Human Capital - Mobility Between Nations

Mobility Between Nations

Educated individuals often migrate from poor countries to rich countries seeking opportunity. This movement has positive effects for both countries: capital-rich countries gain an influx in labor, and labor rich countries receive capital when migrants remit money home. The loss of labor in the old country also increases the wage rate for those who do not emigrate, while the additional labor lowers wages in the new country. When workers migrate, their early care and education generally benefit the country where they move to work. And, when they have health problems or retire, their care and retirement pension will typically be paid in the new country.

African nations have invoked this argument with respect to slavery, other colonized peoples have invoked it with respect to the "brain drain" or "human capital flight" which occurs when the most talented individuals (those with the most individual capital) depart for education or opportunity to the colonizing country (historically, Britain and France and the U.S.). Even in Canada and other developed nations, the loss of human capital is considered a problem that can only be offset by further draws on the human capital of poorer nations via immigration. The economic impact of immigration to Canada is generally considered to be positive.

During the late 19th and early 20th centuries, human capital in the United States became considerably more valuable as the need for skilled labor came with newfound technological advancement. The 20th century is often revered as the "human capital century" by scholars such as Claudia Goldin. During this period a new mass movement toward secondary education paved the way for a transition to mass higher education. New techniques and processes required further education than the norm of primary schooling, which thus led to the creation of more formalized schooling across the nation. These advances produced a need for more skilled labor, which caused the wages of occupations that required more education to considerably diverge from the wages of ones that required less. This divergence created incentives for individuals to postpone entering the labor market in order to obtain more education. The “high school movement” had changed the educational system for youth in America. With minor state involvements, the high school movement started at the grass-roots level, particularly the communities with the most homogeneous populations. As a year in high school added more than ten percent to an individual’s income, post-elementary school enrollment and graduation rates increased significantly during the 20th century. The U.S. system of education was characterized for much of the 20th century by publicly funded mass secondary education that was open and forgiving, academic yet practical, secular, gender neutral, and funded by small, fiscally independent districts. This early insight into the need for education allowed for a significant jump in US productivity and economic prosperity, when compared to other world leaders at the time. It is suggested by several economists, that there is a positive correlation between high school enrollment rates and GDP per capita. Less developed countries have not established a set of institutions favoring equality and role of education for the masses and therefore have been incapable of investing in human capital stock necessary for technological growth.

The rights and freedom of individuals to travel and opportunity, despite some historical exceptions such as the Soviet bloc and its "Iron Curtain", seem to consistently transcend the countries in which they are educated. One must also remember that the ability to have mobility with regards to where people want to move and work is a part of their human capital. Being able to move from one area to the next is an ability and a benefit of having human capital. To restrict people from doing so would be to inherently lower their human capital.

This debate resembles, in form, that regarding natural capital.