The liberal government's decision to rein in the temporary foreign workers program after easing rules to help businesses find workers post-pandemic has sparked a debate about whether governments should even attempt to address labor shortages.

Prime Minister Justin Trudeau announced on Monday that his government is re-imposing stricter rules to stop the flow of low-wage temporary foreign workers and urged businesses to hire and train Canadian workers.

Trudeau said during a Liberal cabinet meeting in Halifax, "Two years ago, following the pandemic and facing a severe labor shortage, we adjusted the temporary foreign workers program, and this is what the business community needed."

But today’s economy is completely different than it was two years ago. Inflation has started to decline. Employment rates have risen. We no longer need as many temporary foreign workers."

Business groups supported more immigration and temporary foreign workers to help fill the labor gap, but economists reject the idea of government intervention.

Christopher Ragan, an economics professor at Carleton University, said, "Ideally, governments should do nothing, but it’s hard for governments to do nothing when employers are upset."

Many economists argue that a tight labor market is beneficial for workers and the economy because the shortage forces companies to raise wages and invest more in technology that enhances productivity.

Ragan said, "When governments and employer groups talk about shortages, it’s not entirely clear what they mean. Does that mean we wish we could hire more low-wage workers? Well, that’s not how economies work."

According to public data released by the Canadian Immigration, Refugees and Citizenship, there were 183,820 valid temporary foreign worker permits in 2023. This was an increase from 98,025 permits in 2019 – a rise of 88 percent.

In the wake of the Liberal government's announcement, Ragan called for the temporary foreign workers program to be abolished, which he says should include phasing out the low-wage stream and integrating the high-wage stream with the economic immigration program.

Prominent economist Mike Moffat – one of the experts who attended the Liberal cabinet meeting in Halifax – also called for the elimination of the non-agricultural low-wage stream from the program.

Diana Palmieri Velasco, senior director of the Future of Work at the Canadian Chamber of Commerce, said, "I think we need to be careful with this kind of call, as it doesn't really match the reality of the economy."

Velasco clarified that there are many low-skill jobs that need to be filled, including in small communities where changing demographics make it hard to find workers.

She also dismissed the argument about wage suppression put forth by economists like Ragan.

She said, "If (businesses) have to raise those wages a lot to attract workers, who will pay for that? The cost will be passed on to consumers at a time when our economy does not look great."

As for skilled labor immigration, Ragan said he supports Canada trying to attract the best and brightest. However, he stated that economic immigration should not focus on addressing labor shortages either, as it is hard to predict where labor shortages will arise.

Ragan added, "I think it would be better to focus solely on skills-based immigration. Stop talking about labor shortages. Tell companies to raise their wage offers if they can't fill a position. Or as the Prime Minister said... Train your workers."

The reaction to labor shortages post-pandemic has been nearly universal from business associations and politicians alike: Canada needs to bring more people into the country to fill those jobs.

Premiers praised the federal government's decision to increase its annual immigration targets. Ontario Premier Doug Ford has been particularly vocal about the need for more immigration to help fill vacant jobs.

In the spring of 2022, the federal government relaxed the rules of the temporary foreign workers program and a few months later, Immigration Minister Sean Fraser announced that Canada would increase its annual permanent residency target to 500,000 by 2025.

While the rule changes occurred under his watch, Trudeau sharply criticized a similar increase in temporary foreign workers during the Harper government.

In 2014, he wrote an op-ed calling for a significant reduction in the temporary foreign workers program and a return to its "original purpose" of filling jobs when no Canadian workers can be found.

Trudeau wrote in the Toronto Star: "I believe it is wrong for Canada to follow the path of countries that exploit large numbers of guest workers, who have no realistic chance of citizenship."

"This is bad for our economy as it drives down wages for all Canadians, but it is worse for our country. It places pressures on our commitment to diversity, and creates more opportunities for division and resentment."

As for whether the Liberal government's shift on immigration indicates a change in opinion regarding labor shortages, Ragan is uncertain.

He said regarding the shift on immigration: "I think the housing crisis is what has pushed things in this direction."

"Governments love to talk about labor shortages. So, I'm not sure this issue will go away, but I think the issue of capacity is on the table now."