Employment Minister Jason Kenney says he considered shutting down the Temporary Foreign Worker Program altogether but has decided to phase it out instead.

In an interview airing Saturday on CBC Radio's The House, Kenney says he agrees with the argument that the free market should decide whether businesses need to increase wages to attract workers.

"To be honest, if I were setting policy today," Kenney told guest host Terry Milewski, I would not have opened that program as they did in 2002. But it's there."

"So why not shut it down?" Milewski asked.

I think that's a fair question," Kenney replied, "We seriously looked at that as an option."

"We seriously looked at saying what every other developed country does: no general low-skilled temporary foreign workers stream," Kenney said. "We came to the conclusion that the economic costs in general and the adjustment costs for particular businesses would be too extreme."

"Probably several thousands of businesses, if we did that cold turkey, would go out of business," Kenney told Milewski.

Kenney announced Friday, just as Parliament went on summer recess, that employers will be barred from hiring temporary foreign workers in regions where the unemployment rate is above six per cent. 

The government would also put a 10 per cent cap on the number of low-wage temporary foreign workers employers can hire per work site by 2016.

That cap will be gradually phased in, starting at 30 per cent effective immediately, then reduced to 20 per cent on July 1, 2015, and 10 per cent a year later in 2016.

"The government could then decide to go to zero per cent and eliminate the low-skilled stream, but we're trying to do this in a prudent way where the adjustment costs are moderate and we don't just end up causing devastation for thousands of businesses."

Other reforms to the program include:

- An increase in the number of inspections: one in four employers will be inspected each year. The government says it will hire approximately 20 more inspectors, bringing the number to about 60.

- An increase from $275 to $1,000 in the application fee employers must pay per worker requested, effective immediately.

- Fines of up to $100,000 for employers who abuse the program, starting in fall.

- Additional funding for the Canada Border Services Agency so it can pursue more criminal investigations.

- Posting the names of employers who receive permission to hire foreign workers.

- Making public the number of positions approved through the program on a quarterly basis.

- Reducing the amount of time a temporary foreign worker can be employed in Canada, to two years from four.

Several business groups, which have been generally supportive of the government's initiatives, were critical of the government's announcement Friday, saying Kenney used a bulldozer where a hammer would have sufficed.

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