Economic Impact of International Education in Canada – 2016 Update
Table of Contents
- Executive Summary
- 1. Introduction
- 2. Recent Trends in International Student Mobility and Economic Impact
- 3. Data Sources and Methodology
- 4. Assessing the Economic Impact of International Students in Canada
- 4.1. Overall Spending in 2014
- 4.2. Economic Impact
- 4.2.1. Direct Economic Impact
- 4.2.2. Direct and Indirect Economic Impact
- 4.2.3. Total Economic Impact (Direct, Indirect, and Induced)
- 4.2.4. Government Tax Revenue
- 4.3. International Students and Canada’s Export
- 5. Conclusions and Recommendations
- Appendix 1 – Detailed Explanation of Data Sources and Adjustments
- Appendix 2 – Scenario Analysis: Assuming Lower Student Expenditure
- Appendix 3 – Scenario Analysis: Assuming Higher Student Expenditure
- Appendix 4 – Data Tables
- Appendix 5 – Reconciliation of the Study Estimates with Valuation by Statistics Canada
2. Recent Trends in International Student Mobility and Economic Impact
International students are those who have crossed borders for the purposes of study. For this study, we have followed the definition of international student by the UNESCO Institute for Statistics, the OECD and Eurostat. They define “internationally mobile students” as 
Therefore, these are students who are not residents of their country of study (inbound international students) or those who received their prior education in another country (outbound international students). 
The country of origin can be defined in several different ways (e.g. based on usual residence, citizenship or the country in which specific educational qualifications have been obtained). UNESCO, OECD and Eurostat have agreed that for measuring international mobility in education, the preferred definition should be based on students’ education prior to entering tertiary education. Where countries are unable to report data according to this definition, they can use the country of usual or permanent residence to determine students’ country of origin. Where this too is not possible and no other suitable measure exists, students’ country of citizenship can be used as a last resort.
Foreign students are defined according to their citizenship. In Canada, if a student studying in a Canadian university or college does not have Canadian citizenship, the person is a foreign student. However, this person may not fit the definition of an international student as we described above.
In principle, our current study adopts the measurement of international students based on their mobility, but has included, in addition to those pursuing formal tertiary education, other students who have crossed the border to pursue formal education in Canada’s elementary and secondary schools, as well as those in short-term credit courses.
Existing literature and RKA’s own previous research has indicated that enrolment of international students have been rising over the past two decades, in different countries including the U.S., the U.K., Australia, Germany, and France. The number of international students studying in Canada almost doubled from 168,600 in 2004 to 336,500 in 2014.  Since the majority of international students fund their study and stay in a foreign country out of their families’ resource and/or with home government/institutional support, as opposed to dependent upon financial resources from the host countries, there are substantial net financial benefits to the host countries.
Existing literature has also shown that the impact of international education goes beyond mere financial benefits to the host countries. By providing international education services, universities and other educational institutions are “internationalizing” their curriculum, bringing in an international perspective and global approaches. International research collaboration, in the form of establishing valuable partnerships and joint ventures with entities in other countries will benefit both the parties engaged in research and economic development as well. Most importantly, international education is helping to create more globally competitive graduates. 
Mobility of International Students
Canadian governments, both federal and provincial, and institutions, continue to recognize the importance of international education in making our economy more prosperous, innovative, and competitive. However, Canada is still a small player in the global market for internationals students. In this section we discuss the trends and developments occurring in international education services.
It should be noted the trends and developments discussed in this section apply to those in the post-secondary education category, as, globally, little literature exists pertaining to student movement in the elementary and secondary school system.
Globally, the number of international students continues to increase, a rebound from the slowdown due to the 2008 global financial crisis. U.S. and the U.K. take in about one-third of all “internationally mobile students”. Of the four major English-speaking international student destinations, international student enrollment increased 42% between 2008 and 2014 in the U.S.  Enrollments have been declining in the U.K. since 2012 due mainly to the introduction of stringent visa policies. Meanwhile Australian enrollments have started to rebound after a significant decline beginning in 2010, and Canadian enrollments are continuing a steady decade-long upward trend.
