EU labour mobility and the challenge to national human capital policies

National governments have traditionally subsidised human capital investments in a number of ways, from baby bonuses and paid maternal leave to the provision of subsidised childcare and education. Such investments are expected to pay off in the form of increased future revenues from taxes and social security contributions. I argue that freebie marketing, also known as the razor-and-blade business model, can help us understand this phenomenon, and that an essential element of those policies is that governments retain a monopoly of taxation of the returns to human capital. The free mobility of workers, which is an essential element of the European Union, represents a challenge to this business model, endangering human capital formation in Europe, and by extension, its economy. In this paper I present three possible policy responses to address this challenge from the national, intergovernmental and supranational levels.