ARCHIVED - Economic Impact of International Education in Canada - An Update

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6. Assessing the Economic Impact of International Education in Canada

In this section, we will combine estimated number of international students in Canada by level of study in each province and territory and estimates on educational and living costs to arrive at an estimation of total expenditure by international students while they study in Canada.

6.1. Total Spending

Based on the data and approaches we described in the previous two sections, we have estimated that students in the K-12 system contribute over $763 million to the Canadian economy, and those in the university system contribute close to $4.0 billion per year to the Canadian economy in 2010. Students in other post secondary institutions contribute another $1.9 billion.  In total $6.9 billion worth of expenditure was put into the Canadian economy in 2010 from those students who studied for six months or longer. This is shown in Table 13. 

Source: RKA Estimates

The average total expenditure per international student (including tuition fees, other fees, books, room and meal, transportation, and discretionary spending) in Canada in different levels of study can therefore be derived as:

• K-12: $21,710
• Trade: $33,210
• University: $33,840
• Other Post-secondary: $33,310
• Other: $33,390
• All Levels of Study: $31,720

An additional $788 million per year has been estimated as the contribution from students pursuing short term language training courses. This has been calculated based on values of spending per week for 1,134,638 student weeks. 

Source: RKA Estimates

Combining long-term and short-term students, we estimate that total international student expenditure in 2010 was about $7.71 billion, a significant contribution to the Canadian economy.[11]

We note that our calculations have made use of various survey results and average expenditure data, as such, our estimates are fairly conservative. We have anecdotal evidence that show, in certain cases, student expenditure is substantially above the average. However, without a consistent data set that shows percentage of international students in different level of spending bracket, we have not included such data in our estimates.

6.2. Direct Economic Impact

6.2.1. Long Term Students

When we compare international education services in each province and territory with other sectors in the economy, we need to translate that total expenditure values into Gross Domestic Product (GDP), employment, and government revenue contribution.

In this subsection, we make use of economic multipliers that we have derived from Statistics Canada’s provincial Input-Output Tables, to estimate international education services’ contribution to each province’s GDP, employment, and government revenue.[12]

In Table 15 that follows, we provide our estimates of the total expenditure made by international students who stay in Canada for at least six months, and the corresponding contribution to the province/territory’s GDP,[13] employment, and government revenue growth.[14]

Table 15 Direct Economic Impact of International Education Services, by Province and Territory, 2010

Source: RKA based on Statistics Canada's Provincial Input-Output Multipliers, 2007.

Total GDP contribution of international education services amounted to over $4.2 billion in 2010 in Canada. By comparison, the GDP contribution of the whole Educational Services sector in Canada was $66.6 billion (2007 value). Therefore, international education services accounted for about 6.3% of Canada’s overall educational services.

In employment, international education services provided 70,240 jobs in Canada.[15] The overall educational services sector in Canada employed about 1,217,800 persons in 2010. Therefore, international educational services provided the equivalent of about 5.7% of all the jobs in the educational services sector.

6.2.2. Languages Canada Short Term Students

When we take into account the spending of short-term language students covered by Languages Canada, these international students also contributed an additional $788 million in 2010 in total spending to the Canadian economy. This is equivalent to about $456 million in GDP, 10,780 jobs, and $48 million in government revenue.  This is represented in Table 16.

Source: RKA based on Statistics Canada's Provincial Input-Output Multipliers, 2007.

6.2.3. Government Tax Revenue

In this sub-section, we will further demonstrate the importance of international education with respect to its contribution to government revenue.  Government revenue, as reported in Table 15 and Table 16, have been derived using the provincial and territorial input-output tables published by Statistics Canada by calculating the amount of net indirect taxes incurred in the process of producing outputs and services by an industry. 

Indirect taxes incurred in the process of producing outputs and services include both indirect taxes on production as well as indirect taxes on products.  The types of taxes can be:

• federal trading profits on lottery and race track
• federal gasoline tax
• federal excise tax
• federal excise duties
• federal air transportation tax
• provincial wine and liquor gallonage tax
• provincial trading profits on liquor and lottery
• provincial gasoline tax
• provincial amusement tax
• local amusement tax
• local retail sales tax
• federal GST 
• provincial retail sales tax
• provincial HST

The net taxes we calculated are total indirect taxes net of total subsidies incurred on products and production.  From what has been included in “government tax revenue” the reader will see that this is a very conservative estimate of the amount of tax dollars contributed by international students as we have not included other types of tax revenue, such as personal income taxes paid by individuals providing services to international students.

The amount of government tax revenue can be further allocated to federal, provincial or territorial, and local governments.  To do this, we have referred to information on consolidated federal, provincial, territorial, and local government revenue and expenditure published by Statistics Canada.  In 2009 (the latest year in which such information was reported), the distribution of consumption taxes amongst federal, provincial/territorial, and local governments was 39.7%, 60.2% and .01%.

Therefore, out of the $397.2 million government tax revenue from long term international students, federal government would have benefited $157.7 million, and $239 million have contributed to provincial and territorial governments’ tax revenue.

