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Tuesday, June 25, 2024
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    Politics and house building

    Followers of international higher education have seen the policy changes afoot in some of the largest student markets. Canada is capping enrolments, the UK is making student visas less generous and Australia is raising the bar for applicants’ financial means. We’ve not before seen this confluence of factors designed to reduce the numbers of students studying abroad. At least we haven’t seen the actions taken in these high-demand Anglophone markets.

    Understandably, the education sectors in these countries are not happy. The fundamental economics of education in all three is the same: governments set the price, the unit of resource, which they will pay to institutions for domestic enrolments. Beyond that, for a university to have more freedom and flexibility, they attract higher-fee-paying international students. There is a strong imperative, and so supply of places has increased to capture some of the very high demand.

    Unhappiness for institutions comes, in part, from the abrupt nature of the changes and the uncertainty which is created. For students and their recruitment agents, that uncertainty is whether a visa application will be approved. For institutions, this is about budgets and planning for the delivery of full courses. In-year changes, or changes by stealth such as slowing visa approval processes, need to be managed reactively. And no-one likes to feel caught off-guard and need to scramble to react to policy change.

    So far, so descriptive. None of this information is new to those who work in and around higher education. For me, the more interesting bits are both the underlying reasons why multiple governments are pursuing similar agendas and how the sectors are responding.

    Why are governments slowing international student flows?

    We haven’t built enough homes. There’s a supply issue when it comes to housing, and demand outstrips supply. Add to that higher interest rates which have exposed some borrowers, particularly those who have only known the post-Global Financial Crisis peculiarities of cheap borrowing. Mortgage rates go up, landlords pass increases on to renters. The cost of housing is central to the argument that in many countries, we face the dreaded “cost of living crisis”.

    Governments facing upcoming elections then ask how they can secure votes when people are getting poorer. Political pollsters regularly ask people how they’re feeling, and particularly whether they are optimistic for their own circumstances. These are crucial questions because it’s this sentiment which drives voters towards, or away from, those in power. When financial times are hard, it’s almost impossible for the median voter to feel positive towards the incumbent government.

    Incumbent governments need a positive story to tell that prices are falling (or, at the very least, not rising by as much). This is a delicate balance of trying to push cash in the voter’s hand to relieve their pain without creating the demand which drives the inflation cycle. There’s a good example in the recent Australian budget: a handout of $300 per household was announced but it’s a discount off energy bills not cash in the voter’s pocket. The goal is for people to feel better – they saved money – through reducing a cost.

    When it comes to housing, it’s too hard to increase supply quickly. And politically difficult to introduce direct measures which reduce house prices. But governments can reduce demand. Among the easiest tap to turn off is international students: they make up the bulk of temporary migrants. Your other choices are skilled workers where reducing numbers will anger the business lobby. And you don’t want stories of family members being denied the opportunity to live together.

    I don’t like it, but I think this is the crude state of affairs. I’m a big fan of international education: it provides amazing experiences, potentially life-changing opportunities for migration and has become a central part of the success of Western universities. If I were in government, though, I might make the same decision and cut numbers. I’d argue that it’s a short-term measure, that the real need is to increase housing supply, but I might accept that tough choices need to be made and the most pressing issue is cost of living.

    How have higher education bodies responded?

    International students provide massive short-term benefits to the countries in which they study. They pay high fees. They spend on housing, food and travel. Their parents come to visit. There is an undeniable positive economic impact which is directly harmed by cutting numbers. Many people rely on international students for their livelihoods.

    In the long term, migrants contribute to a country’s economy and society. Students are typically young and healthy, and not a burden on the state. By definition, those who come to study should be higher skilled. They’ve certainly shown themselves motivated to move and to overcome massive financial, cultural and administrative barriers to move country.

    University lobbies have made these arguments. But they don’t matter. Policymakers aren’t idiots. They know how their economies work, how large an “export earner” education is. No amount of restating the argument that international students are great for everyone will change the basic calculus of this political decision.

    What’s the answer?

    We should accept that, while students are massive economic contributors, there are some negative externalities to their movement. In a static system, where the inflow and outflow of student is stable, we should expect little impact on accommodation, transport or other infrastructure. It is where rapid growth has occurred where there is the greatest friction: students arrive faster than the resources can keep up.

    In the short term, universities are likely to need to find ways of managing within a capped environment or subdued market. There are opportunities here: many institutions talk of diversifying their international enrolments, both by source country and the programmes of study. A capped environment allows for greater choice to support diversity. Investment in source markets, and in developing the programs which are attractive to more diverse groups will likely pay off when numbers can be increased.

    Universities can also be part of the solution when it comes to housing. Many institutions have land, access to capital (for example, through their sectors’ pension funds), and political will to enable large-scale residential developments. Ideally, this would include student accommodation, and social housing and the market-priced properties on which the business case will rely. These are developments which could be done by any large organisation, but universities might be even better placed given their capacity to look for returns over a long period and not a quick solution. At the very least, showing a determination to address the underlying political factors behind recent policies could help with positive government relations.

    What can we learn?

    The university policy and politics landscape can tend toward myopia. We can think solely of our own world and it’s easy to accuse detractors of xenophobia, vandalism or stupidity. If we take a wider view, we can see that political decisions are made in an almost impossibly complex landscape where sustaining the education sector is just one of many competing priorities.

    When university groups present economic arguments, they are important and valuable contributions to the debate. In government, there are tensions between those whose priority is the health of the sector and its reputation globally, and those whose departments control whether someone is allowed into the country, or not. Every piece of evidence which strengthens the sector champions’ arguments is welcomed.

    But there can be a tendency to think that one study will upend the political calculus, will end the debate, and the sector will get what it wants. If only we can prove that students aren’t a burden on the housing market, that their economic heft is far greater than any negative impact, or that the damage to our institutions will go deeper and further than projected. That’s not always how politics works. Accepting the existence of counter arguments doesn’t mean giving in, it can mean showing pragmatism. With pragmatism might come more solutions.

    What’s next?

    My prediction for the fate of international students in Australia, Canada and the UK is that, following elections, there will be an easing of restrictions. This won’t come with a fanfare as governments will likely be cautious about any perceptions that their border policy is anything but strict. The narrative – one the education sector may need to embrace – will be of diversity, quality and sustainability.

    Like many policy areas, this time is a question of a pendulum swing. It will return. Universities can do more to have it swing in their direction, but securing that advantage will be harder than rehearsing the same arguments with yet another economic study.