Effects of Brain Drain on the Labor Market

Effects of brain drain on the labor market

LAMIJA BALTA

Department of Economics, University of Porto

EMINA KRNJIĆ

Department of Economics, University of Porto

SHUKRAT HONKULOV

Department of Economics, University of Porto

Abstract: This paper will focus at the brain circulations from the Balkans countries, as the number of highly skilled people in Balkans countries has seriously decreased over the past 20 years, where people are leaving their home countries in order to find better life conditions. They are mostly attracted to the high salaries and better life conditions overall. What has motivated us to do a research on this topic is the fact that we, as young people, are directly related to this issue. Both, if we leave- or stay in the home country, we are feeling the influence of this matter.  Our paper aims to show which effects does brain drain have on sending and receiving countries, and further analyse weather it has more benefits for sending countries or the ones which are receiving highly qualified people. Regarding the increasing number of young qualified people leaving their home countries, the question that rises, when looking from an economic perspective, is:

How does this phenomenon affect this region’s labor market?

1. Introduction

Brain drain is defined as the process in which a country loses its most educated and talented workers to other countries through migration. It is a term that describes a significant emigration of educated or talented individuals^[1]. drain can also be described as the loss of the academic and technological labor force through the moving of human capital to more favourable geographic, economic, or professional environments. This usually happens between the developing countries and developed countries.

The reasons behind brain drain are twofold: on one hand, globalization produces lodgement of human capital in places where it is already plenty of it; on the other hand, host countries gradually impose conditions to filter highly educated immigrants through selection policies (World Bank, 2008). Two concepts dominate in the theoretical discussion about the impact of highly educated migration on the economic development. The first concept refers to brain drain as a phenomenon that negatively impacts the sending country’s human capital accumulation and fiscal revenue (Grubel and Scott, 1966; Bhagwati and Hamada, 1974). The second concept focuses on the nature of highly educated Diaspora which acts as a powerful force in promoting economic development through a variety of instruments, such as remittances, trade, foreign direct investment (FDI), and knowledge transfer. Indeed, globalization has drastically improved access of technological latecomers to advanced technologies, helping low-income countries to raise per capita income (Mayer, 2000). Migration, if certain conditions are met, can lead to human capital accumulation and influence the net increase of the educational level of the sending country (Beine et al., 2001, 2008). Yet only a handful of studies examines the impact of highly educated migration on the economic development, or engages in the analysis of empirical data pertaining to high human capital emigration rates in small developing countries (Benhabib and Spiegel, 1994; Docquier and Marfouk, 2004; Beine et al., 2001, 2008; Gibson and McKenzie, 2010).

First of all, this phenomenon is considered a problem to sending countries, because the individuals who leave their country have high skills and characteristics, but they make contributions of their skills to the economy of another countries. However, we need to take a look at the both sides of the migrations to the country. If country’s loss of the highly-educated workers is replaced with new highly qualified workers, coming to the country, then we shouldn’t consider this phenomenon a problem. Rather, we are talking about the brain exchange, and not brain drain or brain gain^[2]. But, in case of Balkan region, we don’t see it as exchange, these countries are only losing their workers.

The first question that needs to be answered is whether and under which conditions the brain drain really constitutes a problem for the home country.

1. Brain drain trends in Western Balkan countries

Balkans is a very heterogeneous area, because of the happenings 20 years ago, that ended up as a collapse of the socio-economic and political order. The breakup of the former Yugoslavia left marks that still remain visible, and make this a specific region to be analysed regarding the topic of the brain drain. This region is rare indicator in the world where past history still has influence on the current situation of migrations. Migrations have been a fundamental element in the history of the Balkans, accompanying its stormy events^[3]. The war-caused downfall, which, even it happened 20 years from now, left tremendous marks on the country’s economy. Big factories were destroyed and human capital was seriously damaged, both because of the losses which war caused, and the in-war and after-war migrations of people.

The wounds of war are ever-present here and reflect on the today’s social and economic surrounding, as well as the structure of the country. Weak economic structure, low level of industrial production, low performance results of the educational system, high level of public debt, high unemployment level, and the lack of motivation, commitment and trust, had enormous negative impact on human capital development in those countries. Even the most of the countries have undertaken strategies and action plans, it didn’t show significant decrease in the brain drain rates.

Brain drain rates have been relentlessly increasing, with Macedonia leading the South-Eastern Europe (SEE) pack; Croatia and Bosnia & Herzegovina (BiH) follow them. Countries Albania and Serbia have inferior brain drain rates, which have stayed relatively stable over years and are comparable to the world average. Bulgaria and Romania, members of the European Union, also experience relatively lower brain drain. (Figure 1)^[4]

Macedonia is an example of a small developing country experiencing very high rates of brain drain. Data on the extent of the Macedonian brain drain can be taken from the World Bank KAM (Knowledge Assessment Methodology) database and from the World Economic Forum (WEF, 2010). This data has been obtained through a survey which measures the perception of the respondents about the extent of the brain drain in the country. In this respect, Macedonia is ranked on the bottom of the list, being a country with one of the highest brain drain rates worldwide. The data in Table 2 gives an overview of the radius and structure of the Macedonian brain drain.