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Why RBC’s outsourcing fiasco matters to Canadians

Canadians are often described as a nice, laid back bunch. But a move by Royal Bank of Canada to outsource jobs to foreign workers hit a nerve this week because some things are just a bit too close to home.

The global financial crisis is still fresh on peoples' minds. The economy is growing, albeit at an anemic rate. Consumers are saddled with debt. All this means the subject of jobs is an especially touchy one right now, with the latest national figures showing big losses and an uptick in the unemployment rate.

Let's also not forget the public's love-hate relationship with the country's big banks, and that some of them bounced back from the recession to notch record profits. It's all about context.

So when Dave Moreau, one of the employees affected by RBC's move, recently told CBC, “The new people are in our offices and we are training them to do our jobs. That adds insult to injury,” those words stuck.

RBC came under fire over the weekend after news it contracted iGate Corp. to handle the outsourcing of some technology jobs, using temporary foreign workers to replace some existing staff.

Outsourcing now commonplace

The bank’s boss, Gord Nixon, denied that it is replacing Canadian workers with temporary foreign workers. He also said the bank is providing jobs for anyone impacted by the move, which only involves one temporary foreign worker, according to CBC.

The fact is outsourcing happens all the time.

“It's been around for about 20 years. I think in this story it would be odd if a large organization like RBC were not outsourcing. Eighty or 90 per cent of all large organizations outsource something," says Ron Babin, an assistant professor at the Ted Rogers School of Information Technology Management at Ryerson University, who has expertise in the area of outsourcing. Of course it's no secret the main driver behind outsourcing is to cut costs, which generally amounts to paying a person half as much money, Babin said on CBC's The Current on Tuesday.

But the extraordinary public uproar over RBC's move to outsource 45 tech jobs is a sign of current times. It also highlights broader social equality issues such as the growing gap between the rich and poor and calls into question the effectiveness of the Temporary Foreign Worker Program, which has expanded rapidly since 2006.

Middle-class squeezed

Even more troubling is how the fiasco fits into the broader trend of Canada's vanishing middle class, says Armine Yalnizyan, a senior economist at the Canadian Centre for Policy Alternatives. She noted the number of people making between $30,000 and $60,000 is eroding quickly and that's making people very nervous.

"We all feel the middle class is in jeopardy," says Yalnizyan. "How can you have economic growth and yet you are telling the next generation we can't afford to pay you as much as we paid your mommy and daddy, you're not going to get the same pensions, the same benefits."

Yalnizyan says about half of Canadians are making less than $30,000, and programs like the temporary foreign worker one aren't necessarily helping to address labour skills shortages.

"We now have public policy working against the market. Actually making it worst and easier for employers to actually bully workers. Supposedly policies that are there to meet skills shortages where you're importing people to learn the skills so they can take the skills out. What kind of policy is that?"

Yalnizyan says the number of temporary foreign workers in Canada has roughly doubled since 2006. Government data shows the presence of 338,000 temporary foreign workers at the end of 2012.

Ottawa is now probing the RBC situation. Looking back, the bank might chalk up this public-relations headache as a case of bad luck. Nixon stated the issue was overblown, and that the bank places a high priority on Canadian jobs. That may be true. But it doesn't mean that Canadians shouldn't care.