Economic role of foreign students misunderstood

In Prime Minister Mark Carney’s interview with the New York Times (from the extended version published Sept. 27), he was asked to speak to the cuts to immigration and his plans to reverse those cuts.

His reply, in our view, betrays a common and deep-seated misunderstanding of the role of foreign students in the Canadian economy.

Under certain criteria, post-secondary institutions could grant visas or get visas for foreign students and temporary foreign workers; there was a surge in demand through those two channels. The consequence of that was an immigrant population that went from three per cent to 7.5 per cent of the population in a little under five years. So we stopped those from being purely demand-driven and capped them.

The so called “caps” have indeed resulted in a significant reduction in the number of non-permanent residents in Canada, but most of that reduction has been generated by a decline in the foreign student population. The number of work-permit holders has continued to increase (albeit at a slower rate), as has the number of refugees. Thus, foreign students have gone from accounting for 42 per cent of non-resident permit holders to 22 per cent.

It is curious that the brunt of the reduction in non-permanent residents in Canada has been borne by the foreign student population. Canada’s delivery of education to foreigners is not part of foreign aid (like the refugee program) or a way of curbing wage increases (like the temporary foreign worker program).

It is a Canadian service export that brings in more revenue than the forestry industry. In 2024, revenue from foreign student spending was $47.5 billion, over $12 billion more than the revenue generated by international tourism (the other major service export), and accounted for 407,000 jobs.

In short, Canada’s strategy for reducing the “tightness” in a few housing markets was to voluntarily reduce one of its main exports just when it faces severe contractions in other export sectors such as automobiles, steel and forestry products.

While the “tight housing markets” were largely in major centres like Toronto, Vancouver and Montreal, the largest drop in foreign student numbers was not necessarily the three corresponding provinces. In 2025 Prince Edward Island experienced a 49 per cent drop in student permit approvals (from the previous year), New Brunswick 43 per cent, and Manitoba 39 per cent. There is no evidence that that pattern has been corrected in 2026.

Building owners in the neighbourhood of the University of Manitoba are now faced with a glut of apartments, owing to the reduction in international students. Not surprisingly, virtually all the post-secondary institutions in these provinces (along with many in others) have indicated that they face budgetary challenges induced, at least in part, by shortfalls in revenue from foreign student fees.

For example, despite a two per cent increase in its operating grant from the provincial government, the University of Winnipeg has broached the possibility of faculty layoffs because of budget challenges.

For many years now, public post-secondary institutions have kept themselves afloat by selling education to foreign students above cost to keep down the price of education for domestic students. While this may not be an ideal model, there is no sign that either the provincial governments or federal government are working on new education funding formulas even as they tamper with that very revenue source on which they depend.

Providing education to foreign students in Canada has faced legitimate challenges. Besides the housing-market challenges, there are challenges related to fraudulent applications, enrolment compliance and strains created by the path-to-immigration link for foreign students.

A drastic reduction in the foreign student intake is not necessary for dealing with any of these problems.

What is more, a 2026 auditor general’s report indicates that these challenges have not been adequately addressed because significant resources and effort have not been devoted to them.

Misunderstanding of the implications for the Canadian economy seems to be a better explanation for the choice of voluntarily reducing a major export just as the country faces major challenges relating to its primary trading partner (the United States).

John Serieux and Robert Chernomas teach economics at the University of Manitoba.