Kiwi emigration no brain drain

A popular way of denigrating migration flows is to brand them a ‘brain drain’ from poor countries to rich ones. In fact, this is a myth and instead there is evidence the reverse is the case.

Highly skilled emigrants seeking better opportunities overseas certainly benefit themselves by an average of $US40, 000 to $US70, 000 a year, according to new research by Professor John Gibson of the University of Waikato and his World Bank colleague David McKenzie.

They surveyed 12,000 people, living in 45 countries, who had emigrated from New Zealand and four other places (Ghana, Micronesia, Papua New Guinea and Tonga). They also traced the migration histories of top academic achievers in high school each year from 1976 and 2004.

Spillover Effects

“Because this is such an enormous benefit to these individuals, we would need very large spillover effects for high-skilled migration to have a net negative impact on development in their home countries. Instead, we estimate the likely value of these externalities to be at most $US1000 per year, that is only 2% of the private gains,” Dr McKenzie said.

Other benefits from high-skilled migration include remittances, trade and investment.

The study found remittances amounted to around $US5000 per year for each individual, while the net effect of trade and investment was much smaller – around $US500-1000 per migrant in Ghana, and even smaller in Micronesia and Tonga.

“Our study indicates that governments should be less concerned about high rates of skilled emigration and focus on the basics of providing the policy environment needed to foster growth and innovation at home,” Dr McKenzie said.

Former Prime Minister Sir Robert Muldoon rejected the ‘brain drain’ notion saying that between New Zealand and Australia, it lifted the IQ of each country.

Pricy Policy

With high migrations flows (both in and out), New Zealand is an ideal country to study the benefits, both to individuals and the country.

Yet economics is a long way behind the social thinking that drives immigration policy. One idea that has not been tested may be the best yet.

It comes from Nobel Prize winner Professor Gary Becker, well known for his application of economics to social policy.

In a recent article, published in summary form in the ‘Perspective Series’ of the New Zealand Business Roundtable, Professor Becker raised the obvious potential of selling immigration rights, thus bypassing the cumbersome bureaucracies that have emerged to encourage or prevent it.

He cut to the chase and said that the US, as the world’s most desirable destination for migrants, could set a price of $US50, 000.

Based on the figures for the Gibson-McKenzie Paper, this would be a doddle.

In fact, many would pay this off within a year from their extra earnings.

For example, if skilled individuals could earn $US10 an hour in a country such as India or China, and $US40 an hour in the US, by moving, they would gain $US60, 000 a year before taxes. The higher earnings from immigrating would cover a fee of $US50, 000 in about a year.

Of course, the US could also earn an easy $US50 billion to pay down its deficit, if it had a million applicants with their $US50K entry fee.

New Zealand would have to pitch its cost of entry a little lower but anything would be better than being landed with $9 billion in student loans liabilities, much of it having no chance of being repaid.

Nevil Gibson is Editor-in-Chief of the National Business Review. The above appeared as a part of his online Insight column.

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