Waikato University Economics Professor John Gibson talks in this Double Shot Interview with Bernard Hickey about research he conducted with World Bank economist David McKenzie about the impact on developing and small economies and individuals of outward migration, commonly known as the 'Brain Drain'.
Gibson said the research found that New Zealanders who leave to work overseas typically increased their personal incomes by around US$50,000 a year, but there was a net loss to the government of around US$14,000 to US$15,000 per year as they did not contribute tax revenues at home and generally didn't send remittances home. The individuals did however benefit personally from their tertiary eductations, which are partially paid for by taxpayers in New Zealand.
Gibson suggested one way to even up the balance for taxpayers was to increase the cost of tertiary education, given more than half of those in their 20s leave the country to benefit personally by earning higher wages offshore.
Few send money home and many stay away. The benefits in terms of productivity or increased business opportunities were marginal, he added.
"Perhaps the cost of tertiary education should be increased quite dramatically for individuals, because that would be one of the few things which one could put in place as a sort of leaving tax," Gibson said.
"When they leave, if there is not going to be a flow of remittances, and there's not a huge trade creation or investment boost, then maybe we need to think of some other way," he said.
"One other way would be to make the ticket out, typically tertiary education, make that more expensive."
Around a third of New Zealanders in their 30s had lived overseas and come home, while another third had never left, and the remaining third lived overseas and were unlikely to return.
'Hard to bring home'
They would be difficult to tempt home with any economic incentives, given the large pay advantages from working overseas. Those who returned home did mainly for family or non-economic reasons, Gibson said. Those who found foreign-born partners or who had PHDs were most likely to stay offshore, he said.
The research by Gibson and McKenzie, which is available here at VoxEu, found that the 'Brain Drain' was neither massively bad nor massively good for developing economies. Remittances from outward migrants often offset the losses from any income from those higher skilled workers who left, while new trade or investment from returnees and expatriates was variable and not huge, they found.
The biggest gains were to the migrants themselves, they found.
Our findings question both the pessimistic view that high-skilled migration hurts development, and the optimistic view that most countries can benefit to the extent Taiwan, China and India have from trade and investment flows. For most countries, the first-order effects are mostly an individual phenomenon – individuals stand to gain a lot from migration, and the second-order effects on others are small in comparison and seem to at least balance one another out if not also be a net positive.
In the absence of compelling evidence for massive externalities from their presence, we argue governments should not be so concerned about high rates of skilled emigration, but focus instead on the basics of providing the policy environment needed to foster growth and innovation at home.
19 Comments
"Gibson suggested one way to even up the balance for taxpayers was to increase the cost of tertiary education"...doh
If you had pushed him a bit more he might have said "...and those who try to leave should face prison sentences..."
He's not a mate of Goff and Cullen by any chance is he?
Wolly, the thing about putting up fees as Gibson suggests is about having a "leaving tax" on those who are able to benefit the most from their education.
What he is not telling you is that the REASON why the universities want to put up student fee's is because it will allow university employees like himself to give themselves a big pay rise.
In-fact Gibson must currently be the most popular person as judged by his peers for coming up with this paper and 'it's better for our nation to increase costs', angle.
Yes, that's just what NZ needs! A less-educated population! We can become a nation of trainee hairdressers and parttime checkout operators and plumbers mates and rubbish collectors!
Our passtimes and interests will revolve around the footy, Hot Rod and Woman's Day magazine, and arguing among ourselves down at the pub every night about whether Paul Henry should be made Governor General or merely Prime Minister.
We'll be the envy of the world!
Utter nonsense. Typical nonsense from academia. Never get out on the street and find out what's really going on. The simplest answer is to close down Waikato University. The sore thumb test is then to see if Gibson can get a job outside academia.
Another solution is to send your sons and daughters to Australian Universities like 400,000 asians do each year. When they finish they get jobs as chefs and hairdressers, or go home.
