The economic impact of international students around the world

Editors’ note: our sincere thanks to Jason Baumgartner (Indiana University Bloomington), Julie Chambers (Institute of International Education) and Robert Gutierrez (Institute of International Education) for permitting us to post their NAFSA 2010 slideshow here.  As our regular readers know, GlobalHigherEd has run a series of entries on this theme including:

• Is a UK funding crisis an effective mechanism to spur on the ‘education as a global growth industry’ development agenda? (15 January 2010)
• Taking note of export earnings (25 November 2009)
• Measuring the economic value of Canada’s international education “industry” (29 October 2009)
• Economic benefits of international education to the United States (13 May 2009)
• Making sense of the economic contribution of international students in Australia (up to 2008) (4 April 2009)
• Measuring the economic impact of ‘export education’: insights from New Zealand (7 February 2009)

Further entries will be developed this summer, especially now that we have just finished over a month of work-related travel (hence the recent slow-down in entries on this site).

Kris Olds & Susan Robertson

Taking note of export earnings

Editor’s note: this is reprinted from the UK Higher Education International Unit‘s most recent newsletter (International Focus issue 48.25.11.09).

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Ahh – the end of the workday and time for a glass of wine: a fine New Zealand Sauvignon Blanc, perhaps?

The first time we heard that education generates more ‘export earnings’ for the New Zealand economy than does wine, we were both knocked off of our seats, and not because we had too many glasses! We were surprised because New Zealand’s white wine industry is world-famous – indeed almost as famous as Australia’s tourism industry. But wait: here too, it is now clear that education exports (ie, the provision of education across a border, either physically or virtually) generate more revenue for the Australian economy than does tourism, and is pegged third after exports of coal and iron ore.

Recent data released by the governments of Canada, the UK and Australia all point to similarly striking figures. In Canada last month, for example, the Department of Foreign Affairs and International Trade noted that international students generated 83,000 jobs, C$291m (£166m) in government revenue, and contributed C$6.5bn (£3.7bn) to the Canadian economy. The last figure is higher than Canada’s earnings for coniferous lumber ($5bn/£2.8) and coal ($6bn/£3.4bn).

In 2007, the British Council estimated the value of education and training exports to the UK economy at nearly £28bn, which is more than the automotive or financial services industries. And just a few days ago, NAFSA, the US-based Association of International Educators, noted that international students and their dependants contributed approximately $17.6bn (£10.5bn) to the US economy in the 2008-09 academic year.

It is increasingly common to hear about such numbers, and more often than not even experts within the higher education sphere are surprised by the significance of the impact of providing international students with an education. Given this, we would like to flag three key issues to think about when faced with these admittedly staggering numbers.

First, it is important to think about why these numbers are being sought at this point in history. We would argue that these numbers are being constituted, and debated about, in the context of an ideological transition – one that increasingly enables views to emerge of higher education as a driver of economic versus cultural-political change. For example, a decade or two ago, it would have been impossible to imagine creating tables such as the one profiled in Kate Geddie’s entry in GlobalHigherEd in which education is measured against ‘scrap plastics’ or ‘chemical woodpulp’. Thus, a new organising logic, to use Saskia Sassen’s phrase, is emerging: one that reframes higher education as an urban/national/global services industry, for good and for bad.

Second, it is worth thinking about the emerging capabilities to generate such analyses. Interestingly, almost all of the analyses have been generated by consultants working on behalf of ministries of education, or ministries of foreign affairs and trade. It is noteworthy that there is little capacity within the state to assess such impacts, so representatives of the state reply upon consultants with track records of studying an array of economic development impacts. Most noteworthy, though, is the increased involvement of ministries, other than education, in the sponsoring of such analyses. Thus, the reframing of education as a service industry is dependent upon a reconfiguration of the responsibilities of ministries for the education sphere, such that ministries of trade, as well as immigration and sometimes foreign affairs, are coming into the picture. This emerging trend has huge implications for the future of the governance of higher education.

