Brain drain: Why looking at only emigration doesn’t make sense

Often in New Zealand we bemoan the fact that so much of our “skilled labour” is heading overseas.

This concern is fine – however, looking at this factor by itself does not tell us anything about the change in our skill base domestically.

In a paper by Satish Chand and Michael Clemens it is claimed that skilled migration out of Fiji has been caused by the same factor behind the increase in the stock of skilled labour in Fiji (ht Market Movers) – namely an increase in the return on skills overseas.

This makes sense, an increase in demand for skilled labour overseas increases the return for skilled labour overseas – with an open labour market skilled labour will then bugger off. This in turn will reduce the supply of skilled labour, increasing the wage and increasing the incentive for people to train in these specific skills – increasing the long-run supply of this labour type.

I find the perceived result that the skilled capital stock INCREASES (which is what they find) a touch implausible, as if domestic demand for those skills does not change and a higher return on labour exists overseas (holding the wage rate up) surely the equilibrium level of employment for that skill is lower. Still I do not know what mechanism they use to explain this – as I have not gone through most of the paper. Once I have I’ll correct myself in the comments 😛

Still it is a valid point that we have to look at why people are leaving before making judgments – instead of merely stating that people leaving is a bad thing.

  • John

    “This implies that allowing highly educated immigrants into the US discourages US citizens from pursuing education.”

    That is from the comments section of the second link. I think our Government could have a bias towards immigration over training up the existing population.

  • “I think our Government could have a bias towards immigration over training up the existing population”

    It isn’t up to the government to “train” a set of skills – it is about providing an environment where people can make decisions on what sort of skills to train in, with the wage providing an incentive for people to train in different things.

    Labour is heterogeneous, people from different countries are good at different things. If we let labour move freely, then people will (eventually) move to where they are most “productive” (in a happiness sense) – surely this is the ultimate goal of policy.

    As long as New Zealanders can move overseas for jobs, there is no “training” issue – either we have a “shortage” of skilled labour or we have a “surplus” (both relative to some random target). Currently people want to act that we have both (we need to train domestic skills – we must not let people in) – it is inconsistent

  • John

    For a lot of people the problem is a need for retraining or upskilling and there is a large degree of “learned helplessness” to overcome. I would like to see governments put effort into helping these sort of people.

  • “For a lot of people the problem is a need for retraining or upskilling and there is a large degree of “learned helplessness” to overcome. I would like to see governments put effort into helping these sort of people.”

    Government can help by making the market for this type of upskilling available, and then giving people the choice to do it or not methinks.