The public’s visceral response to RBC’s foreign worker scandal is about more than the sullied reputation of Canada’s largest bank. It could well be a cautionary tale for Corporate Canada on the volatile mood of Canadians grown weary of post-recession cost-cutting and job losses at companies that are still turning healthy profits.
The Royal Bank of Canada was thrust into the spotlight for its decision to outsource 45 information technology jobs to iGate Corp., whose workers in India were reportedly brought to Canada under the federal Temporary Foreign Worker Program to receive training from the very RBC employees they were replacing. It is illegal for a company to bring temporary foreign workers into the country if it puts Canadians out of work.
After days of public outrage and negative headlines, CEO Gord Nixon issued an apology on customers’ log-in pages and in national newspapers Friday.
“RBC has been in the news this week in a way no company ever wants to be,” Nixon’s apology notes, adding that “while we are compliant with the regulations, the debate has been about something else.”
The apology came too late to stem a widespread backlash, including thousands of angry online comments on the initial CBC story and a Facebook group that swelled to more than 7,600 members promising to boycott the bank.
But why the furor?
After all, the bank’s move to outsource work is certainly not unusual, especially in the financial sector, where many of its peers have also contracted out former in-house services to clamp down on costs as the economy slows.The other big five banks and thousands of other companies in Canada, from Tim Hortons to Air Canada, have outsourced parts of their business.
But legal and political experts say RBC may have become a lightning rod for a latent hostility that has been simmering among the Canadian public as the economy grinds to a near standstill, debt hits record levels and many are struggling to keep or find jobs.
At the same time, Corporate Canada continues to churn out profits, in part by cost-cutting and slashing jobs, while hoarding their cash reserves instead of investing in employment or spending to boost the economy – a behaviour that has raised the ire of Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty.
“We haven’t seen much movement in average real wages in Canada, but we see escalating incomes at the top end of the distribution, and so there’s been a pervasive feeling that ordinary people aren’t feeling the benefits of growth,” said Lars Osberg, an economics professor at Dalhousie University.
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“That’s combined with the widespread knowledge of the high salaries at the top of the banking pyramid. “
RBC chief executive Gordon Nixon made $12.6 million in 2012, a 25 per cent increase over 2011, as the bank reported a $7.5-billion profit, up 17 per cent from the previous year. This at a time when banks were warning that cost-cutting is necessary to offset an expected decline in banking revenues.
It also comes less than a month after the bank announced increases on service fees on many types of accounts effective June 1.
Those figures, along with the knowledge that a large portion of profits come from Canadian mortgages and bank accounts, make banks an easy target for a public frustrated with an increasingly depressed labour market (the economy lost 54,500 jobs in March alone).
“Unemployment is ticking up and people are getting more worried,” he said.
But U.S. business consultant Steve Siebold says this anger is misdirected and that Canadians have no right to complain. Outsourcing is a reality, and it is not the bank’s responsibility to provide Canadian jobs, he said.
“It’s time to drop the entitlement mentality that just because you live in the neighbourhood [that] means a company should hire you. At the end of the day, you are responsible for what happens to you,” he said.
“To expect that the government, a local bank or anyone else is going to come riding in on the white horse to save you is ridiculous.”
The public anger at RBC is focused on employee assertions that the bank had not only fired them but had asked them to train their replacements – foreigners who will eventually do their work overseas.
RBC’s Gordon Nixon has acknowledged that one iGate employee entered the country under the temporary foreign workers program. And iGate told CBC that its employees enter the country through the Temporary Foreign Workers Program and intra-company transfer visas. Exact details remain unclear, however, as both iGate and RBC are tight-lipped about the contract. RBC directed The Huffington Post Canada to a press release and refused to answer any specific questions. IGate has yet to respond to inquiries.
Human Resources Minister Diane Finley has asked officials to review documents submitted by iGate after apparent discrepancies appeared between public statements made by RBC and information previously provided to the government by iGate.
Marisa Feil, supervising attorney at immigration law firm FWCanada Inc., says the story is more of an ethical issue than a legal one. While the moves of RBC and iGate are technically legal, she questions the level of government scrutiny the foreign workers’ applications received.