Third, there is striking variation in the nature and quality of the analytical models adopted by ministries, and their consultants, in accounting for the economic impact of education exports. Despite our comment above about emerging capacity to assess such impacts, and of the role of more powerful ministries in this analytical exercise, the numbers are not yet comparable (nor, in some cases, trustworthy). For example, should all levels and forms of education be accounted for? Or, to what degree is national support (e.g., research assistantships, fellowships, associate instructors) for foreign students accounted for in the analytical models on offer? These are but two of dozens of questions that could be asked about the numbers that have emerged to date. International comparability is impossible at this point in time, and one has to wonder why this is the case if the sector is so seemingly significant in economic terms.

In closing, the globalisation of education, including higher education, is undeniably creating a diverse array of economic, social, cultural impacts. The export-earnings issue is starting to capture the attention of powerful stakeholders, public and private, for-profit and non-profit. Yet the quality of the analyses to date is patchy at best, and certainly not comparable internationally. Why might this be the case, and what could or should be done about it?

Kris Olds & Susan Robertson

Economic benefits of international education to the United States

Editor’s note: this guest entry was kindly prepared by Jason Baumgartner (pictured to the right) of Indiana University in the United States. Jason has worked for the Office of International Services at Indiana University since 1999.  He is the lead software developer of the iOffice application suite, which is a comprehensive immigration case management solution to enable staff to proactively assist international students and scholars in maintaining their lawful stay without interruption.  This software is utilized by international offices throughout the Indiana University system and is licensed to other universities throughout the country.  He is a member of NAFSA.  He developed the current algorithm and conducts the annual analysis (since 2000) for the NAFSA Economic Impact of International Students.  He has a Master’s in Information Science from Indiana University.

As regular readers of GlobalHigherEd will notice, this is another in a series of entries (see ’Measuring the economic impact of ‘export education’: insights from New Zealand‘; Making sense of the economic contribution of international students in Australia (up to 2008)) that attempt to shed light on how countries calculate the economic impact (and ‘export earnings’) of foreign students.  I encourage you to read Jason Baumgartner’s entry below for its own sake, but also to begin comparing how the US (and this is really as close to an official view as one could get in the complex US higher education landscape) frames this issue in comparison to other countries, including New Zealand and Australia.

As I’ve noted before, we welcome guest entries on this issue from people studying the issue in any country, be they government officials, academics, consultants, or graduate students.  The issue of understanding the economic impact of foreign students is severely underdeveloped, with little reflection on how different analytical models (and associated assumptions) can generate very different findings.  Our thanks to Jason Baumgartner for his help in moving thinking about this issue forward.   Kris Olds

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NAFSA’s annual economic impact statements estimates the amount of money international students bring to the United States to support their education and stay.  For the 2007-2008 academic year it is estimated that international students contributed approximately $15.54 billion to the U.S. economy.   The following graph outlines the growth of this economic impact over the last 30 years:

The economic impact is defined as the amount of money that international students collectively bring into the United States to pay for their education and to support themselves while they (and in some cases, their families) are here.

The methodology used to calculate the economic impact has been greatly refined over that last three decades with the current model in place since 2000.  The current algorithm in use was developed by Jason Baumgartner and Lynn Schoch at Indiana University – Bloomington’s Office of International Services.  The analysis of the dataset has been conducted each year since 2000 by Jason Baumgartner.

The goal of this economic impact formula is to use data already collected for other purposes to provide a reasonable estimate of the economic resources that international students import to the United States to support their education here each year.  The following figure outlines the algorithm:

The data sets used for this analysis comes from the following two sources:

1. The Institute of International Education annual Open Doors report, funded by the Department of State, provides numbers of foreign students at universities and colleges throughout the United States during the academic year.  In many cases, this data provide separate totals for undergraduate, graduate, and non degree students.
2. Peterson’s provides cost figures for tuition, living, and miscellaneous expenses at U.S. institutions for the academic year.  In some prior years this information came from College Board.

