Shelter Restaurant has been serving fresh smoked salmon and seared tuna at the edge of a calm harbour in the small town of Tofino, B.C., for more than two decades.

It has had its fair share of troubles, such as a devastating fire right before Christmas in 2022 that forced it to shut down and reopen in a nearby location, but the business, which employs up to 180 people in the summer, has continued to be a community landmark for the touristy town’s roughly 2,500 residents.

Holding onto that positive vibe may be difficult, though, due to recent changes in Canada’s immigration policies, said Jay Gildenhuys, the restaurant’s owner, and that’s because the business relies to a certain extent on foreign workers.

“I can’t imagine surviving without foreign workers,” he said. “We might survive, but we certainly wouldn’t be able to operate in the professional manner that we do now.”

The restaurant didn’t feel the pain of labour shortages so much during this past summer season, but it “certainly” will next year and beyond, Gildenhuys said, as the contracts of its temporary foreign workers gradually come to an end as the government tries to find ways to reduce unemployment and

housing prices. Canada’s unemployment rate is climbing and the number of job vacancies is on the decline, but the unequal distribution of the labour force means there are certain regions, especially rural areas, that are finding it hard to fill jobs, thereby creating a headache for the federal government as it gets set to announce its new

immigration targets in October, analysts say. The restrictions on temporary foreign workers announced by the federal government last year have already impacted other businesses in Tofino, Samantha Hackett, executive director of the Tofino Chamber of Commerce, said.

“It is a struggle for our businesses,” she said. “We hire a lot of Canadians. We hire a lot through working holiday visas. We hire a lot of foreign workers. We’re hiring anything and everything, and when we lose the temporary foreign workers, it means that our Canadians are now overworked and burnt out and will not stay in our remote rural communities.”

About 4,200 kilometres from Tofino, Huron County in southern Ontario faces similar issues. With a population of about 60,000, the county has an unemployment rate of 4.3 per cent, which is much lower than the national rate of 7.1 per cent and almost half of that of the province, Colin Carmichael, executive director of the Huron Chamber of Commerce, said.

He said the region’s labour issues are “unique” since its workforce is small to begin with, “skews a little older” and lacks an “army” of teenagers. The restrictions on temporary foreign workers have only made the situation worse.

“Almost everyone under the age of 24 who lives in Huron County is working if they want to,” he said. “My son is 16; he had two jobs this summer because they’re just desperate. People who talk about no summer jobs in Canada, I push back and ask them to come to Huron County.”

The labour shortage issues in Tofino and Huron County are not isolated events, said Diana Palmerin-Velasco, a senior director at the Canadian Chamber of Commerce, which represents more than 200,000 businesses.

“The reality is that there are many jobs that are just not attractive to our domestic workforce,” she said. “Night shift jobs, hard physical labour, meat processing — these are just not attractive.”

Some regions have always struggled to attract local labour, Palmerin-Velasco said, and many of these communities rely on foreign workers. She said approximately 10 per cent of the country’s business chambers have expressed concerns about their need for foreign workers, and that need shows up in every province.

“We need to keep that in mind,” she said as the federal government gets set to announce its annual Immigration Levels Plan, which maps out the number of permanent residents it wants to bring in for the next three years.

The targets announced last year featured a big cut. The federal government currently aims to add about 395,000 permanent residents in 2025, 380,000 in 2026 and 365,000 in 2027, which is a drop from the 2024 target of about 485,000.

Canada is also trying to bring down the number of temporary residents, such as students or foreign workers, to five per cent of the overall population by 2027. The number of temporary residents dramatically rose following the pandemic when the federal government was looking to solve a major labour crisis. Some economists say the government lost control of how that was affecting the economy in the process.

“Policymakers kind of lost sight of what was going on out there and the impacts that poor control over the immigration program was having on the economy,” Robert Kavcic, an economist at Bank of Montreal, said. “It’s pretty clear to them now that they have a role in managing these flows because there are big spillovers across the economy in terms of inflation and stress.”

The decision to reduce the number of newcomers has slowed Canada’s

population growth rate to 0.1 per cent in the second quarter from the first quarter, according to Statistics Canada. The growth rate was also much lower than the 0.7 per cent growth posted in the second quarter last year. The estimated flow of immigrants during the second quarter dropped 22.9 per cent to 103,507 compared to a year ago.

