Housing crisis: don’t blame international students; blame Arthur Laffer

Housing Minister Sean Fraser (immigration.ca)

The federal government should reassess its policy on international students and consider a cap on a program that has seen “explosive growth,” putting pressure on rental markets and driving up costs, Housing and Infrastructure Minister Sean Fraser said…

“The reality is we’ve got temporary immigration programs that were never designed to see such explosive growth in such a short period of time…” He said the growth of the program for international students is happening in concentrated regions of Canada and is putting an “unprecedented level of demand” on the job market but even “more pronounced” demand on the housing market.

Globe and Mail
August 21, 2023

Everything is connected and, suddenly… Well, here we are, smacking up against our own version of everything, everywhere all at once.

Let’s start with Arthur Laffer.

(Actually, first, try Googling Thomas Piketty; better yet, read some of what he’s written on the history of economic inequality in the last century or so, including his thesis that inequality is a feature rather than a flaw of capitalism. That may provide useful context for why Laffer was so wrong about everything.)

In 1974, Arthur Laffer drew a graph that became known as the Laffer Curve. It essentially argued that cutting taxes was the best way to light the path to economic prosperity for all.

Rich people naturally liked the cutting taxes part … ignoring, of course, the “for all” after prosperity.

The theory might have been — was/is— laffable, but its obvious appeal to the wealthy and their political minions helped beget Ronald Reagan, Margaret Thatcher, Brian Mulroney, Stephen Harper et al, not to forget multiple generations’ worth of government policies based on the magical trickle-down-theory thinking of economics: give tax breaks to the wealthy who will spend them wisely and create prosperity for those in the cheap seats.

We know where that has led.

To John Risley.

Risley built a business career out of gobbling up multi-millions in federal and provincial non-repayable contributions, conditionally repayable contributions, low-interest and no-interest loans and other taxpayer-funded incentives, then using those public funds to help build businesses he sold for personal profit.

He’s still at it. As the Examiner’s Tim Bousquet reported earlier this month, Risley is now hustling public subsidies for his “green” hydrogen project:

There’s a lot of discussion about export to the U.S. and such [in Risley’s co-authored op-ed in Policy Magazine], which I believe is meant merely to impress upon us that the authors know what they’re talking about before they get to the real point:

“In addition, launching a business capacity-building program with Hydrogen Europe and a Canadian counterpart would be very beneficial.”

Let me rephrase that in common English:

“Give us public money, and we’ll make this thing work.”

Oh, and the trickle-down part?

Risley recently sold his German-built, 107-metre superyacht — “the 63rd largest superyacht on the planet, custom-built with 10 guest cabins, including four for VIPs, a helicopter pad, teak decks, a dance floor, steam room, elevator, beauty salon and, and, and…” — to a Ukranian-American billionaire for $350 million.

Trickle, trickle…

But back to those international students, Canadian universities, jobs markets, the housing crunch, the need to cap international student visas, and so on and so forth.

One of the many trickle-down-into-a-torrent impacts of slashing taxes on the wealthy and corporations beginning in the 1980s has been a decades-long cratering in public funding for universities — from 82.7 percent of Canadian university operating revenues in 1982 to under 25 percent today.

That, in turn, led to a tidal wave of ever-increasing increases in student tuition and other fees. According to a 2022 report by the Canadian Federation of Students:

Since 1980, average undergraduate tuition fees have increased by 926 percent and average graduate tuition fees have increased by 1,244 percent, meanwhile, overall consumer prices have increased by 311 percent.

That wrapped the vice grips around the necks of students, especially those from poorer backgrounds who had to decide how many lifetimes’ worth of debt they could afford to take on, but also around universities that needed to attract ever more students from anywhere just to counter declining government support.

All of that has led to many consequences — increasing university dependence on string-attaching private donors, increasing dependence on low-paid gig profs… And, of course, to the emergence of an international student recruitment industry that generated $9.6 billion in tuition last year.

Because universities generally don’t receive public funding for their international students, they do need to charge those students more to cover the added costs. But there are no rules about how much more they can/should. So, they do. Consider:

Despite making up just 17 percent of students studying in Canada, international students contributed 43.5 percent of all tuition fees collected in 2020, according to the most recent survey by Tuition and Living Accommodation Costs (TLAC).

International students contribute way more to the economy than simply tuition fees. Your Canadian Immigration, a private immigration consultant that helps students and others come to Canada, estimates that, in 2019-2020, international students…

contributed over $22 billion to the Canadian economy, with more than half of that going to universities and colleges. This money helps to fund research, academic programs, and other initiatives that benefit both international and Canadian students.

International students also help to create jobs in the education sector. According to a report by the Canadian Bureau for International Education (CBIE), every international student in Canada supports 1.8 jobs in the education sector. This includes jobs for professors, staff, and support workers.

But, according to student visa numbers, there are now more than 800,000 international students in Canada, double the number in 2015.

That means they have become a convenient, identifiable target for anyone frustrated by the difficulties of trying to find housing in Canada — and for politicians looking for someone to blame for the lack of affordable housing.

The problem is that the problem isn’t international students. And we won’t solve our real problems by capping their numbers.

What we really need to do is go back to 1974, take a mulligan on Arthur Laffer’s curve, and start over.


A version of this column originally appeared in the Halifax Examiner

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