The Impact of International Students on Destination Economies in 2023

What do a battery that can power a car for 400 kilometres, an online marketplace that directly connects students with landlords, and an app that can identify any song in a matter of seconds all have in common?

They are all inventions of former international students.

In 2020, there were over 6.3 million international students who together contributed US$370 billion to the global economy.1 These students have created jobs, built billion-dollar companies, and invented processes that have changed the way we live.

But the story of international students turned entrepreneurs is not limited to a dollar amount. Their story is also about the pursuit of dreams in the face of incredible risk.

Today, we’re looking at just how much international students mean to the countries they study in. In a market-by-market analysis, we’ll share the most impactful contributions made by international students—measuring by more than just the numbers.

Key Insights at a Glance

• Over 25% of the 583 US companies valued at a billion dollars or more in 2022 were founded by international students.
• International students contribute over CA$22.3 billion per year to the Canadian economy.
• Immigrants are 40% more likely than Canadian-born individuals to own businesses in knowledge- or technology-based industries.
• International students will contribute ￡3.2 billion to the UK economy over 10 years through income tax and National Insurance payments alone.

The US remains one of the most popular destinations for international study in the world. This is due in part to the US being the largest economy in the world and maintaining significantly low rates of unemployment. But this student-economy relationship is mutually beneficial.

In the 2021/22 academic year, the nearly one million international students who attended US colleges and universities contributed US$33.8 billion to the US economy and supported more than 335,000 jobs.2

While the economic contribution of students last year was 19% higher than 2020/21, it still falls short of the all-time high set in 2018/19, when more than one million students generated US$40.5 billion and supported more than 450,000 jobs.

Let’s take a look at the distribution of economic impact across each state. This interactive map displays the overall financial contribution of international students to every US state in 2021/22.

For every three international students in the US in 2021/22, one US job was created. The total number of jobs supported (335,423) by the financial contributions of international students is up 9.5% compared to the prior academic year. Jobs supported by international students in the US dropped by 26.4% last year.

Economic contribution per international student in the US dropped from $38,000 in 2019/20, to $35,000 in 2021/22.

Last year’s $5.5 billion increase has to be mentioned alongside the decline of $10.3 billion in 2020/21—the largest single-year decline since NAFSA began tracking these figures over 20 years ago.

The US has regained about half the ground it lost in the previous year. And while COVID-19 is the default answer for explaining this slow recovery, we can’t forget about the competition. The US is seeing more competition for international students today than ever before.

As other English-speaking countries see their market share of international students rise, the US is experiencing an annual decline. Let’s examine some key reasons why reversing this trend is so important for the US.

The Immense Value of US Startups

International students offer more than a dollar value to their host country’s economy. If US policymakers need any incentive to retain and attract top international students, they should look at their recent accomplishments.

In 2018, there were 21 billion-dollar US startups with a founder that first came to the US as an international student. Fast forward to 2022, and the number of billion-dollar startups with an international student founder has exploded to 143.

Over 25% of the 583 US companies valued at a billion dollars or more in 2022 were founded by an international student. Perhaps the most impressive aspect of this feat? The diversity of these former students, who hail from 57 different countries.3

A secondary benefit of these businesses? The jobs they create. U.S. billion-dollar startups with an international student founder created an average of 860 jobs in 2022.

Roadblocks to Continued Success

The ceiling for innovation from international students in the US is exponentially high. Barring any major policy changes over the next 3 years, by 2025, the US could easily be the home of over 300 billion-dollar companies founded by an international student.

The biggest thing standing in the way of that? Currently, there is no reliable way under US immigration law for foreign nationals to start a business and remain in the country after founding a company. Successful immigrant entrepreneurs in America are almost always refugees or family-sponsored and employer-sponsored immigrants.

A startup visa that allows international students who found companies and create jobs to remain in the country would be an impactful addition to the US immigration system, opening the door for more students stay and grow a business after graduation.

Canada

Boasting one of the most diverse populations on the planet, Canada embodies inclusivity and celebrates diversity. In fact, Canada ranks as the most diverse country in the world outside of Africa.

The welcoming and friendly environment that Canada has fostered is creating an economy that’s fuelled by the contributions of immigrants, many of whom are international students.

International Students’ Economic Contributions to Canada

In 2020, international students contributed over C$22.3 billion per year to the Canadian economy—greater than exports of auto parts, lumber or aircraft. These students were responsible for supporting over 218,000 jobs.

In 2020, International students represented 24% of students in Canada’s post-secondary education system, up from 12% in 2016.4

Canada’s international student population is growing fast. And all signs point towards the need for it to keep growing. But right now, Canada is seeing an aging population retire out of the workforce. More than 1 in 5 persons (21.8%) are close to retirement age (between 55 and 64 years), an all-time high in the history of Canada.

There are also more retirement-age citizens than young adults (15 to 24) in Canada, the demographic at which individuals typically enter the labour market. In 2021, there were 81 young adults per 100 retirement-age citizens. In 1966, there were more than 200 young adults per 100 retirement-age citizens.

Canada’s workforce is aging, and there are a variety of employment sectors that are in need of employees and skilled labour—a need which could be addressed by international students.

Canadian Immigrant-Led Businesses

Canada’s international students, and to a greater extent, its immigrants, go on to lead successful Canadian businesses.

Canadian businesses led by immigrants are much more likely to export and derive a greater share of revenue from exporting. They rely less on the US as a market and export to more diverse markets, resulting in the growth and diversification of Canadian exports.5

This growth is powered by the number of immigrant-led businesses that export at twice the rate of that of their Canadian-led competitors.

