As fewer foreign students arrive, Canada’s labour market braces for adjustment
International student flow
When Canada moved to tighten the rules around international student enrolment from higher financial thresholds to stricter post-graduation work permits, many colleges and universities immediately feared for their balance sheets. Less discussed, but just as consequential, is what this shift means for the country’s job market. For years, international students have not only filled classrooms but also nestled into kitchens, retail shops, call centers, and, later, professional offices. With fewer of them arriving, some industries could be facing leaner times.
A Labour Market in Deceleration
The backdrop against which declining foreign enrolment is unfolding is a labour market that has visibly cooled. According to Statistics Canada:
In August 2025, Canada lost 66,000 jobs, a 0.3 percent drop, largely due to declines in part-time employment.
The unemployment rate rose slightly to 7.1 percent, up 0.2 points from July, marking the highest level in the current cycle (excluding pandemic distortions).
The employment rate (share of working-age people employed) fell to 60.5 percent, slipping by 0.2 percentage points from the previous month.
Meanwhile, data on job vacancies shows similarly downward pressure:
In the second quarter of 2025, job vacancies fell by about 18,900 positions (−3.6 percent), bringing the total to 505,900 unfilled roles.
That drop follows a similar decline in the first quarter. Compared with a year earlier, vacancies are down by about 72,900 (−12.6 percent).
The job vacancy rate (the fraction of labour demand represented by unfilled positions) has slipped to about 2.8 percent in Q2 2025. This is lower than in recent high-demand periods.
These trends (job losses especially in part-time work, rising unemployment, falling job vacancies) suggest the labour market is not overheating. Rather, it is shifting toward a state of greater slack: more people looking for work per open job, more hesitation among employers about hiring, and greater risk of underemployment.
Where the Loss of International Students Might Hurt Most
In a hot labour market, the absence of international students filling lower-wage, irregular, or temporary roles would likely precipitate immediate shortages, wage jumps, and service disruptions. But given the current cooling, the impact is likely to be more muted, though still meaningful in certain sectors and geographies.
Here’s how the interaction between the declining student pool and labour market softness might play out:
Low-wage, flexible work: Sectors such as hospitality, food service, retail, cleaning, and lodging have traditionally drawn heavily on student labour (both international and domestic) to fill shifts that are less regular or less appealing in terms of hours or pay. With fewer international students, and with part-time domestic worker supply often limited or demanding different terms, these sectors may start seeing gaps. However, since demand for labour is weaker, there may be more idle domestic supply to draw upon, slowing the urgency.
Shift in wage pressure: Because employers in vulnerable sectors have less competition for labour (reflected in falling job vacancies and rising unemployment), they may not feel compelled to raise wages sharply even as student-labour supply shrinks. Some wage growth is evident; for example, average hourly wages are up year-over-year, though growth has decelerated in many areas.
Professional and skilled sectors: The drop in job vacancies spans many sectors including health, business, finance and administration, trades, transport, manufacturing, and education. Specialized roles that international graduates would typically feed into such as tech, engineering, health-care support, etc. may see a thinning pipeline over time. But in the short term, hiring in those fields is already slowing, which gives those sectors somewhat more time to adjust.
Regional/local effects more pronounced: In cities and towns with high concentrations of international students, local labour markets, housing markets, and service sectors (restaurants, transit, retail) may feel sharper effects. These effects could also ripple into staffing agencies that relied on students as a reliable supply of flexible workers.
Will It Be Bad or Manageable?
The current condition suggests that while the decline in international students will impose costs, particularly on firms accustomed to drawing from that labour pool, the damage is likely to be manageable rather than catastrophic, at least in the short to medium term. Key reasons:
The cooling labour market means that there is more slack. Employers have more options among domestic workers, underemployed people, or people who were previously discouraged from job seeking. That provides a buffer.
With unemployment rising, job seekers are likely to be more willing to take roles that students might have filled, though incentives such as flexibility and wage might have to improve.
Firms and staffing agencies may move to adjust their models: offering better working conditions, more predictable hours, or investing in domestic training or upskilling.
However, “manageable” does not mean “no pain.” For some employers, especially in labour-intensive, service sector roles, the combination of fewer international students and weaker domestic supply could push costs up via higher wages, recruiting, or turnover, even before productivity or demand picks up. And longer-term, the slowdown in filling higher-skilled roles could contribute to skill shortages, innovation lags, or slower growth.
Conclusion
The timing of the drop in international student numbers places Canada in a relatively advantageous position compared to what might have been the case during a labour shortage boom. While Canada is not facing massive hiring frenzies or runaway wage inflation at the moment, the absence of students will nevertheless require adjustments. Employers may need to rethink flexible work hours, part-time staffing, and conditions that make roles attractive. Staffing firms that have relied heavily on international students must diversify their sourcing or redesign roles.
Longer term, there’s risk that Canada loses more than student tuition. The educational institutions, innovation ecosystems, and skilled-labour pipelines that benefit from international student arrival and retention could suffer. Whether Canada navigates this shift with resilience or stumbles will depend on policy responses (immigration, work permits, training), on how flexible employers are, and how quickly domestic labour supply can adapt.