MANILA, Philippines — Labor exporting countries like the Philippines can even benefit from the occurrence of the so-called brain drain if their education systems remain elastic to overseas demand and there is continued investment in human capital, according to a new report by the World Bank.
In its report released yesterday titled “Moving for Prosperity: Global Migration and Labor Markets,” the multilateral finance institution said encouraging more of a country’s high-skilled workers to work overseas for higher pay could actually force these countries to step up their game in producing more globally-competent workers to serve both domestic and overseas markets.
“Whereas brain drain literature argues that emigration leads to the loss of a poor country’s human capital stock, brain gain literature postulates that the departure of high-skilled migrants may actually lead to an increase in the human capital levels,” the report said.
This is because prospects of emigration to countries with higher wages encourages workers in poorer countries to invest more in education and gives them the drive to continuously improve their set of skills. Workers may even acquire skills that may help them in emigration, such as foreign language courses, the WB added.
“Although the returns to education at home may be low, the potential to migrate combined with higher wages abroad increases the incentive for residents of poor countries to invest in education,” the report said.
“These incentives will increase overall educational attainment compared to a world with no emigration,” it added.
This works best for sending countries if the cost of education is low and the delivery is effective. Potential gains abroad must also be high, meaning there is clear demand for workers and immigration policies are favorable to sending countries.
“If the potential gains are high, the cost of education low, and the probability of emigration within a certain range, then we might end up with more skilled people in origin countries,” the report said.
World Bank also pointed out to evidence that remittances to home countries by migrant workers are partly used to finance the education of their children, which contributes to the development of human capital in labor exporting countries.
A sending country that has built a reputation for the quality of its high-skilled workers through immigration, also tends to attract more foreign direct investment.
“Other benefits from high-skilled emigration include the diffusion of knowledge and attracting foreign direct investment (FDI) to the sending countries. Therefore, a more holistic view of high-skilled emigration implies that the already small negative effect of emigration may be lower than currently believed. It would also suggest that emigration can benefit both the sending and the receiving countries,” said the report.
In the Philippine setting, the World Bank noted that private nursing schools are examples of educational institutions with elastic supply of education that can meet external demand for workers.
“Private nursing schools in the Philippines could expand capacity in the face of increased demand,” said the bank. “That is why we are more likely to observe the brain gain effect in nursing in the Philippines.”