Australia earns $15 billion a year from overseas students. It's the third biggest export earner. Are you sure you want to add another couple of AUD $ billion per annum to be siphoned out of the NZ economy. Think about the implications of that.
His suggestions are beyond belief. The 'real' problem lies with the concept of making education a 'commodity' instead of a right.
If we are not solely for the concept of 'advancing the human mind and species as a whole for everyone whether they have money or not' then they have NO RIGHT to even call themselves a "university".
Making money off people via pretending to educate them and then handing them little pieces of paper that actually mean bugger all in the REAL world while these ‘students of nothing’ walk out with personal debts that get bigger and bigger year on year with every new entrant is just ludicrous and appalling.
Many universities are just fast becoming conveyor belts that churn out people with 'self entitlement' syndrome that quite often lack real life experience. Their 'degree' is used like a plaque to reinforce their net worth yet when life gives them a curve ball like the CHCH quake their credibility fall to pieces in seconds.
"Gibson suggested one way to even up the balance for taxpayers was to increase the cost of tertiary education, given more than half of those in their 20s leave the country to benefit personally by earning higher wages offshore."
I nearly choked on that. Aren't most NZ students already indebted enough by the time they graduate? Should they be blamed for trying to "benefit personally"? Maybe the focus should be on retaining educated people (through more exciting work opportunities and higher salaries) rather than on creating even more disencentives to going past A levels?? Then maybe we'll have a chance to diversify and dynamise our economy rather than keep being obsessed with houses.
As we compete directly with Australia to earn munny from foreign students , I would look to under-cut them and provide a superior education , to build the NZ education industry .
Raise the fees on local students !!!........... Which ivory tower has this bozo been stuck up , for too long . A sabbatical at MacDonalds , flipping 'burgers and waiting on tables , would do John Gibson the world of good .
Get real , dude !
For any suggested policy, it is worth considering whether it could have the OPPOSITE effect to that intended.
I think this is a prime example: there is a serious risk that raising university tuition fees will drive MORE graduates overseas, so that they can earn enough to pay the fees back. Many of these graduates will choose not to return.
Gibson's suggested policy should be ignored until someone can clearly demonstrate that it won't hasten rather than slow the 'brain-drain'.
Well it's good to see that finally someone has come out and indicated with some research to back it up what the brain drain actually costs NZ.
And of course Gibson is right. The New Zealand taxpayer is subsidising tertiary students and has done so for years, many of who will never make a contribution to this country as they are out the door as soon as they graduate never to be seen again, without so much as a backwards glance or a thank you. They are in effect bluggers. Not only have they had the benefits of a tertiary education at the expense of the NZ taxpayer, but also basic education through the school system and subsidised health care from the time they were born. New Zealand has to stop paying the education and child rearing costs for what in effect becomes another country's citizens. Continuing on like this without making any changes just becomes another example of New Zealand's special kind of stupid.
Making students pay a more realistic fee for their education would probably be a good start, but there may be unintended consequences of doing that. Perhaps the better way to go would be to make those who have benefited at the taxpayer’s largess pay for it if they go overseas. That is, if you don’t keep your student loan repayments up, an overseas based defaulter’s passport is not replaced when it expires or needs to be replaced. The only thing you get are travel papers that permits travel back to New Zealand. That will wake a few of the bluggers up.
Agree with Justice comments, when I came out of varsity was amazing who actually really cared about your degrees as opposed to experience (not for all degrees I will admit) but the lecturers would have you belive otherwise.
Those who leave should just pay a higher interest rate on there loan, to load someone in there 20's up with 30-40k of debt before they even start work is not the answer, all they will do of course is go overseas to try and get a higher paid job. (Thats why they are leaving now)
Clean out some of the dead wood hanging around in the University and bring down the wage bill.
It's an interesting approach but probably lacks realism. Lets acknowledge that we import at least as many well qualified immigrants than we export.