Data from the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) Institute for Statistics (UIS) indicate the top ten host countries for inbound international students (in formal tertiary education only) are:
- United States (19% of total mobile students)
- United Kingdom (10%)
- Australia (6%)
- France (6%)
- Germany (5%)
- Russian Federation (3%)
- Japan (3%)
- Canada (3%)
- China (2%)
- Italy (2%)
Figure 1 below further illustrates the trend in the number of international students in selected number of host countries, using data from this source.
Figure 1 Total Inbound Internationally Mobile Students, by Selected Host Countries , 2013 (formal tertiary education students only)
Factors Driving Increase in International Students
An examination of economic trends related to source countries of international students reveals that since 2000, economies – those with a gross national income (GNI) per capita between USD $4,126 to $12,745 – are the ones driving growth in outbound student mobility.  The total number of outbound international students from these economies jumped 161% between 2000 and 2012, as compared to only 29% from high-income OECD countries. Since 2006, the growth of students from high-income non-OECD countries such as Russia, Saudi Arabia, Singapore and the United Arab Emirates has largely been driven by government scholarship initiatives such as the King Abdullah Scholarship Program and Brazil Scientific Mobility Program. 
All major international student host countries in North America and Western Europe, as well as Australia and New Zealand, have conducted research to analyze the change in student enrollment and the economic benefits brought by these students to the host countries.
U.S. research on international education indicates that strong consumer demand and partnerships with foreign governments and foreign universities are currently the main drivers of its international enrollment growth.  According to the latest Institute of International Education (IIE) Open Doors data, international students in higher education brought in US$27 billion to the U.S. economy in 2014.
The most recently available study from the U.K. (published in 2014) evaluated the contribution of post-secondary international education using data for 2011/12 academic year.  Non-U.K. students directly contributed £10.71 billion to U.K.’s export.
It is noted that the academic year was the year immediately prior to the introduction of the 2012 higher education reforms and the consequent increase in privately paid tuition fees in England and the prospective opening up of the sector to some for-profit providers. Other U.K.-wide political developments have impacted on higher education as well, with increased regulation of the international student market. Tighter government restrictions on the recruitment of international students have become an increasing challenge for universities to manage. Based on research mentioned earlier, it appears that international student enrollment in the U.K. has indeed declined since 2012.
Australia is the third most popular destination for international students, attracting nearly seven per cent of the world’s international students.  Export of international education services (including post-secondary and other non-post-secondary enrollments) is considered the fourth largest export from Australia. Over the past decade, demand for higher education exports has outpaced Australia’s overall export demand by some margin. Whereas total export demand about doubled in the last decade, higher education exports grew by 133%. Notably, from around 2010 demand began to soften due to the global economic environment, the rise of the Australian dollar, regulatory constraints and other issues. The most recent data, however, are suggesting that the market is recovering.
The Australia Council of Private Education and Training (ACPET) report in 2013 estimated that international students contributed Australian $15.4 billion to the Australian economy.
The report by Infometrics and the National Research Bureau in 2013 for Education New Zealand, estimated that the gross output of the international education industry was valued at $2.6 billion in a year. 
In France, Campus France, the French Agency for the promotion of higher education, international student services, and international mobility, produced a report on estimating the financial benefits of international students in France in 2014. While the report estimates that international students cost the state around 3 billion euros, these students contribute 4.65 billion euros to the French economy. 
In Germany, the German Academic Exchange Service commissioned a study in 2013 to estimate the impact of internationally mobile students on host countries.  The study found that during their stay in Germany, these students contributed 1.28 billion euros in a year to the economy. It is noted that such benefits to the host country were due to students’ living expenses incurred only, as the costs of provision of higher education in these countries were borne by the States.
