Danger Ahead

Canadian universities and colleges like to congratulate themselves for their enormous success in increasing international student enrolments over the past few years.  And why not?  That success has brought Canadian institutions billions of dollars and allowed them to make up for roughly a decade of domestic tuition fee controls and stagnant core provincial funding.

We have told ourselves a lot of stories over the last few years about why we have been so successful.  Many of them have to do with how welcoming we are as a country to foreigners, or the quality of our institutions.  Those stories are not without truth.  Some of them have to do with policies around post-graduation work permits and immigration for international students.  This, too, has some truth to it.

But look, everyone in international education knows that by the standards of the UK and Australia, Canada’s marketing efforts in most of the world are not particularly strong.  Go to education fairs anywhere you want in the world, and it becomes clear that our presence simply is not as strong as theirs and our federal government marketing efforts are limited.  In our heart of hearts, we all know that our successes in international higher education are to a considerable degree due to the failures of others.

Those failures have been legion.  America began chasing away students from Islamic countries in the wake of 9/11. Australia lost a lot of students from India after a series of hate crimes against them in Melbourne and Sydney in 2009 and 2010.  The UK has had a lost decade of international student recruitment after Theresa May was appointed to the Home Office and imposed a series of policies which have impeded student recruitment there ever since.  And of course, in 2016 America elected a crypto-fascist toddler as President.  All of which makes Canada, when it comes to international students, the classic case of the kid born on third base who thinks he hit a triple.

Now here’s the thing.  We talk about “flows” of international students without thinking too much about what that word implies.  But they are like a liquid, always flowing where gravity pulls them.  Except, where international students are concerned, “gravity” is English-language education.  If Australia, the US and the UK all put up barriers to that flow, guess where it’s going to end up?  That’s right.  Canada.

But barriers are not irreversible.  America’s post- 9/11 paranoia went away to some extent in the Obama years and the country’s student inflows recovered.  It took a few years, but Australia got those Indian students back again.  And guess what?  In the UK, not only is Theresa May gone (albeit not in quite the way I imagined a few years ago) but the House of Commons is on the verge of passing new legislation largely reverses her policies as well.  Now, granted, the UK at the moment has nothing resembling a functioning central government and the likelihood of anything getting passed in the current Parliament is uncertain, to put it mildly.  But they are going to reverse those policies sooner or later.

Then what?

South of the border, institutions are looking warily at demographic projections which show serious calamity for higher education in less than a decade (American birth rates, particularly in the northeast, dropped substantially after 2008 in a manner less severe, though still strongly reminiscent, of what happened in ex-Socialist Europe after 1989).  And sure, as long as Uncle Ranty is still in the White House, there is going to be a problem attracting students to the US.  But there’s an election next year.  His ouster is by no means assured, but it’s a better-than-even bet that he loses (among post-WWII Presidents, only Jimmy Carter had worse net-favourables at this point in the Presidency, and that was under the weight of a tanking economy). 

Then what?

I’m not one to go on about higher education “bubbles” – I think that term is vastly overhyped.  But everyone needs to be realistic about their competitive position.  And there’s a good chance that in 18 months, Canada’s competitive position in international higher education is going to be significantly threatened.  In the magical-thinking world that is Ottawa, this can be handled by adding another $3-4 million to the budget and…adding $90 million in funding to external mobility (i.e. sending Canadians abroad).  This is a policy which may have its attractions but it’s not immediately obvious how it relates to market conditions. 

Magical thinking is not, of course, restricted to Ottawa.  There are also provincial governments who take a hell of a lot for granted when it comes to maintaining the brand value of Canadian education.  For instance, in Ontario, where the previous Liberal government put a moratorium on dodgy partnerships between non-GTA public colleges and private career colleges, mainly due to quality concerns, the Ford government has, after lobbying by the affected colleges, quietly re-approved these arrangements.  A mis-selling scandal here is – to my mind – virtually guaranteed.  It might not be as bad as the one we’re seeing right now in BC, where a private college has been found to have thrown in a diploma on the day a student paid her tuition, but it’s cause for concern.

It’s almost as if some provinces think that international students will keep coming regardless of what happens here because “the world needs more Canada” or some such nonsense.  As if quality regulation is important for an international brand.

Well, time to wake up, everyone.  The easy money days are more than likely about to end.  We might actually have to work for those student dollars.  Or, if not, contemplate running our institutions on smaller budgets.

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One response to “Danger Ahead

  1. Speaking of internationalization and the prospect of a shrinking market (June 5th), the marginal financial edge of which many universities are now taking advantage may shrink even if the market holds up. To varying degrees across provinces, domestic student demand for access to higher education has been in a trough. Depending on which projection one relies on, demand will return to pre-trough levels around 2023-2024. When it does, the financial effect of the international market will change. During the trough, the marginal cost of enrolling international students was close to zero; in many colleges and universities they occupied already financed surplus capacity. The marginal financial edge was huge: all revenue and very little, if any, cost. A return to pre-trough levels of domestic demand will soak-up surplus capacity. It is difficult to imagine that any provincial government will tolerate domestic students being “bumped” by international students. In that case, even if the international market holds up, the marginal cost/marginal revenue equation will have changed as accommodating international students will require growth, which in turn will raise marginal costs and shrink the marginal gain as marginal costs approach average costs. It is equally unlikely that provincial governments will fund those costs. This prospect is not so far in the future that colleges and universities that are now counting on international enrolment to balance their budgets should begin now to think strategically about the prospect of places now being filled by international students being filled by domestic students, and the costs of growth needed to maintain current levels of international enrolment. The positive margin might still be there, but it will be smaller.

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