Worker exploitation key to success for shady contractors 

April 11, 2025

Canada’s construction industry finds itself at a strange crossroads, one that is creating a perfect storm for the underground economy and worker exploitation to flourish.

According to BuildForce Canada estimates, nearly 400,000 workers will be required to meet construction industry growth demands and to replace the 20 per cent of the current workforce projected to retire over the next decade.

At the same time, Canada’s housing shortfall is estimated be roughly 3.5 million units, according to the Canada Mortgage and Housing Corporation, which says those units will be required to restore affordability to the housing market by 2030.

Canada’s residential construction industry will therefore see much needed growth in coming years, both in terms of supply and labour demands. And yet, this has the potential to cause an undesirable expansion to Canada’s underground economy.

When it comes to tax cheats and worker exploitation, the residential construction industry is one of Canada’s worst offenders. According to Statistics Canada, residential construction accounted for 32.7 per cent of the country’s $72.4 billion in underground economy activity in 2023. At its current rate of growth, residential construction could comprise half of the underground economy within a decade.

Contractors, and by extension the subtrades and the labour brokers that support them, will routinely try gaming the system by convincing construction workers to become independent contractors. This misclassification and being paid in cash are sold as a way for workers to earn “more” money, but many don’t understand the implications or costs associated with doing so.

By misclassifying workers as independent contractors and paying them under the table to avoid taxes, fraudsters cheat workers out of hard-earned pay and benefits. These benefits include worker protections like pension, health care, workmen’s compensation, and employment insurance.

Another challenge to meeting workforce demands is the Government of Canada’s recently announced 2025–2027 Immigration Levels Plan, which will pause short-term population growth to achieve more sustainable and better managed growth over the long term. The plan includes controlled targets for temporary residents like international students and foreign workers, as well as for permanent residents.

This has become a balancing act for our industry: the push to recruit new workers to support construction industry forecasts and address the housing shortfall while reduced immigration will shrink our supply of new labour. Despite the pullback, Immigration Canada has stated that immigration remains a cornerstone of the country’s labour force growth.

Immigration curtailment is designed in part to help governments across the country play catch-up on housing needs in their respective jurisdictions. This catch-up involves massive investments in new housing, which unfortunately will exacerbate issues for construction workers in the housing industry.

The underground economy already disproportionately impacts newcomers to Canada, who are often more susceptible to labour trafficking and worker exploitation, and who also comprise a significant part of the residential construction industry workforce. With more funding being funneled into housing projects across the country and the recognition that immigration is still driving our workforce growth, the potential for Canada’s construction industry tax fraud crisis to deepen is high.

Immigration, Refugees and Citizenship Canada has taken positive steps to help address some of these issues. This includes a recent pilot project for construction workers in the GTA which provided a pathway to permanent residency for workers who entered Canada legally but who subsequently lost their status. A commitment to expand on the program was made in March 2025, and included a new measure that will also allow foreign workers to begin an apprenticeship without a study permit.

Even with these measures, it’s quite possible newcomers brought in to help address Canada’s construction industry workforce challenges may end up working on projects that contribute to the underground economy.

To ensure one solution doesn’t become another problem, Canada must match its commitment to immigration and housing by ensuring workers are paid prevailing wages. By investing in skills and training programs for workers, it reduces the likelihood they will be exposed to the pitfalls of the underground economy. We also need continued investment in enforcement to help crack down on our industry’s worst offenders, protect workers and ultimately, Canadian taxpayers.

The United Brotherhood of Carpenters and Joiners of America’s Tax Fraud Days of Action campaign runs from April 12-18, 2025. To learn more, visit stoptaxfraud.ca.

Jason Rowe is the District Vice-President of the United Brotherhood of Carpenters Canadian District.