Higher rewards prove main reason for highly skilled NZ expats

by Ray Clancy on August 30, 2010

New Zealand is top of the global brain drain with highly skilled professionals leaving for much higher rewards and more incentives are needed to entice them to stay, a study has found.

The growth in these people becoming expats is unlikely to halt with the average earning US$75,100 compared with US$53,700 if they stayed in New Zealand, according to experts.

And they are costing their country US$10,000 each through foregone tax and costs of government services such as education, according to World Bank research.

As the OECD leader in the brain drain, New Zealand was included in a World Bank policy group’s investigation into tertiary educated migrants from small nations. Other nations included in the study were Ghana, Micronesia, Papua New Guinea, and Tonga.

Though expats put a strain on their home nation by leaving, the incentives for them to do so are great, the report found. Even accounting for higher costs of living abroad, New Zealanders were better off by US$21,000 overseas than they were at home, the study found.

‘The largest benefits are to the migrants themselves, who benefit through massive gains in income and through greater human capital. The main cost we measure is the fiscal cost of emigration,’ said report authors John Gibson, of the University of Waikato and David McKenzie of the World Bank.

The National Party successfully campaigned on halting the brain drain in 2008, and was able to reap the rewards from returning expatriates last year as the worldwide recession forced migrants to return home in the face of rising unemployment.

The authors also point out that as the study was restricted to a set of relatively small countries which face high levels of emigration, the impact of high skilled emigration is likely to be quite different for large countries such as China and India.

‘Ours is the first comprehensive micro-level assessment of the channels through which high skilled emigration operates, and we see it as a productive area for future research for this approach to be extended to other countries, and potentially to other sample frames of interest other than the top academic achievers,’ they conclude.

The study surveyed 271 New Zealanders who excelled academically between 1976 and 2004, and the average sample member was in the top 7% of New Zealand earners.

In May, Prime Minister John Key said this year’s personal tax cuts were essential to attracting New Zealand born skilled professionals.

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