Economic impact of international education in Canada – 2017 update

1. Introduction

International education, owing to its impact on Canada’s ability to develop and retain the necessary knowledge and skills, plays an important role in the globalization of its economy allowing it to thrive in a fast-changing and competitive environment.

Global Affairs Canada commissioned Roslyn Kunin and Associates (RKA) to conduct this study to determine the value of the impact that international students’ spending in Canada has on the Canadian economy. This study is an update to the 2014 impact assessment and uses the same estimation approach, although some minor adjustments of assumptions have been made.

As in the 2014 study, the analytical approach used in this study included the estimation of total spending by international students (including tuition and fees, books, accommodation, transportation and discretional spending), and the estimation of the economic impact on the Canadian economy as of 2015 and 2016 in terms of exports,[3] GDP, employment and government revenue. The study also provides the economic impact by province and territory and the level of studies, as well as the impact by the top 10 source countries.

This study covers long-term students at schools, colleges and universities, as well as short-term students. For the number of long-term international students (those pursuing education and training for periods longer than six months and requiring study permits), we relied on Immigration, Refugees and Citizenship Canada (IRCC) data. For short-term students (less than six months duration), we relied on Languages Canada’s data. In order to calculate student expenditures, we relied on data from various sources, including Statistics Canada’s annual Tuition and Living Accommodation Costs survey. To fill in the gaps in data, we made several assumptions, including those with respect to scholarships and bursaries provided by Canadian government (federal, provincial or territorial) institutions, as well as expenditures by friends and family members visiting the international students, therefore adjustments were made to the original sets of data. These adjustments are detailed in Appendix 1. We also carried out sensitivity analyses with respect to some key variables. This is presented in Appendix 3.

To capture the overall impact of total spending by international students on the Canadian economy, we used Statistics Canada’s interprovincial expenditure impact model. In this study, we not only quantified the direct economic impact associated with international student spending, but have also taken a total impact approach to quantify direct, indirect and induced impacts. These include quantifying the activities of businesses providing goods and services to entities where direct expenditures occur (thus including direct and indirect impacts). In addition, as a result of increased local household income, there may be further increases in overall expenditures. This was considered a spun-off (or induced) impact. Total impact includes all three: the direct, indirect and induced impacts of an initial spending. The total impact can be considered the upper band of economic impacts, whereas the sum of direct and indirect impacts provides a relatively conservative level of impacts on the economy. In this updated study, we focused on the direct and indirect economic impact on the Canadian economy as of 2015 and 2016.[4] Direct impacts, along with total impacts, are shown in Appendix 2.

In the main body of the report, we present our estimates of the number of international students in Canada by province and territory and by long-term and short-term study status. Then we present our estimates of their annual total spending, and resulting combined direct and indirect economic contribution to the Canadian economy, and the importance of international education services to Canada’s trade with the rest of the world. We also provided historical comparisons of the value and impacts of international education to highlight its growing contribution to Canada’s economy. In addition, the study includes a comparison of economic impacts by the top 10 source countries.

In appendices to the main body of the report, we further applied scenario analyses to provide alternate estimates of the value and impacts of spending by international students in situations where higher or lower student spending occurred. We also provided an explanation of the differences between our estimates and those released by Statistics Canada.

Detailed data tables are also presented in Appendices 5 and 6.

[3] Given that spending by international students represents Canada’s exports in educational services, in this report we have used the phrases “spending by international students” and “international education services” interchangeably. It should be noted that the inclusions in “international education services” are quite different from Statistics Canada’s definition, based on the Manual on Statistics of International Trade in Services 2010 (published by United Nations). Statistics Canada’s definition of education services, in the context of balance of payment, is as follows:

“Education services comprise of services relating to all levels of education whether delivered through correspondence, via TC, satellite, or the internet, or by teachers, among others, who supply services directly in host economies. Excluded are the services provided to non-residents who are present in the territory of the service supplier (as this is included in the travel category).”

Therefore, the comparable value in Statistics Canada’s balance of payment data is that associated with education-related personal travel.

[4] Economic impact studies evaluate the impacts of increased economic activities due to an increase in spending from programs or individuals on a regional economy and they measure the impacts in terms of macro-economic variables, such as gross domestic product (GDP) and employment. Such an analysis is useful for government decision making when evaluating and comparing impacts from different programs and projects. It should also be noted that, in spite of its usefulness, an economic impact analysis is not a cost-benefit analysis and does not take into account the opportunity cost associated with program expenditures. The evaluation of costs associated with providing education to international students is beyond the scope of this study.