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With the federal government seeking to curb the economic strains of recent population growth, the crop of temporary foreign workers is expected to decline. This shift is likely to create labour challenges for certain sectors, says Desjardins Group.

Policy action to reduce the number of non‑permanent residents in Canada is expected to slow real GDP growth while curbing inflation, particularly shelter costs, Desjardins said in a report.

Simultaneously, the presence of fewer temporary foreign workers should also boost wage growth as the number of young workers declines and unemployment and job vacancies rise, the report said.

Higher wages should, in theory, entice workers to fill the jobs that are currently being done by temporary foreign workers. However, the report said, “there is little evidence of people waiting on the sidelines to work.”

As a result, the sectors that rely most heavily on temporary foreign workers — such as accommodation and food services and retail trade — will likely face the biggest hit from a policy reducing the availability of this cheap labour source, the report suggested.

These sectors are already hurting as they were among the hardest hit by the pandemic, and they’ve seen a surge of insolvencies so far this year, the report noted.

“High borrowing and input costs, on top of elevated debt levels coming out of the pandemic, have weighed on these industries even in an environment of ample and relatively inexpensive temporary labour,” the report said. “For sectors of the economy that emerged from the pandemic battered and bruised, the federal government’s plan to reduce [temporary foreign worker] admissions will make an already challenging situation even more difficult.”

Some companies in these sectors may innovate and improve productivity in response to the lack of low-cost labour. “Unfortunately, others will not, posing ongoing challenges to Canadian businesses,” the report said.