Higher earning links to international students that graduate from Canadian university: new study

International students who graduate from the University of Waterloo earn more, on average, than their Canadian-born counterparts, according to a new study, and transitioned to permanent residency at nearly twice the national rate.

 

At a time when Canada’s international student program is under fire, Waterloo economist Mikal Skuterud and co-authors Joel Blitt and Ruiwen Zhang have produced research about their institution – described as “the MIT of the North” in their paper’s title – that offers ideas for getting the program back on track.

 

The authors argue Canada should adopt a “quality over quantity” approach to attract top students from around the world and encourage them to stay. When selecting new permanent residents, they say, the process should consider the school the applicant attended and their field of study.

 

The number of international students in Canada tripled in a little more than a decade to more than a million in 2024, a shift that brought billions in new revenue to universities and colleges. But in January, the federal government slammed the brakes, reducing the number of visas it will issue by 35 per cent this year, and a further 10 percent next year, citing strain in the housing market.

 

For their study, Prof. Skuterud and his co-authors were granted remarkable access to data that linked Waterloo student files, including grades, to immigration records and income tax filings over 17 years. The total sample is more tha 86,000 international student graduates from 2005 to 2021. The research was published last month as a working paper by the Canadian Labour Economics Forum.

The study found that Waterloo’s international graduates have earnings that start slightly higher and rise slightly faster, on average, than those of Canadian-born students. That advantage has grown in recent years, as international students have earned even higher starting wages. The cohort of international students that graduated between 2017 and 2019, for example, earned an average of 37-per-cent more than their Canadian-born counterparts one year after leaving school, at $57,500 compared with $42,000.

 

A large part of the explanation, the authors said, is that international students are more likely to pursue fields of study that lead to careers with higher wages, such as engineering and computer science. The improvement over time may also be an indication that the university has steadily refined its ability to select students who are more likely to succeed, the authors said.

 

They also found that international students with lower earnings tended to have earned weaker grades and to have demonstrated more difficulties in English. That suggests their lower earnings reflect a lower level of skills when compared with their peers.

About 70 per cent of the former Waterloo students in the study became permanent residents, much higher than Statistics Canada’s national data, which shows that only about 30 to 40 per cent of international students with a bachelor’s degree attain PR status within a decade of receiving their first study permit.

 

Prof. Skuterud said that if Canada is trying to leverage the economic value of immigration, the goal should be to raise the overall human capital of the population. And he says the findings, although based on the University of Waterloo, offer lessons for the national immigration strategy.

 

“In my view, the international student program should be about cream-skimming the talent pool, using our universities to attract talent from around the world, and, in turn, trying to settle those individuals at high rates,” Prof. Skuterud said.

He believes Canada should focus on selecting permanent residents based on the comprehensive ranking system, which awards points based on education, language ability, work experience and other factors, although he suggested some additional categories should be added to the matrix.

 

At the moment, the ranking system doesn’t award points based on field of study. A visual arts degree and a computer science degree are similarly rewarded, Prof. Skuterud said. It also doesn’t distinguish between schools, so those who attended a university that consistently produces high-earning graduates are treated the same as those from schools that don’t perform well.

 

“The beauty of that is it incentivizes universities to produce good outcomes for their students,” he said.

 

But over the last decade, the share of international students going to colleges has sharply increased. More than a quarter of Ontario’s 24 publicly funded colleges had more international than domestic students in 2021-22.

The Ontario government gave about 80 per cent of its international study permit allocation to colleges this year, and only about 15 per cent to universities, which Prof. Skuterud calls a “quantity over quality” approach. The group that has the lowest earnings one to two years post-graduation are international students who graduated from college.

 

“The best indicator of high human capital is a person’s expected future earnings in Canada,” he said.

 

“Every time you prioritize a college graduate with a business diploma, which is what’s happening, you’re de-prioritizing a computer science graduate from Waterloo. To me, it’s a really bad trade off.”

 

 

 

 

This article was first reported by  The Globe and Mail