Tuesday, April 9, 2013

RBC Outsourcing of Temporary Foreign Workers

The Royal Bank of Canada (RBC) is indirectly replacing 45 Canadian workers with foreign workers through contracting firm iGate. This move has sparked outrage for good reason. This isn’t a case of sending work overseas; these foreign workers are coming to Canada to displace Canadian workers.

This is all being done under the temporary foreign worker program which allows RBC “to hire foreign workers on a temporary basis to fill those jobs, but only if a Canadian isn’t available to do the work.” However, these IT-related jobs in question at RBC are not high-skill jobs. There are plenty of Canadians who can do this work.

The real issue is money. RBC could easily get a flood of Canadian IT employees if they bumped up the hourly wage they pay. Any apparent shortage comes from trying to pay below the market-based wage.

It makes sense to allow companies to bring in foreign workers for jobs requiring rare skills, but that is far from the case here. The fact that RBC is actually replacing existing workers makes the financial motive even more transparent.

Widespread objection to RBC’s move isn’t just a knee-jerk reaction from organized labour. I’m rarely accused of being left-leaning. I believe in free markets when there are enough players for genuine competition. However, this move by RBC to cut costs is bad for Canada.

9 comments:

  1. Thanks for explaining Michael. I was confused because companies outsource (even between cities and provinces).

    I didn't realize the foreign workers were coming here. Maybe other companies have followed this same strategy but didn't get spotted.

    ReplyDelete
    Replies
    1. @Promod: I don't know if other companies are doing the same thing, but if so it's a problem.

      Delete
  2. A number of foreign workers brought into Canada on temporary work visas has grown up tremendously due to the changes brought in by the Cons and during their term. Amazingly, government funded CBC radio has somehow managed to link this trend to corporate tax reductions introduced by Liberals. Or should this not be amusing any more?

    ReplyDelete
    Replies
    1. @Anatoli: I get tired of debates about whether the left or right is to blame for problems. I find lots to like and dislike with both the Conservatives and Liberals. My main concern is that we should stop companies from abusing temporary foreign worker rules as a way to reduce wages of qualified Canadians who want the jobs.

      Delete
  3. Here is my comment more so about outsourcing.

    I have a bell home phone. When I call for support it's routed to the Phillipines. The service is fine, they even have training there to mimic local accent's in their speech to make the call more "local" sounding. No problem to this point.

    My question is wouldn't we all benefit more by keeping these low to mid level paying jobs in Canada? You have an employee maybe paid around 30 or 40 K so he/she will be taxed via their payroll dept., then everything they buy in Canada of course is taxed again. In turn our "system" generates more "moving" money here. Once the job and the money leave our shores that revenue vanishes with it. Less purchasing here. It's like we are shooting ourselves in the foot to get a short term increase in profits at companies that have 1b$ quarters that want to squeeze out an extra little bit of profit. To me that is a shortsighted approach.

    The more people with money in their pockets here means they will buy more things, more houses, more cars. You would think that benefit would then eventually go back even to the banks, the telco's, and all the other companies that use call centers out of Canada in increased sales of their product or service in the future.

    This just makes sense to me.

    ReplyDelete
    Replies
    1. Michael, I cliked on ur "contact" site but cud not find where to clik to send u an email. Also ur site that states "get free report" for the 9 best stocks sends me to JOIN some entity first. Is this what u intended re the above? Thx

      Delete
    2. @Paul: I see outsourcing to another country as verydifferent from bringing foreign workers in to work in Canada.

      @Anonymous: My email address is on the contact page. However, I prefer to interact with readers through comments.

      Delete
  4. I am puzzled to be in the minority in this one, thinking that what RBC is doing through iGate is no different than many, many other large companies that outsource to different parts of the world.

    As for the workers being here, I was under the impression that they're in Canada for a short period while learning the new functions and then returning to India.

    Minister Finley can claim this is 'unacceptable' all she wants, but if the legislation permits it, do we want government dictating contract terms between private entities (shades of Flaherty's mortgage complaints)...

    And it seems the market is correcting as expected: the negative publicity this generated will likely cause losses that will offset any gains from the outsourcing. Management should take this into account next time the idea comes up. If they mess it up enough share price gets driven down, etc...

    ReplyDelete
    Replies
    1. @Fernando: Whether or not the legislation permits what RBC wants to do depends on whether the worker skills required are genuinely unavailable in Canada.

      Delete