The German study cited went beyond evaluating the impact as a result of student expenditure on the host countries. It further evaluated the long term economic impact of these international students in terms of their contribution by remaining in the host country and gaining meaningful employment.
International students have become integral to the financial health of the top international education providing countries, but the impact goes beyond money spent on tuition fees and living expenses, as illustrated in the German study cited above. In addition, U.S. research has indicated that international students are also helping to fill skills shortages. A World Education Services (WES) study in 2014 indicated that international students are a vital source of enrollments for STEM (science, technology, engineering and mathematics) fields. In 2013 more than one in three international students in the U.S. was enrolled in a STEM field. In Canada, RKA’s own previous research also indicates that international student enrollment in the STEM field grew much faster than their domestic Canadian students.
Approaches and Methodology
All major players in the international education market undertake their own research and analysis to capture the economic benefits on the economy of the host country and here we provide a description of the approaches and methodologies adopted by some of these players.
In the U.S., research has been conducted to estimate the benefits of international students in higher education. National Association of Foreign Student Advisers (NAFSA) defines economic benefit as the “amount of money that international students studying at U.S. colleges and universities collectively bring into the United States to pay for their education and to support themselves while they (and in some cases, their families) are here in the United States”.
There are two main outputs from this analysis: Part (1): Estimate of Economic Benefit, which is the overall imported dollars from international students without any multiplier effect; and Part (2): Estimate of Jobs Created/Supported, which is both the direct and indirect (i.e. multiplier) of jobs created and supported via the import dollars from international students studying in the United States.
To capture Part I, researchers determine the costs associated with U.S. higher education along with living expenses, minus any U.S.-based monetary resources that an international student may receive. The goal of Part II is to determine the appropriate direct and indirect (multiplier effect) number of U.S. jobs created and/or supported, based upon the above estimate of economic benefit of direct import dollars from international students studying at U.S. institutions of higher education.
The U.S. Bureau of Economic Analysis (BEA) provides datasets for calculating the multiplier effect of jobs created and/or supported by trade. These datasets, known as RIMS II, are specific to industries at the state level. The specific industry datasets used in this analysis include datasets for education, accommodations, food services and drinking places, retail trade, telecommunications, transit and ground passenger transportation, and insurance carriers.
U.K. research in this regard is similar to the U.S. one in that efforts are concentrated on measuring economic benefits brought by higher education. The most recent study, conducted for academic year 2011/12, estimated economic benefits in the country’s higher education on the U.K. economy that can be readily measured, but did not include any assessment of the value of the sector’s collaboration with business or the impact of new ideas generated by universities or their graduates.
In estimating direct impact, the study separates the impact as: I – direct and indirect university income, expenditure and employment; and II – direct and indirect expenditure of non-U.K. students and visitors.
The higher education institutions included in the study are universities and colleges included all of the ‘not-for-profit’ enterprises which receive core funding from the public purse through the higher education funding bodies. Modelled estimates were also made of the impact of the off-campus expenditure of international (i.e. all non-U.K.) visitors attracted to the U.K. by the universities and colleges. The model used was a purpose designed and specially constructed ‘type II’ input-output model based on actual U.K. data derived from the Office for National Statistics’ input-output tables together with data from its Blue Book.
Data used came from Higher Education Statistics Agency’s university finance, staffing and student statistics (for the estimates in part I) and Travel trends (Office for National Statistics) and the Student Income and Expenditure Survey published by the Department for Business, Innovation and Skills (BIS) (for the estimates in part II).
The most recent study on this topic, by Prognos AG for Germany Academic Exchange Services (DAAD) in 2013, took a more comprehensive approach, both in the short term (during students’ actual stay) and long term (following students’ completion of study), in evaluating the economic benefits of international student mobility. However the study only focused on international students pursuing a bachelor’s or master’s degree in the host countries.
In terms of its methodology, the effects during the actual study period and effects following graduation were separately evaluated.