“I was surprised that this was made such a big deal of, because, technically, this is the procedure. It’s not like they came in without an LMO (labour market opinion) or there was foul play in that regard,” she said. Companies must obtain a favourable LMO from the government in order to receive a temporary foreign workers permit.
“People are upset because these Canadians lost their jobs, they’re bringing in these foreign workers to work here temporarily, to get trained and then send them back and then have them work (overseas) because the wages and the working conditions are a lot less strict.”
Last year, 199,515 employees were approved under positive labour market opinions, up some 30 per cent from 2011 and rising every year since the recession. There were 1.4 million unemployed Canadians.
Feil feels that applications from some of Canada’s biggest companies may be spared a tough grilling by Service Canada about the qualifications they say are required for a job and about proof that they couldn’t find a Canadian to fill the role.
“What I think this sort of scandal shows is that some of these bigger companies may be getting a little bit of a pass.”
There is an intended public list of employers who broke the rules and are no longer eligible under the program, but it is empty.
Feil said it is easy to engineer an application for temporary foreign workers by making qualifications so specific that no Canadian would qualify. The program allows employers to pay foreign workers 15 per cent less than Canadians under changes made by the Conservative government.
The website Outsource Canada points out that in some provinces, the number of unemployed Canadians is almost equal to the number of foreign workers operating there. In Alberta, for instance, there were 84,465 temporary foreign workers and 103,800 unemployed Canadians last year.
The RBC scandal has “touched a nerve” in a way that past stories about Canadians losing jobs to foreigners have not, said Armine Yalnizyan, a senior economist at the Canadian Centre for Policy Alternatives.
Some Canadians were shocked at the audacity of Caterpillar Inc.’s decision to move 450 Canadian jobs to Indiana, just 36 hours after so-called right-to-work legislation making it more difficult for unions to organize had been signed into law there. The company closed its plant in London, Ont., after its workers refused to take a 50 per cent pay cut.
And news that Chinese-owned HD Mining had been granted permits to bring temporary foreign workers from China to a British Columbia coal mine because of a job requirement that employees speak Mandarin sparked a federal review of the system.
But neither story provoked the same sort of reaction as the RBC scandal, which brought the issue down to a very personal level in a way that most Canadians can identify with. RBC employee Dave Moreau, who shared his story with the CBC, was an IT professional – a job that was supposed to be “safe” in the post-industrial knowledge economy, Yalnizyan said.
“We’re told that the banks are the vaunted sector ... they look bulletproof, and then suddenly you see this older white guy saying, ‘I’m training my replacement who’s going to end up doing work in India’ and you think, ‘Oh, my God. That could be me,’” she said.
“It’s like ‘holy crow, what does it take to get and stay in the middle class?’ and I think that’s the heart of the anxiety.”
The story is part of the “overall thrust” of companies’ seeking lower wages, particularly in the wake of the financial crisis, she said.
“With slow growth everywhere, the one way to crank up profits is by reducing your costs, and the one cost you can control is worker’s wages,” she said.
“The question is why should we be rooting for the banks or any form of economic growth if it is always for and about somebody else?”
Simon Kiss, a political scientist at Wilfrid Laurier University, says the story blew up because it comes at a time when the economy and jobs have been top of mind for Canadians since the recession.
“I don’t know that this has so much to do with RBC in particular,” he said, agreeing that the level of anger is not common.
“There’s kind of a latent reservoir of concern in public opinion for their financial security,” and corporations and foreigners are common targets of displaced anger during times of heightened insecurity, he added.
“I don’t know if people are making the connection between the hoards of cash, the healthy balance sheets that corporations have and the why workers are being outsourced,” Kiss said.
He isn’t convinced that this moment of heated debate on the future of labour in Canada will result in lasting change.
“The challenge for people interested in changing the policy is a) are they going to be able to sustain the public’s visceral reaction? and b) are they going to be able to get people to make the links between what is happening in this particular issue and something more general.”