Daniel Luzer has an interesting post over at the College Guide blog discussing a proposal in Michigan to convert its merit-based Promise scholarship into a tax credit for graduates who remain in-state to work after graduation. The goal of either program:
to counteract “brain drain” and try to keep bright, hard-working students in the state after graduation.While it is reasonable that the state, which invests in higher education (at least partially) to improve its economy, would want to retain the graduates that it subsidized in order to get some benefit from its investment (i.e. to expand its tax base), such a policy of brain drain aversion through incentives is misguided. The reason is simple: college graduates (so-called skilled labor) follow the jobs made available by employers, not the other way around. Offering a tax credit for remaining in state to work will have no effect if a graduate is unable to find suitable employment.
Employers are not going to relocate to the state of Michigan because it has an excess supply of college graduates...unless the state offers an attractive environment to do business. The nearly 15% unemployment rate in Michigan signals that it does not offer an attractive business climate. Rather than dumping more taxpayer money into college education in a misguided attempt to improve its economy, Michigan (and other states) would be better off to use its resources to make it more attractive to do business in the state. This would attract employers who would create jobs for the state's graduates, as well as likely attract skilled workers willing to migrate from other states. This would mitigate the need to incentivize students to stay in state to work, saving the state money and likely boosting its economy and tax base. That is, unless the stated goal of investing in college education to improve the economy is a false premise for some other social goal.