Effects during actual period of studies:
On the income side, the economies of host countries benefit in the short term from the effects (value creation and employment) triggered by student spending. These effects are calculated on the basis of an input-output model. The input-output calculation flows into the national accounts. It reflects the relationships of goods and production within the economy as well as between other economies, and is therefore useful for calculating the effects induced by consumer demand. The effects of tax revenues at the level of state authorities are calculated on the basis of internationally comparable tax tables.
Effects following graduation:
The direct effects caused when students remain in a host country after graduation are twofold. On the one hand, there are the direct effects of value creation resulting from gainful employment on the part of the students concerned: this is calculated on the basis of country-typical productivity. On the other hand, there are the revenues accruing to the state authorities through taxation on the income of the graduates. This is assessed on the basis of internationally comparable tax tables. As in the case of international students, the effects triggered by the consumer spending of international graduates are modeled on input-output calculations.
The most recent study by Campus France in 2014 was based on a survey conducted to capture international students in France. It generated an estimate of the number of students by length of study, country of origin, and average spending (including tuition and fees, and living expenses). In addition, expenses incurred by visiting family members and friends were also captured. The economic benefits calculated for these students were compared with direct and indirect financial support these students received during their stay in France (government scholarships, and students’ own employment earnings).
Even with the cost of public financial aids, the study concluded that there is net benefit for France to attract international students.
The Australian research, the ACPET report in 2013, captures impact generated by international students in higher education, as well as those in the Vocational Education and Training (VET) and English Language Intensive Courses for Overseas Students (ELICOS) programs, and schools. Economic contribution was based on student spending as well as spending of their visiting friends and relatives. These benefit values are also converted to contribution to the country’s value-added (GDP) and employment.
The most recent study from New Zealand, by Infometrics, National Research Bureau (NRB) for Education New Zealand used an approach fairly similar to the studies conducted in Canada, except that the analysis is broader in evaluating the size and activities of the offshore institutions from New Zealand offering education services outside of the country.
The four main sources of information/data for the study include:
- Ministry of Education data on the number of international students and their tuition fees.
- A web-based survey of expenditure by students on living costs.
- An email survey, with some personal interviews of educational providers who provide goods or services offshore.
- Economic multipliers
After adjusting for the import content of spending, earnings by students while in New Zealand, and the purchase of second hand goods, it is possible to obtain an estimate of the contribution of the international education industry to New Zealand’s Gross Domestic product (GDP).
One advantage of the New Zealand study appears to be the underlying survey of student living expenditure conducted. Expenditure on living costs is measured over the number of months, up to and within the previous 12 months that the student has been in New Zealand. It is obtained from a large web-based survey of international students. Invitations to participate in the survey were sent to all usable email addresses provided by Immigration New Zealand. Consequently there was no sampling required. The results were based on approximately 7,500 responses received.
 Based on data from Immigration, Refugees and Citizenship Canada (IRCC). See “Facts and Figures – Immigration Overview: Temporary Residents”.
 World Education Services (WES), 2015. “International Student Mobility Trends 2015: An Economic Perspective”.
 Institute of International Education.
 Data extracted from http://data.uis.unesco.org/, in March 2016, by selecting data in Education: International student mobility in tertiary education.
 These include countries such as China, Brazil, and Turkey.
 World Education Services.
 World Education Services.
 Universities UK, 2014. “The Impact of Universities on the UK economy”.
 Group of Eight Australia. Policy Note: International students in higher education and their role in the Australian economy.
 Infometrics, NRB 2013. The Economic Impact of International Education 2012/13, for Education New Zealand.
 Campus France 2014. Beyond Influence: the Economic Impact of International Students in France.
 German Academic Exchange Service, 2013. The Financial Impact of Cross-border Student Mobility on the Economy of the Host Country. The countries analyzed in the study include Germany, the Netherlands, Austria, Poland, Switzerland, and Spain.
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