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Brain drain: Is it as bad as we think?


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By Eranjaya Wickramasinghe 

Brain drain is the migration of highly-trained or qualified personnel in search of the better standard of living and quality of life, higher salaries, access to advanced technology and more stable political conditions in different places worldwide.

When people in developing countries worry about migration, they are usually concerned at the prospect of their best and brightest decamping to Silicon Valley or to hospitals and universities in the developed world. 

With approximately 250 million people living outside their country of origin, migration is undoubtedly a global phenomenon. Its effects on economic growth are various and can have both positive and negative effects. 

Evidence indicates, however, that low-income countries are disproportionately affected by the exodus of young, skilled people. Unemployment, lack of opportunity, and economic growth remain among the top most reasons as to why people migrate. For countries without the means to harness the potential of migration, such outflows among the potential workforce can be detrimental to those left behind.

Despite the increasingly rigorous immigration rules and regulations, the ‘developed world’ is determined to attract the best. 

“Let me be clear: none of these measures will stop us from rolling out the red carpet for the brightest and the best,” British Premier David Cameron stated in unequivocal terms in his address in May 2015 on his Government’s plans to control immigration. This may well be a blessing for the British; but it is a growing menace for countries like Sri Lanka which are at the receiving end as talent flows away.

Why?

Opportunity is the driving force of migration. Unsatisfied demands for higher education and skills, which have been created by the knowledge-based global economy, have generated unprecedented opportunities in knowledge-intensive service industries. These multi-trillion dollar industries include information, communication, finance, business, education and health. 

The leading industrialised nations are also the focal points of knowledge-intensive service industries and as such constitute centres of research and development activity that proactively draw in talented individuals worldwide through selective immigration policies, employment opportunities and targeted recruitment. 

Higher education is another major conduit of talent from less-developed countries to the centres of the knowledge-based global economy. Together career and educational opportunities drive “brain drain and recirculation”. The departure of a large proportion of the most competent and innovative individuals from developing nations slows the achievement of the critical mass needed to generate the enabling context in which knowledge creation occurs. 

To favourably modify the asymmetric movement and distribution of global talent, developing countries must implement bold and creative strategies that are backed by national policies to: provide world-class educational opportunities, construct knowledge-based research and development industries, and sustainably finance the required investment for these strategies. 

Brazil, China and India have moved in this direction, offering world-class education in areas crucial to national development, such as biotechnology and information technology, paralleled by investments in research and development. As a result, only a small proportion of the most highly educated individuals migrate from these countries, and research and development opportunities employ national talent and even attract immigrants.

What drains the brains?

The effective brain drain exceeds the income maximising level in the vast majority of developing countries. A brain drain may cause fiscal losses. Above a certain level, brain drain reduces the stock of human capital and induces occupational distortions.

What drives the brain drain, and how can we quantify it? Poverty and a lack of economic growth, going hand in hand with discrimination, political repression, and a lack of freedom, motivate people to flee their country. 

The brain drain can be decomposed into two multiplicative components: the average emigration rate (the mean of all skill groups) and an index of positive selection in emigration (the proportion of college graduates in the total number emigrating divided by the proportion of college graduates among natives). The average emigration rate is an indicator of openness to migration; it depends on country size, geographic and cultural characteristics, and (to a lesser extent) development. 

The largest emigration rates are observed in middle-income countries, where incentives to leave are important and liquidity constraints (on travel) are not severe. As for the selection bias, economic and institutional development are the major determinants since positive selection increases with poverty. Overall, the largest brain drain rates are observed in small and poor countries in the tropics.

The brain drain has long been viewed as detrimental to the growth potential of the home country and the welfare of those left behind. It is usually expected to be even more harmful for the least developed countries because, as explained above, with increasing development, positive selection in emigration and brain drain rates fall.

Positive side

A brain drain can also have benefits for some home countries. Alongside positive feedback effects from remittances, circular migration, and the participation of high-skilled migrants in business networks, innovation, and transfers of technology, consider the effect of migration prospects on the formation of human capital in home countries. 

New research suggests that limited high-skilled emigration can be beneficial for growth and development, especially for a limited number of large, middle-income developing countries. But for the vast majority of poor and small developing countries, skilled emigration rates significantly exceed the optimal rate.