Raising fees will undoubtedly shrink the number of locals able to get into university, probably resulting in a dimunition of standards. You need to maintain a certain number of students in a particular course in order to pay for the expertise to run the course. Lose the quality, lower the international rating, and you will also rapidly start losing foreign fee-paying students. These are really only an income stream and accepting too many actually lower standards as universities bend over backwards to award degrees to those that buy the degrees. A low pass rate looks bad to a prospective international who wants to guarantee a return on their investment.
There should be far more stringent entrance requirements as far too many students end up with massive student loans, with no benefit from attending university. A student loan and the subsidised university fees should come with a caveat that a student accepting such assistance should agree to work in NZ for at least 5 years post qualification, as they do in several other countries.
Didn't the govt mention some changes to the student loan criteria at budget time? Something like you have to have passed half your papers for a degree by then end of the 2nd year at Uni? Happy to be corrected if that's not correct.
Recently it was reported that 17% of the NZ population have a tertiary qualification and of the top 20% of income (from all sources) earners 35% have a tertiary qualification. So 65% of the top 20% of income earners do not have a tertiary qualification.
How about we prevent people with a student loan from going overseas ... ya wanna go overseas you have to pay off the student loan first ... then NZ gets some real benefit for providing low-interest loans.
Tertiary education should not be subsidized, then overseas students and locals are on an equal playing field, and anyone who's intending to get their degree and head overseas is entitled to do so, but must pay the full cost of their education and pay the loan off before they do so ... or must find another way to finance their education.
Seems the fairest way to me ...
In New Zealand. The tuition fee for many undergraduate science or engineering type courses at Imperial College in London, for example, are, for overseas students (which New Zealanders are - they are not UK citizens or EU residents), is NZ$47,555.00 pa. And that doesn't include the cost of travelling to the UK or living in London. So the annual cost could then become NZ$80,000pa? The fee for some of their Masters and Doctorial degrees is NZ$29,666.00pa.
At Harvard University in Cambridge, Massachusetts, the fees for a Master's or PhD degree are NZ$46,634.00pa for the first two years (if you can get in that is). It then drops. Living and other costs required to study there make it considerably more as health insurance for example, which is compulsory, must also be purchased. To be frank, to study at Harvard and live in Boston you won't get much change out of NZ$80,000 a year.
To do an MBA at Harvard Business School at the moment, the annual tuition fee is $NZ64,800. Harvard estimates that the overall cost for a single student taking all costs including living costs is $US79,400 =NZ$100,000pa. And good luck securing a place, lol.
http://www.hbs.edu/mba/admissions/costsummary.html
While the above examples are at the more expensive prestigious institutions overseas, cheaper overseas universities are still expensive for a New Zealander as they have to pay the full fee as a non-citizen, and the cost is prohibitive. A ‘cheap’ school could still cost $30-40,000 pa. If it wasn't that expensive our kids would be flocking overseas now to do their studies. The quality of the education is a step-up overseas as well. And when it comes to getting a job, well you’re already there eh?
SJ basically a good idea but I doubt if it could be enforced.
My question is, why does New Zealand’s economy in the production sector not provide enough decent jobs to make them stay ? I’m sure Steven Joyce has an answer – HA - yes he says importing from Asia is cheaper.
Top level education for the youngsters and then not having decent jobs for them - and the best joke of all - exporting brain power for a 0 = zero tarif - what an economy ?
Far too much taxpayer money is sunk into far too little return in tertiary education. It is not just that students take their skills overseas, it is that many even end up unemployable, many were not really bright enought to go to uni in the first place, many make poor choices of qualification; and many more who made extremely poor choices of qualification were actually given McJobs by the Hulun Clark government. We are back to the pre Rogernomics era in this respect.
I suggest that student loans are made conditional on a few years of earning and paying into a tertiary education savings account BEFORE commencing the education. This would have the effect of weeding out those who lack committal, and would also lead to some real world experience influencing choice of qualification, instead of silly young idealistic twits selecting useless save-the-planet and utopian type qualifications on YOURS and MY dime.
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