Similarly, of the $48 million tax revenue generated by short term international students, $19 million was contributed to federal government, and almost $29 million was contributed to provincial and territorial governments.

6.2.4. Comparison with Impact Values in 2009 Study

Compared with our previous study results, change in total spending values by long term students can be attributed to both change in enrolment and price inflation.  As can be seen from the table below, enrolment of long term students has increased by 22% between 2008 and 2010.  Total spending has grown by 26%, indicating the implicit price inflation rate of about 2% per year.

We further note that because of data availability, we have been able to use more accurate tuition and fees to calculate spending by university students in each of the provinces and territories.

We did not have a regional breakdown of enrolment of Languages Canada short term students in 2009, and as such our estimates of enrolment in each of the provinces were derived by reference to the share of total spending of CIC students in a province.  With improved data, we have a more accurate picture of possible short term student spending in provinces and territories in 2010.

Further, we note that because we have used more detailed provincial input-output tables to calculate impact values and better input industry allocation, impact values are more accurate in this update.

6.3. Comparison of International Education Services in Canada with Other Export Trade

In this sub-section, we will provide a comparison of the total value of international education services by top source country, with the values of Canada’s exports of goods and services to these countries. We will also compare the value of total expenditure in international education services in Canada with the total export of goods in Canada.

Table 17 details the number of study permit holders in 2010 (as of December 1st) by top ten source countries.  This represents the estimate of the number of long term international students in Canada in different levels of study by top source countries.

Source: Citizenship and Immigration Canada

Using data from Languages Canada, we have in the Table below the estimates of language training students by the same top source countries.

Source: Languages Canada

However, data from the Languages Canada does not allow us to provide further details on the proportion who study for fewer than 6 months in a given year. As such we do not use information from Languages Canada in our calculation to follow.

Overall, international students from the top 10 source countries account for almost two-thirds of all international students coming to study in Canada.  By multiplying an average total expenditure per student by level of study by the total number of international students in each of the top ten source countries, we have calculated the total amount of exports of international education services from Canada to each of these countries. This is summarized in Table 19.

Source: RKA Estimates

Note that the amounts generated as shown here in Table 16 are underestimates of the “true” amount of Canada’s export in educational services as we are only accounting for the number of students who stay in Canada to study for at least six months in a year, but not those in short-term education and training programs.

For comparison, we have also shown the value of international education services in each of the top 10 source countries as a percentage of total value of goods export to these countries. The final row in Table 20 shows the value of international education services in Canada from all long-term international students and the value of Canada’s total export in goods.

Source: RKA Estimates

While the size of international education services is small in comparison with the value of total export in goods to countries such as Japan and the United States, such services contribute substantially to Canada’s total export to countries such as India, the Peoples’ Republic of China, South Korea, and Saudi Arabia.

We do, however, point out that our estimates of international education services exceeds both the travel services and total services exports reported by Statistics Canada for a number of these top ten countries, specifically for China, Korea, India and Saudi Arabia.

Comparing with results from our 2009 study, the importance of international education compared with Canada’s value of exports has increased.  Overall the value of international education accounts for 1.7% of the value of all Canada’s export in goods in 2010, which is an increase from 1.1% in 2008.  We caution that part of the reason of this increase maybe attributed to the fact that we have data for international students by level of study in each of the top source countries in this study, which we did not have in the 2009 study and therefore have applied an average expenditure value for all students from that country.

For individual top source countries, these ratios have increased for China, Saudi Arabia, France, India, and Mexico.

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[11] For comparison, we note that Statistics Canada’s annual record of trade in services indicates that, in 2010, total expenditure of international students studying in Canada at the colleges and universities amounted to $3.51 billion.  See National Accounts for more information.  Readers can refer to Section 2 Methodology for an explanation on the difference between our estimates and Statistics Canada's estimates, and Appendix 1 for reconciliation of our estimates with Statistics Canada's valuation.

[12] Statistics Canada, Provincial Input-Output Multipliers, 2007.

[13] Total expenditure (or industrial output) refers to the value of outputs produced, whether the products are used as an intermediate product (think of a log cut down from a tree fro the purposes of building houses, for example) or used as a final product (think of a beam in a completed house). If we calculate gross domestic product at the provincial level, or GDP at the provincial level, this way, the cost of the log will be counted many times, as it moves from a raw product to its eventual use as a beam, and it is wrong. The value of total industrial output thus includes both the value of intermediate inputs and primary inputs - the latter being the labour and the capital in production. It is the sum of the latter, which is also referred to as the value added, that is equal to gross domestic product at the provincial level.

[14] The types of taxes included in the Input-Output Tables include indirect taxes on products as well as indirect taxes on production, at the federal, provincial, and municipal levels, where applicable, net of subsidies on products and/or production.

[15] Note that direct economic impact in terms of GDP, employment, and government revenue is not attributed to the educational services industry only. In fact, total expenditure in each province has been allocated to these following industries in the individual provincial input-output model: universities and government education services; retail trade; transit and ground passenger transportation; finance, insurance, real estate and rental and leasing; and arts, entertainment and recreation.