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Special Report: Brain Drain: A Global Problem

November 5th, 2013

‘Brain drain’ is when a country is unable to retain its most highly educated citizens. Most countries suffer from brain drain to a degree, and it can have a devastating effect on economies, with skills shortages reducing competitiveness and hindering real GDP growth. The Global Competitiveness Index (GCI) 2013 measures brain drain through a country’s ability both to retain and to attract talent. Venezuela and Myanmar have the biggest problems with brain drain globally according to the GCI.

Key Points

  • Qatar tops the list of countries to retain talent in the GCI 2013 out of 148 economies globally;
  • Emerging countries, particularly those in Latin America, Africa and Eastern Europe suffer the greatest issues with brain drain;
  • Venezuela is the second lowest ranking country globally after Myanmar for its capacity to retain talent in the GCI 2013;
  • Economies which have a large proportion of the population employed in services tend to attract talent easily;
  • India has the world’s biggest reverse brain drain in 2013 due to its strong economic growth.

Overview of the Global Brain Drain Problem

  • The lure of higher salaries, better employment prospects and better employment conditions abroad is typically the impetus behind mass loss of talent;
  • Wealthy countries have the fewest problems with brain drain. Qatar tops the list of countries to retain talent in the GCI 2013 out of 148 economies globally, while Switzerland has the capacity to attract the most talent, also out of 148 countries;

Countries with Highest Capacity to Retain Talent Globally 2013

score out of 7.0

Source: Global Competitiveness Index 2013

  • Conversely, emerging countries, particularly those in Latin America, Africa and Eastern Europe suffer the greatest issues with brain drain. Venezuela is the second lowest ranking country globally after Myanmar for its capacity to retain talent in the GCI 2013, and the lowest for its ability to attract talent. This is due in part to Chavez being re-elected in 2012. Many Venezuelans believe his re-election to be bad for the economy and job prospects, and prefer to seek work opportunities elsewhere;

Countries with Lowest Capacity to Retain Talent Globally 2013

Source: Global Competitiveness Index 2013

  • Eastern European countries are among the worst affected by brain drain. Serbia and Bulgaria feature at 146th and 142nd place respectively for their capacity to retain talent. This is due to high youth unemployment rates in both, with many educated young people seeking work in Western Europe;
  • There is a strong direct correlation between countries’ salaries and their rankings for talent retention in the GCI 2013. Switzerland has the world’s third highest average salary per hour globally in US$ terms, at US$45.0 per hour. Egypt had the 7th lowest, at just US$1.5, and ranked down in 133rd place for its ability to retain talent;
  • The dominant industries in an economy also play a role in attracting skilled workers: economies which have a large proportion of the population employed in services tend to attract talent easily. Singapore ranked second globally for its ability to attract talent, and had the second highest percentage of its total employees employed in finance, business services and real estate globally in 2012 at 20.1%;
  • Political instability is another major contributing factor to brain drain problems. Iran and Egypt both have significant political instability in 2013, with the former ranking in 131st place for its ability to retain talent in the GCI 2013, and the latter at 133rd place;

The Impact of Brain Drain on Economies

  • While many developed countries try to restrict entry by low skilled workers, many also encourage those in sought-after professions such as scientists, doctors and engineers. On the whole this benefits the economies which use these workers to meet skill shortages, yet it can have a negative economic effect on their countries of origin;
  • Countries with skills shortages in sciences and engineering tend to lag behind in research and development (R&D). This means they at a competitive disadvantage compared to other countries that invest heavily in R&D, and so are their domestic companies;
  • Many emerging countries are investing heavily in raising education standards. For example spending on education by the government in Ukraine is high, equal to 7.6% of total GDP in 2012.  Yet the country ranks 140th globally in the GCI 2013 for its ability to retain talent, meaning that much of the benefit of this investment is lost to other countries. Much of its brain drain problem is linked to its very low wages: an average of just US$2.2 per hour in 2012. It also suffers with very high unemployment;
  • The effect of brain drain can have a devastating impact not just on economies but also on health of the population. Many Sub-Saharan African countries are experiencing widespread health problems due to a lack of doctors and nurses, many of who leave their home countries to work in developed nations. As a result, life expectancy is very low in many countries in the region;
  • If a country lacks a population that is highly educated and skilled, it will struggle to transition from being a primary economy to a tertiary economy- this means that its economy will be largely comprised of agriculture and low paid work as opposed to services. This has a negative impact on productivity;
  • While there are undoubtedly economic benefits to recipient countries in skills shortages being met, it also confounds to some degree the issue of domestically educated graduates finding it hard to gain employment.  In the UK in 2013, industry sources state that well over a third of graduates were not in graduate level positions two years after graduating.

Initiatives to Prevent Brain Drain

Some countries and regions have initiatives in place to try to combat the damaging effects of brain drain.

  • Kazakhstan, ranked 41st in the GCI for its ability to attract and 80th for its ability to retain talent, funds higher education abroad for high achieving students through the ‘Bolashak Programme’. This is on the condition that students it has paid for then spend five years working in Kazakhstan once they complete their studies;

Prospects

  • Some countries are seeing the phenomenon of ‘reverse brain drain’. This is where they had previously experienced a loss of skilled workers, but then experienced reverse migration as skilled workers return back to their country of origin. India arguably has the world’s biggest reverse brain drain in 2013. Its strong economic growth and boom in opportunities in information and communication technologies (ICT), business services and education has meant that many IT professionals and finance graduates are leaving developed countries to return to India for work. This is trend that is likely to continue in the mid-term;
  • As many developed countries are forecast to experience only modest economic growth, and youth unemployment is high in many, it is likely that more emerging countries will begin to see educated citizens return home to work as more and more companies invest in emerging countries.
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Carrie Lennard

Carrie Lennard has been the Business Environment Manager at Euromonitor International since 2011. She holds a BA French and German from Sheffield University and a Bachelor of Laws from University of Law. She has a particular interest in the impact of business environment changes on consumer industries.

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