Universities Committed to Empowering Students in Canada

The drive of international students cannot be overstated. Immigrants are 42% more likely than Canadians who were born in Canada to either found a business or be self-employed. Economic class immigrants are also more likely than Canadian-born individuals to own businesses in knowledge or technology-based industries.6

Part of the lure of not only studying but growing a business in Canada is the country’s commitment to continuous development. In Montreal, Quebec, ranked as one of the most popular cities in the world among international students, institutions are continuously searching for ways to improve the international student experience.

Starting this fall, Concordia University will offer every incoming undergraduate student a chance for at least one course-based experiential learning opportunity during the course of their degree. And beginning in 2025, Concordia aims to make two experiential learning opportunities available to new students.

This move is an example of Canada’s commitment to providing all incoming international students with the tools necessary to make a smooth transition to life after university. As long as Canada continues to pour resources into developing incoming bright minds, they are likely to return the favour.

The University of Waterloo is home to the largest work-integrated learning program in the world. UW’s Work-Learn Institute has an entire research centre dedicated to it and shares best practices with other institutions across the country.

These are examples of Canada’s commitment to providing all incoming international students with the tools necessary to make a smooth transition to life after university. As long as Canada continues to pour resources into developing incoming bright minds, they are likely to return the favour.

United Kingdom

Alongside the immeasurable social and cultural benefits they bring to British communities, international students’ financial contributions are vital.

The nearly ￡26 billion of net economic contribution made by international students in the UK in 2018/19 is a key piece of the UK government’s strategy for economic growth, which aims to grow education exports to ￡35 billion by 2030.7

International students make up nearly a quarter of all students in the UK and more than half at several top London universities.

And while there have been murmurs of international students in the UK crowding out domestic students, the numbers tell us that’s not the case. International students actually subsidize their lectures and research.

Here are a few eye-popping statistics that capture what international students mean to the UK economy:

• The average international student contributes more than ￡100,000 a year to the UK economy.
• International students will contribute a whopping ￡3.2 billion to the UK economy over 10 years through income tax and National Insurance payments alone.
• One year’s intake of international students at British universities generates ￡390 worth of economic activity for each person in the UK annually, rising to more than ￡700 for every resident of London.

The international student population in the UK is helping the local economy thrive. It’s even more clear when we take a look at specific metro areas benefiting from classes full of international students.

The Regional Benefit of International Students to the UK

Metro areas that are home to universities are seeing their local economies stimulated by the additional spending of international students.

It’s estimated that Sheffield Central benefits from nearly 3,000 students to the tune of ￡290 million, and Nottingham South by ￡261 million for each year’s worth of students.

But these figures don’t account for opportunity costs or any long-term benefits such as investment, business and trade links.

International Entrepreneurship in the UK

So what about those students who do end up staying in the UK after graduation to grow a business? Does that have a big economic impact on the UK as a whole? The quick answer is yes.

Here are a few statistics to back it up:

• 57% of British university startups are founded by international graduates.
• Nine of the UK’s top 10 unicorn businesses (Over ￡1 billion valuation), including Shazam and Funding Circle, have at least one immigrant founder.
• UK immigrants are three times more likely to start a business in the UK than people born in the UK.8

It’s not the odd student who goes on to be successful at what they do in the UK. It’s a significant share of them. As opportunity for international students in the UK increases every year, the ceiling for their impact on the UK economy rises.

In 2021 alone, venture capital firm Creator Fund found that there were over 800 startups from 94 different UK universities. COVID-19 did not slow UK university startup activity down. Instead, students have used the time flexibility during the pandemic to progress their ideas forward.

When they’re not progressing the UK’s budding startup world, international students are also finding graduate jobs in sectors with acute skills shortages,9 debunking the idea that they could be taking jobs that would otherwise be held by UK students.

Post-Graduate Work Will Dictate Future Economic Impact

No matter where international students are in the world, they reciprocate. Building diverse and inclusive mindsets, developing cutting-edge technology at a better rate than locals, and filling the most in-demand jobs on the market. These are some of the benefits they give back to the countries which educate them.

But as we start to think about what this impact will look like 10 years from now, the strongest indicator for success is likely to be opportunity. Post-graduate working opportunities, specifically.

In the last 12 months, every major English-speaking destination has taken steps forward to increase opportunities for international students after graduation.

Canada: The PGWPP is still going strong, setting the standard for the rest of the world with a 98% acceptance rate.

US: Recently expanded eligibility for the OPT program, adding 22 new fields. Prospective students are also now allowed to file for an F-1 student visa 365 days ahead of time, allowing them to plan out their academic future much further in advance.

UK: The Graduate Route has caused the UK to be the fastest-growing destination for international students, but the threat of students not being able to bring their families with them could severely curb the interest of incoming cohorts.

Australia: Australia now offers students the longest period of post-grad work eligibility of any major destination country in the world. Starting in July of 2023, international graduates of over 200 different bachelor and master’s programs will be granted an extra two years of post-study work rights.

How each of these markets nurtures and develops their post-graduation programs will strongly influence the ceiling for the economic impact of students who study there.

Asking an artificial intelligence chatbot to write you a movie script, facilitating merchant payments from anywhere in the world, and grocery shopping from your phone are all experiences made possible by international students. And there could be many more like them to come.

Today, innovation is so often expressed through entrepreneurship. Startups are vital to an economy because the best ideas will rarely be applied or perfected without people who are willing to take a chance on those ideas, and themselves.

International students are world-class risk-takers who are willing to bet just about everything on themselves, provided they are given the opportunity to do so.