The Potential of Canada’s International Education Strategy: Evidence from the “MIT of the North”

Excellent case study and analysis by Mikal Skuterud and others that challenges Canada to adopt a strategic approach to international students and education focussing on quality, not quantity:

UWaterloo is best known for its academic programs in computer science, mathematics, and engineering, which has earned it the moniker the “MIT of the North.” Evidence that UWaterloo’s international student graduates struggle in Canadian labour markets relative to their Canadian-born counterparts graduating from the same academic programs with similar academic standing provides a direct test of the skill underutilization hypothesis. The evidence also offers critical lessons on whether policy efforts to realize the full economic potential of international students are best directed at augmenting employer hiring behaviour through DEI initiatives, for example, or at improving the attraction and selection of international talent and promoting skill formation, including language training.

Our main findings are:

1. Roughly 70 percent of UWaterloo’s international students transition to Canadian permanent residency (PR), twice the rate of international students at the national level. There is little difference in the transition rates of UWaterloo’s students with the highest and lowest academic achievement and little evidence that policy efforts since 2008 to ease foreign students’ Permanent Residents transitions has impacted UWaterloo graduates, unlike at the national level. This suggests these policies have primarily affected the immigration outcomes of lower quality graduates, including community college graduates.

2. Canadian-born students at the 95th percentile of the skill distribution leave Canada after graduation at twice the rate of Canadian-born students at the 5th percentile. While the best international students are twice as likely to outmigrate as the best Canadian-born graduates, there were five times more Canadian-born graduates of UWaterloo between 2005 and 2021. This implies that Canadian students have contributed more in absolute numbers to “brain drain” in recent years than international students at UWaterloo.

3. The average post-graduation earnings of UWaterloo’s international students not only exceed Canadian-born graduates of UWaterloo, but also Canadian-born university graduates nationally. Moreover, the earnings advantage of UWaterloo’s international student graduates has increased over time as the economic returns to degrees in technology and engineering, where UWaterloo’s foreign students are heavily concentrated, have increased relatively more.

4. Comparing students graduating at the same time from the same academic programs with similar academic standing, we find evidence of disparities in international students’ average earnings after graduation. The earnings gaps are largest for East Asian, especially Chinese-born graduates. They are also concentrated among academically weaker students and appear to be entirely explained by deficiencies in English language proficiency. The results provide no evidence consistent with the common belief that immigrants’ skills are underutilized in the Canadian economy. In fact, we find that measured skills are more important in determining the labour market earnings of foreign-born than Canadian-born graduates.

Overall, our analysis points to the potential of Canada’s International Student Strategy to boost economic growth. However, given the extent to which student outcomes vary by program of study and institution, realizing this potential requires prioritizing quality over quantity in foreign student admissions. Unfortunately, the Strategy has become preoccupied with growth, especially in the college sector.

We recommend redirecting the Strategy in two directions. First, IRCC needs to offer international students a single transparent pathway to economic-class immigration that relies exclusively on an enhanced Comprehensive Ranking System to select candidates with the highest expected future Canadian earnings. The success of the CRS in predicting immigrants’ future earnings can be enhanced significantly by adding applicants’ fields of study, school identities, and post-graduation earnings to the set of criteria used.

Second, Canada can do more to influence the choices that the world’s best and brightest students make themselves about where to study and settle after graduation. Options include using targeted tuition subsidies to attract exceptional prospective foreign students to the country’s top university programs in technology and engineering and income tax schemes to incentivize the highest quality graduates to work in Canada after graduation.

Source: https://clef.uwaterloo.ca/wp-content/uploads/2024/09/CLEF-074-2024.pdf