Still, more reductions need to take place if Canada wants to meet its goal of having temporary foreign workers make up only five per cent of the overall population by 2027. The number of temporary residents has decreased, but they still made up 7.3 per cent of the population as of July 1, according to Statistics Canada.

The difference between the current reality and the government’s goal is something that

Bank of Nova Scotia economist Rebekah Young will be keeping an eye on when the government announces its latest targets.

“Are they going to accelerate the net outflow of temporary residents to achieve those numbers? Are they going to signal more aggression?” she said.

One solution could be to select more immigrants who are already in Canada as temporary residents. Doing so would convert more temporary residents to permanent residents and not impact the overall population growth, Young said. Currently, 60 per cent of new permanent residents are being selected from within Canada, she said, and she expects that percentage to be higher.

Overall, she said the ongoing economic slowdown due to the trade war with the United States and the high unemployment rate will give the government some space to continue with what she calls the “normalization” of immigration numbers towards the pre-pandemic norm, when the annual numbers hovered around 300,000 to 350,000 newcomers annually.

Palmerin-Velasco, however, isn’t ruling out the possibility of another decline in the immigration targets considering that the situation has become “very politicized,” referring to recent calls for the closure of the temporary foreign workers program (TFWP) by Conservative Leader

Pierre Poilievre and others. But blaming the TFWP for Canada’s higher unemployment rate is misplaced, she said, since the overall number of people working in this category isn’t very high. Temporary foreign workers make up just nine per cent of the total number of temporary residents in Canada, according to a statement by former immigration minister Marc Miller in 2024.

Of the rest, 42 per cent are students and 44 per cent are workers under the International Mobility Program (IMP), which includes postgraduate work permits, spousal work permits for students and workers arriving through intercompany transfers or arrivals through humanitarian pathways, including those fleeing Ukraine.

In other words, for every four work permits that come under the IMP, there’s one permit under the TFWP, Palmerin-Velasco said.

“If people are concerned about big numbers of temporary foreign workers, let’s look at the international mobility program as well,” she said.

Regardless of the overall immigration target, the Canadian Chamber of Commerce wants the federal government to focus on aligning the numbers to the needs of the economy, including those regions that continue to struggle with labour issues.

“I don’t think they necessarily have to increase the overall numbers,” Palmerin-Velasco said. “We just need better distribution.”

One way to do that would be to allow provinces and territories to select a larger share of the newcomers, she said. Last year, she said, most provincial nominee programs received a 50 per cent cut in their allocations.

Immigration lawyer Steven Meurrens said he doesn’t believe the federal government will want to further annoy the provinces — who are all asking for more immigrants — by announcing further cuts in the overall immigration numbers.

Another reason he doesn’t expect a reduction is because of all the talk about Canada’s plans to attract skilled immigrants who may have been looking to go to the U.S.

Ever since U.S. President Donald Trump slapped a US$100,000 fee on new applications of the H1B visa — a document that skilled workers need to work in the U.S. — there has been talk about how Canada can potentially attract these workers to this country. There were similar talks when Trump was first elected president in February as well.

But, according to Meurrens, Canada currently doesn’t have a separate program in place to attract these high-skilled people. He said changes in the immigration system in the past two years have made it very difficult for people to convert their temporary residencies to permanent residencies and this could discourage people from coming to Canada.

The current system, though, has made it easier for French-speaking newcomers to come to Canada, a policy that Muerrens and other economists have been critical of since it leaves less room for high-skilled people to come into the country.

“Until 2023, the government wasn’t really targeting Francophones and so you had a lot of companies hiring people who didn’t speak French,” he said. “And now all of a sudden, the government is essentially saying to these companies that they might not be able to keep those temporary workers who they hired, and that they’ll have to replace them with Francophones who are not even in the country yet.”

The lack of pathways to convert a temporary resident into a permanent one has led to a lot of frustration among skilled newcomers and even businesses, Meurrens said.

It’s an emotion that resonates with Gildenhuys in Tofino, who said it will be a struggle to run his restaurant next summer without temporary foreign workers.

“It’s extremely worrisome and disappointing because for us, the temporary foreign workers program has been really successful,” he said. “We’ve had nothing but positive experiences, and it certainly doesn’t take away jobs from Canadian workers.”