The Wage Effects of Restricting Temporary Foreign Workers: Evidence from Canada’s 2014 TFWP Reforms

Wen-Hao Chen and Tony Fang

No 18240, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study examines the labor market impacts of Canada’s 2014 reforms to the Temporary Foreign Worker Program (TFWP), which introduced stricter limits on hiring low-skilled foreign workers. Using a difference-in-differences framework with Labour Force Survey data from 2005 to 2019, we compare wage outcomes for domestic workers in TFW-intensive occupations to those in similar low-skill jobs unaffected by the reforms. Robustness checks— including event study analysis, propensity score matching, placebo tests, and additional validation with Census data (2006, 2011, 2016)—consistently show that the reforms led to a statistically significant increase in wages for affected domestic workers. The estimated impact ranges from 3.7% to 4.5%, suggesting that restricting access to temporary foreign labor modestly improves wage outcomes for low-wage Canadians. These findings offer timely insights amid renewed policy efforts to tighten immigration, highlighting the potential benefits of targeted reforms while cautioning against broader restrictions that could undermine labor market responsiveness and sectoral needs.

Keywords: temporary foreign workers; immigration policy; labor market; wages; low-skilled workers; policy evaluation; difference-in-differences (search for similar items in EconPapers)
JEL-codes: J21 J31 J61 J68 O15 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-lab and nep-mig
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Published - published online as 'Restricting temporary foreign labour: evidence on wage effects from Canada’s 2014 policy reform' in: Journal of Ethnic and Migration Studies , 24 October 2025

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