Global impact

The global impact of brain drain on development and the income of those left behind depends on other beneficial feedbacks operating after migration. The main ones are remittances, circular migration, and externalities from the presence of emigrants abroad (such as lower bilateral trade costs). The level of brain drain that maximises income and development in the home country may then exceed 10% by a few percentage points, depending on the size of these feedbacks.

Remittances by high-skilled migrants to family or relatives can replenish the stock of human capital that may have been depleted in the home country by the brain drain. Overall, high-skilled migrants remit more, but this result does not hold in all surveys, suggesting that the link between education and remittances is diverse and varies across host/home-country pairs.  In developing countries, the possibility of temporary emigration increases the returns to education and has the same effects on human capital formation as permanent, uncertain migration; returnees’ additional knowledge and financial capital acquired while abroad generates important benefits, especially for technology adoption, entrepreneurship, and productivity. Intentions to return are similar across skill groups, and return decisions depend on the economic and political situation in the home country. 

Although return migration is probably the least documented aspect of international migration, it is commonly accepted that historical examples of massive return migration of high-skilled workers are more a consequence than a cause of development and sound policy reform in home countries. 

Diaspora externalities and high-skilled migrants can reduce transaction costs between countries and thus facilitate trade, foreign direct investment, and technology transfers between host and home countries. There can also be diaspora externalities for institutional quality and for promoting democracy in the home country.

Brain drain and 

economic development

Brain drain and the economic development of home countries are two interdependent processes. First, a brain drain affects development, and its effect becomes unambiguously negative when the emigration rate is high. Second, a lack of economic growth motivates college graduates to emigrate. Interactions between these two variables can be the source of vicious and virtuous circles linked to individual decisions to migrate. 

Once a significant brain drain gets underway, it can have damaging effects on the economy that induce further waves of emigration by high-skilled workers (Iran after the 1978–1979 revolution, the Irish crisis of the early 1980s, the ex-USSR republics after 1991). But when a return is significant, it gives incentives to other waves of returnees to come home (Ireland after the fiscal reform of 1987, Taiwan in the 1980s). 

Human capital accumulation and development slow with the brain drain, the “skill-setting curve,” and the brain drain slows with development, the “migration-setting curve”. An intersection between these two downward-sloping curves represents an equilibrium. The system may generate multiple equilibria: countries that share similar characteristics may end up in a favourable equilibrium with low poverty and a low brain drain, or an unfavourable one with high poverty and a high brain drain.  In the majority of developing countries, the favourable equilibrium prevails, and the observed level of brain drain should be seen as an inevitable by-product of poverty. But in about 50% of small developing countries—those with fewer than one million working-age adults—the unfavourable equilibrium prevails, implying that poverty and brain drain could be reduced if individual emigration decisions were coordinated. 

Small states are much more likely to be badly coordinated because migration from such states is more responsive to economic shocks. These small countries require appropriate development policies, such as temporary subsidies for the repatriation of high-skilled expatriates. 

Plumbing the brain 

drain in Sri Lanka

Sri Lanka can most certainly do without an economically-draining brain drain. As per the Department of Census and Statistics, Sri Lanka, in 2016, a total of 242,930 have left the country looking for foreign employment, and over 2.5 million during the last eight years from 2008, with over 6,500 professionals and a staggering 75,000 skilled labour having left the country just last year. As for foreign employee remittances, we have made $7.424 billion in 2016 alone, and over $30 billion over the past four years.

For a developing country such as ours, this transfer can change the skill structure of the labour force, cause labour shortages, and affect fiscal policy, but it can also generate remittances and other benefits from expatriates and returnees. Overall, it can be a boon or a curse for developing countries, depending on the country’s characteristics and policy objectives.The income-maximising level of a brain drain is usually positive in developing countries, meaning that some emigration of the more skilled is beneficial. A brain drain stimulates education, induces remittance flows, reduces international transaction costs, and generates benefits in source countries from both returnees and the diaspora abroad. Thus, there are opportunities open for the Sri Lankans to rethink. Appropriate policy adjustments, which depend on the characteristics and policy objectives of the country, can help to maximise the gains or minimise the costs of the brain drain.

(The writer is presently an undergraduate in Economics at Monash University, Australia.)


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