Brain Drain in New Zealand: Issues, Evidence and Implications

Abstract

There is public concern that New Zealand is experiencing a ‘brain drain’ — the loss of a large number of its brightest citizens to other countries. Some of the related public policy issues are discussed in this paper. The paper begins with an outline of possible reasons for concern about a brain drain. This is followed by a summary of the available evidence on whether New Zealand is actually experiencing a brain drain, examining the numbers of emigrants and immigrants, and their skill and age compositions over time. The focus is on the aggregate picture, rather than specific occupational categories. More detailed discussions of the evidence can be found in Glass and Choy (2001). The paper also presents some thoughts on the related policy implications. When a Brain Drain Is of Concern A brain drain refers to the numbers of emigrants and immigrants (that is, a brain drain is a net outflow of people), or to their attributes (that is, a brain drain is a net outflow of the high-skilled or the highly-experienced). The latter tends to be the interpretation normally adopted, and is the focus of this paper. A net outflow per se may be of public policy concern if one believes that a certain critical mass is needed to support the nation’s development and progress, that is, if a larger population is needed to achieve economies of scale and higher rates of economic growth and improved living standards. The problem lies in determining what the optimal size is. Net outflows may not be the only cause for concern. If the people leaving and entering the country are different in some relevant way, there may still be concerns even if there were no net outflows. Similarly, a country may not be better off just because there are net inflows (say, there were zero population growth, all the people leaving were high-skilled and all the immigrants were lowskilled). Therefore, the composition of both the inflows and outflows matters. A net loss of skilled workers is equivalent to a reduction in the domestic human capital stock and may be of concern. The key link between living standards and the skill composition of migration flows is through income — a central component of living standards. The key to Wai Kin Choy was a policy analyst at the New Zealand Treasury, and Hayden Glass was an economist with the Law and Economics Consulting Group (LECG) when this paper was written. The views expressed are those of the authors and do not necessarily reflect the views of the New Zealand Treasury or of LECG.