The extensive data provided by these two sources (which collect it directly from surveys of the institutions involved) allow us to make our estimates sensitive to differences between institutions.  However, there are still areas where our estimates and formulas could be improved.  For example, we compute economic impact only for students reported in Open Doors.  Universities that do not provide information to the Institute of International Education are not represented.  Also, enrollment reports represent peak enrollment, and not necessarily enrollment levels throughout the year.

To estimate expenses we use tuition, fees, and living expenses estimates derived from Peterson’s data collected on surveys completed by institutions every year.  We try to make our calculations sensitive not only to differing costs at institutions, but differing costs for ESL students, undergraduates, graduate students, and students on practical training as follows:

1. Undergraduates and English Language Programs: The number of undergraduate students at an institution is specified by Open Doors data.  Peterson’s data provide undergraduate tuition and fee amounts, on-campus room and board amounts, and miscellaneous expenses.  These categories are sometimes broken down into averages for international, out-of-state, flat rate, and in-state, students.  When multiple averages are available, we choose averages in the order given above.
2. Graduate Students: The number of graduate students at an institution is specified by Open Doors data.  Peterson’s data provide graduate tuition and fee amounts, on-campus room and board amounts, and miscellaneous expenses.  If there are no differentiated graduate expenses provided by an institution in the Peterson’s data then the undergraduate expenses would be applied.
3. Students on Practical Training: We assume these students earn enough in their U.S. jobs to pay living and educational expenses for the year, and so import no funds for their support.  Therefore, net economic impact of students in practical training is zero.

Economic impact of an international student equals tuition and fees, plus room and board, plus miscellaneous figured at 50 percent of room and board, less U.S. support.  We assume that spring enrollment figures are the same as the fall figures reported, that all students are enrolled full time for two semesters or three quarters a year, and that students live on campus for the full year.  The miscellaneous expenses, enumerated in Peterson’s data, average about 40 percent of room and board expenses.  We use a 50 percent figure as an approximation that includes all extra expenses except for travel.

The amount of U.S. support given to international students is calculated to subtract from the expenses in order to establish a greater sense of the export dollars flowing into the U.S. economy.  For this analysis the Open Doors survey is used; which asks schools to report the percentage of their students who are self-funded, the percentage who have U.S. source income, etc.  The U.S. support percentage includes funding from a U.S. college or university, the U.S. Government, a U.S. private sponsor or current employment.  For this analysis the percentages are calculated based upon the institution’s Carnegie classification and the academic career of the student.  For example, this process will differentiate the level of support between undergraduates and graduates at a particular research institution while it also differentiates between a baccalaureate classified institution from an associate’s classified institution.

This model represents the export dollars brought in to each institution, state, and the overall U.S. economy that can be tracked over time.  This provides a good measure for comparisons to other export data, such as data published by the Department of Commerce.  This estimate also takes into account any U.S. funding or employment the international students may be receiving in an effort to best represent these export dollars flowing into the U.S. economy.  This provides for an algorithm that identifies and estimates for this large U.S. export, provides a political argument for support of international education at both the national and university level, provides a trend of this data going back many years, and is very sound to hold up to the political nature of critiques of this statistical analysis.

There is no multiplier effect calculated within this analysis which may provide an even greater representation of the end result of these export dollars in terms of the additional revenue generated by the flow of these dollars throughout the overall U.S. economy.  Instead this model focuses on core export dollars as a result of international students studying within the United States.

For more information please refer to the NAFSA Data & Statistics.

Jason Baumgartner

Editor’s update: link here for the press release of the newest US report (‘International Students Contribute $17.6 Billion to U.S. Economy‘) which was released by NAFSA on 16 November 2009. The report was also produced by Jason Baumgartner.

Graphic feed: Australia’s dependence (2007-2008) upon foreign students

Source: Australian Government (2008) Review of Australian Higher Education: Final Report, December, Canberra: Commonwealth of Australia.

