Internationalisation of ICLs to deal with Human Capital Trade Imbalances

Abstract

The international emigration of skilled workers can lead to a flight of human capital from developing countries or from developed countries going through economic difficulties, and this is highly regressive. These source countries suffer both loss of this workforce and also usually bear the cost of public subsidies of higher education and other government investments, such as for pre-higher education subsidies, for such workers, only to have them emigrate after graduation. Even in countries with student loan schemes a limitation of current arrangements is that repayment of the debt continues only while the graduate is resident in the country in which they undertook their higher education. This paper considers a way of addressing the imbalances and regressively in the trade of human capital involving internationalisation of the collection of student loans through the taxation system contingent on income, a feature now of loan collection in many countries. Our purpose is to outline the design issues required and we focus on countries with well-established income contingent loan (ICL) schemes such as Australia, the UK and New Zealand. Such a scheme could be designed to require the emigrating graduate to take out an ICL repayment obligation in line with their remaining student debt at the time they are issued with an employment visa to the destination country. The ICL could then be repaid on the same terms as domestic students and the collected funds transmitted back to the country of origin, potentially to support higher education.