “demographic deficit” – a phrase that refers to Canada’s low birth rate and the growing numbers of skilled people retiring from the workforce: by some estimates, 40 per cent of the globe’s petroleum engineers will retire within the coming decade. The other is a skills shortage, pure and simple. Canadians are more likely to go to university than to technical institutes and trade schools, which means industrial tradespeople aren’t being trained in sufficient numbers. To compound matters, Canada’s system for evaluating potential immigrants tends to favour migrants with academic credentials.

Government policy needs to balance all these forces, Veress says, and loosening rules on temporary workers is an excellent way to do it. This approach meets the needs of employers, but it also helps politicians fend off such political pressures as public concern that the system may somehow favour foreigners at the expense of those already living in Canada. Because language plays such an import role in immigrant success and general health and safety, the rules include a basic level of language proficiency. Those seeking temporary permits also need valid offers of employment or qualifying skilled trade certificates from a province or territory. Also, they must have worked at least two years in the occupation within the last five years.

A Case Study
Venezuela provides a case study of how this new system can benefit Canada. Industrial facilities in Venezuela, like those clustered around the small city of Ciudad Guauyana, benefitted enormously from the country’s energy policy prior to 2000. Located near Venezuela’s Orinoco ultra-heavy oil belt (which probably has more oil-in-place than Canada’s oil sands), development of these huge operations was greatly spurred by policy regulations which demanded local processing of the oil before it could be shipped overseas.

Much changed after 1999, when Hugo Chavez was elected the country’s president. The charismatic socialist soon began to dismantle the system which had worked so well – notably nationalizing the operations of western companies. It was only a matter of time before employment in that sector began to lose its appeal to local workers. The result was that numerous workers began migrating to Canada from Venezuela just as the oil sands industry was heating up. Today, there may be as many as 4,000 Venezuelan families living in Fort McMurray alone. To the extent that Venezuelan workers arrive in Canada with temporary work permits, blinkered views about “foreigners taking Canadian jobs” are greatly diminished. Those skilled workers are here because Canadian industry needs them.

At least in part, workers began migrating from Venezuela’s Orinoco fields to the oil sands more than a decade ago because temporary work permits are not that new an innovation.

“In some senses, things are not much different than in the past,” says Veress. Both the federal and provincial governments have long had programs which enabled people to immigrate to Canada, and once they arrived “there were programs to train immigrants so they could find a job. What policy-makers are trying to do now is the opposite. Bring people into the country to take a job. They can become immigrants later on, after they’re established. Increasingly, governments want people to be here on a work permit basis before they become permanent residents. That’s the focus” – and that focus makes sense.

The new regulations are labour-market driven. “We need to have the right people at the right time in the right numbers. “In the past, many people came to Canada with master’s or PhD degrees, and then just couldn’t find a job in their profession. (Minister Kenney) used to joke that the safest place to have a heart attack is in the back of a taxi, because your driver was likely to be an immigrant doctor. I myself have seen fairly accomplished professionals stocking shelves at London Drugs.”

Much of this waste of talent would disappear under better labour rules, Veress suggests. He makes a compelling case for the federal strategy of bringing skilled workers into Canada by providing them with work visas. “We need to bring people into Canada, but it’s best if they have been working before they get the permanent-resident option. If they like it here, they can become immigrants. This is a better way of doing it because the people who are here have already proved that they can get a job in their own area. If you’re already working in your field, you must’ve jumped through all the hoops you needed to get that job. You have certification from the regulatory body, and so on.”

For many years the federal and provincial governments have had parallel programs to deal with new arrivals. The federal skilled trades program allows people to apply for a job in Canada from outside of Canada, and checks to see that they could meet all of the requirements of becoming a permanent resident. The provincial programs, however, are mostly for people who are already Canadian residents. “The federal program opens up the door a little bit more to someone from overseas who wants to come to Canada but not necessarily as an immigrant.”

Bursting Bubbles
“I think the labour market in Alberta and Saskatchewan is a bit like a bubble. I don’t like to say that, because bubbles tend to burst,” Veress adds. “I’m no economist and no academic, but as you know we are resource-based economy. We have to be able to sell what we have. We are somewhat diversified, and not entirely reliant on oil, but what would it take to burst the bubble? Any disruption in our markets or demand for the oil we produce.”

Let’s assume that there is a bubble, and that in the medium term it does burst. Certainly such an event would be consistent with the report released last fall by the International Energy Agency. Readers will remember that the IEA forecast that higher oil prices and technological and geological ideas are likely to drive global oil production into the stratosphere. Counterintuitively, the agency suggested that the United States would be nearly self-sufficient in energy by about 2035.

While most of the large petroleum companies seem to dismiss the extreme elements of the IEA scenario, there is much medium-term concern in Canada – especially given the two-fold realities of clogged pipeline capacity and rising production levels. If a bubble does exist and it does pop, the rules for temporary workers are self-regulating. Applicants without job offers would not receive work permits. Those whose jobs evaporate would presumably find work elsewhere, return to their place of origin or apply for permanent resident status in Canada. While Canadian experience would likely work to the benefit of those submitting permanent residency applications, it would not be a guarantee.

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