International education activity in Australia up 23 per cent from previous financial year

Australia is continuing to see rapid growth in the export of education (including higher education) services, and the associated generation of export income.  Today’s Australian Education International‘s AEI eNewsletter, which is well worth subscribing to if you are interested in GlobalHigherEd (which you must be if you are visiting this weblog!), includes a link to a new Research Snapshot (November 2008) that notes:

International education activity contributed $14.2 billion in export income to the Australian economy in 2007-08, up 23.4 per cent from the previous financial year. Over the 10 years to 2007-08, education exports have grown at an average annual rate of 16 per cent, compared with an average annual rate of 7 per cent across all services exports.

Here is a copy of a relevant table from the new Research Snapshot:

This document updates some data we profiled in our 24 June 2008 entry titled ‘Analysing Australia’s global higher ed export industry‘.

The international comparability of export earnings data is something we intend on focusing on this year. If readers of GlobalHigherEd entry have insights on this topic, or would like to prepare a guest entry on it, please do not hesitate to contact us.

Kris Olds

China: from ‘emerging contender’ to ‘serious player’ in cross-border student mobility

Last year we carried a series of reports (see here, here and here) on the global distribution of student mobility. While the US and the UK had the lion’s share of this market, with 22% and 12% respectively, we noted China had made big gains. With 7% of the global market and in 6th place overall, it was an ’emerging contender’ to be taken seriously, with trends suggesting that it was a serious player as a net ‘exporter’ and importer of education services.

So it was with great interest I read today’s Chronicle of Higher Education report by reporter Mara Hvistendahl, on China now being ranked in 5th place (behind the US, UK, France and Germany) as an “importer” of foreign students. See this OECD chart, from its new Education at a Glance 2008 report, to situate this development trend and China’s current position [recall that China is not an OECD member country].

As the Chronicle report notes, this is a far cry from China’s 33 overseas students in 1950.

Given, too, that in 1997 there were only 39,000 foreign students whilst in 2007 there were some 195,000, this 5-fold increase in numbers in 10 years (Chinese Ministry of Education and the China Scholarship Council) represents a staggering achievement and the one that is likely to continue. So, how has China achieved this. According to the Chronicle report:

To attract students, China offers competitive packages, replete with living stipends, health insurance, and, sometimes, travel expenses. In 2007 the China Scholarship Council awarded 10,000 full scholarships — at a cost of 360 million yuan ($52-million) — to international students. By 2010 the council aims to double the number of awards.

Two-fifths of the 2007 grants went to students in Asia. In a separate scholarship program that reflects its global political strategy, China is using its strengths in science and technology to appeal to students in the Middle East, Africa, and Central Asia, forming partnerships with governments in those regions to sponsor students in medicine, engineering, and agriculture.

But there are other factors as well pushing China up the ladder as an education destination. China is increasing regarded as a strategic destination by American students and the US government for study abroad. Figures reported by Institute of International Education fact-sheet on student mobility to and from the US show an increase of 38% in US students going to China in just 1 year (2005/2006). This also represents a profound shift in Sino-American educational relations.

In sum, these figures reflect the outcome of an overall strategy by China (perversely aided by the US’s own global trade and diplomacy agenda):

• to develop a world class higher education system;
• to internationalize Chinese higher education;
• to stem the tide of students flowing out of China;
• to attract half a million students to China by 2020; and
• to advance Chinese interests through higher education diplomacy.

If realized, this would put China at the top of the exporting nations along with the US. It will also register China as a global higher education player with global impact. Without doubt this will change the geo-politics of global higher education.

Susan Robertson

Analysing Australia’s global higher ed export industry

The globalization of higher education and research is creating and attracting new players and new analysts. Credit ratings agencies have, for example, started to pay more attention to the fiscal health of universities, while fund managers are seeking to play a role in guiding the investment strategies of university endowments in the United States, and more recently Saudi Arabia.

On this broad theme, and further to our recent entry (‘New foreign student and export income geographies in the UK and Australia‘), the Reserve Bank of Australia released a June 2008 report titled ‘Australia’s Exports of Education Services‘. The Reserve Bank of Australia‘s:

main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board, with the objective of achieving low and stable inflation over the medium term. Other major roles are maintaining financial system stability and promoting the safety and efficiency of the payments system. The Bank is an active participant in financial markets, manages Australia’s foreign reserves, issues Australian currency notes and serves as banker to the Australian Government. The information provided by the Reserve Bank includes statistics – for example, on interest rates, exchange rates and money and credit growth – and a range of publications on its operations and research.

The scale and economic impact of this new industry is reflected in the Bank’s interest in the topic.

‘Australia’s Exports of Education Services‘ highlights key dimensions of the development of what is now one of Australia’s leading export industries such that it now generates $12.6 billion (2007 figures), and is Australia’s third largest export industry (see the two figures below from the report).

While the report is succinct, and can be downloaded for free here, I would like to flag three key themes from the perspective of the GlobalHigherEd analytical agenda.

First, reading through the report one cannot help but note the mercantilist approach that is infused in the analytical terms and data categories associated with the report, and Australian higher education ‘industry’ discussions more generally. From the dominant Australian perspective, global higher ed is unabashedly an export industry that needed to be created in a regulatory and ideological sense, and then subsequently, nurtured, reshaped over time, and more generally planned with strategic effect. Global higher ed is also situated within a broader array of educational services:

• Higher Education
• English Language Intensive Courses for Overseas Students (ELICOS)
• Vocational Education and Training (VET)
• Schools
• Other Awards Sectors (e.g., “bridging courses and studies that do not lead to formal qualifications”)

Data on international student enrollments (1994-2007) using these categories is also available at the Australian Education International website (see the site too for clarification about source data and a key methodological change in 2001).

This strategic cum assertive/aggressive approach to the creation of ‘customers’ means that Australia will also ensure it has a capacity to monitor its primary competitors (especially New Zealand, the United States and the UK), and its emerging competitors (especially the group of countries that make up the European Higher Education Area, as well as Malaysia, Singapore, and China). Competition can occur through enhanced capacity to attract the mobile students who should have come to Australia, enhanced capacity to keep them at ‘home’ (via “import-substitution” policies and programs), or the external profile of weaknesses in the quality of Australia’s higher educational offerings, especially for fee-paying foreign students.

Second, the emergence of China and India as sources of mobile students is abundantly evident in the report (see Graph 5 and Table 4). Recall our 22 June entry, too, which presented data on Asian student numbers from the new Asian Development Bank (2008) report titled Education and Skills: Strategies for Accelerated Development in Asia and the Pacific. In short, Australia has strategically hooked into the highly uneven development wave evident in the ADB report, and shifted from ‘scholarship to dollarship’ (a phrase Katharyne Mitchell has used more generally) with respect to the country’s primary overseas student target. As the Bank’s report puts it:

Until the mid 1980s Australia’s involvement in providing education services to non-residents was directed by the Australian Government’s foreign aid program. Nearly all overseas students studying in Australia over this period were either fully or partly subsidised by the Australian Government, with the number of overseas students capped by an annual quota. Following reviews into Australia’s approach to the education of overseas students, including the 1984 Jackson Report, a new policy was released in 1985. This policy introduced a number of measures, such as allowing universities and other educational institutions to offer places to full fee-paying overseas students, which encouraged the development of Australia’s education exports sector. There were also changes in overseas student visa procedures aimed at helping educational institutions market their courses internationally. As a result of these changes, overseas student numbers increased significantly, and there has been a rise in the proportion of university funding sourced from fee-paying overseas students.

Third, the expansion of such a market, and the creation of significant export earnings, has created dependency upon full fee paying foreign students to bankroll a major component of the budgets of Australian universities (see Graph 4 above).

Thus, when between 15-20% of average annual revenue comes from “fee-paying foreign students”, especially the parents of Asian students, a condition of broad structural dependency exists, all ultimately shouldered upon household decision-making dynamics in places like Kuala Lumpur, Beijing, Mumbai, Seoul and Singapore. And it should also be noted that the income streams being generated from these students are proportionally being reinvested into the enhancement of the faculty base; indeed, as the figure below from a new Association of Universities and Colleges of Canada report (Trends in higher education – Volume 3: Finance) demonstrates, Australia has seen a massive increase in student numbers (local + foreign) but relatively little faculty growth.

Is it any wonder then, that the Brisbane Communiqué Initiative, an initiative that we will profile in early August, was developed in 2006, largely in response to the Bologna Process?

The Brisbane Communiqué, and related initiatives in Australia, remind us that structural dependency upon foreign (Asian) students exists. Given this, Australia cannot help but be concerned about any initiative that might lead to the possible realignment of Pacific Asian (especially China), and South Asian (especially India) higher education systems to the west (aka Europe), versus the south (Australia), when it comes to the mechanisms that enable international student mobility.

Kris Olds

The ‘other GATS negotiations’: domestic regulation and norms

In our previous entries (here and here) in GlobalHigherEd we introduced the World Trade Organization (WTO) and explained the content and implications of the liberalization negotiation within the General Agreement on Trade in Services (GATS). The liberalization negotiation is the most well known activity within the scope of GATS. In fact, very often the GATS and education literature restricts the content of the agreement to its liberalization disciplines (that is, market access and national treatment).

However, other negotiations that are equally relevant to the future of higher education are also taking place, and specifically the negotiations on Domestic Regulation (DR) and Norms.

Discussion on these topics takes place as the logical consequence of the fact that the GATS is an incomplete agreement. In the Uruguay Round, the GATS was designed and signed, but member countries did not reach a consensus in sensitive issues, such as Domestic Regulation (Article VI) and the so-called Norms (Articles X, XIII and XV). So, after Uruguay, two working groups – composed by all WTO member countries – were established with the objective of concluding these articles.

Domestic regulation negotiations
Article VI establishes that the national regulation cannot block the “benefits derived from the GATS” and calls member countries to elaborate disciplines and procedures that contribute to identify those national regulations that states’ impose on foreign services providers that are ‘more burdensome than necessary’. The regulations in question include those associated with:

• qualification issues (for instance, certificates that are required by education services providers),
• technical standards (which can be related to quality assurance mechanisms), and
• licensing requirements (which, in some countries and sectors might refer to conditions and benchmarks on access to the service).

One of the procedures that is being discussed in the framework of the Working Group on DR is a polemical ‘necessity test’. If this instrument is approved, Member States will have to demonstrate, if asked, that certain regulatory measures are totally necessary to achieve certain aims, and that they could not apply any other less trade-restrictive alternative.

Rules
In the framework of the Working Group on Rules, three issues are being discussed:

• Emergency Safeward Mechanisms (Article X): These mechanisms, when settled, would permit to countries to retrieve some liberalization commitments – without receiving any sanction – in case that it can be demonstrated that the liberalization experience has had very negative effects. Southern countries are more interested in the achievement of strong mechanisms, while developed countries pushes for softer disciplines.
• Government procurement (Article XIII): The Working Group examines how government procurement could be inserted in the GATS framework. Therefore, transnational services corporations could become public procurement bidders in foreign countries. Developed countries are most interested in strong disciplines in relation to this rule.
• Subsidies (Article XV): In this case, Members are elaborating disciplines to avoid the “distortion to trade” provoked by subsidies.

DR and Rules negotiations are different to the liberalization negotiations in the sense that the former are not developed progressively (i.e. round after round). On the one hand, once each country reaches an agreement, consecutive negotiations on these areas will not be necessary. On the other hand, DR and Norms affect all sectors indiscriminately because, in contrast to liberalization negotiations, they are not negotiated sector by sector.

The outcome of the Working Groups on DR and Rules will thus modify the balance between the legitimate capacity of the states to prosecute certain social objectives (for instance, in relation to the access and quality of public services such as education) and the obligation to guarantee a free trade environment for transnational services providers.

Given the importance of these ‘other’ negotiations in the GATS, our view is that the education community should make sure that they also keep a watchful eye on them. GlobalHigherEd readers might find the information in the periodic publication TradeEducation News, launched by Education International, a useful way of doing this.

Antoni Verger and Susan Robertson