Reversing the elite brain drain: a first step to address Europe's skills shortage.

• Author: Campanella, Edoardo
• Position: The Flow of Human Capital

Since the end of the World War II, Europe has been repeatedly afflicted by waves of brain drain, with varying degrees of intensity across time and countries. But these outflows of human capital have rarely turned into some form of brain circulation, nor have they been compensated by adequate inflows of foreign talents. Now, the Digital Revolution and the economic restructuring imposed by a never-ending Eurozone crisis are amplifying the costs of these human capital losses, creating skills shortages that are undermining Europe's ability to compete globally. So far, the European Commission (EC) has taken steps to loosen immigration policies to attract skilled foreigners from across the world. A thorough historical analysis, however, will show that it is high time for European governments to reattract their runaways. Policies aiming at remigration, rather than immigration, will generate greater political and economic efficiency. (1)

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In a world of blurring national borders and growing demand for sophisticated skills, governments struggle to retain their brightest minds. When institutional deficiencies, technological inertia, or political cronyism prevent people from realizing their full potential, no country--even the most developed--is immune to the outflow of its best talents. In this sense, Europe is a case in point. For more than half a century, bright academics, ambitious entrepreneurs, and visionary scientists have defeated the conservatism of Europe by crossing the Atlantic Ocean in search of vibrant university environments and rewarding professional opportunities. These emigrants are not only Europe's most skilled workers but, according to several metrics, also the most gifted in their respective fields globally, with their "quality"--expressed in terms of educational and professional backgrounds--having significantly increased over time. In short, this is the brain drain of "la creme de la creme." (2)

To make matters worse, Europe's outflows of human capital have rarely been compensated by adequate inflows of equally skilled foreign talents from either developed or developing economies. An inward-looking, innovation-averse Europe is not the ideal place for gifted foreigners who are willing to bear the cost of emigration. The number of skilled American workers who decide to move to Europe is much lower than the number of Europeans who are now part of the U.S. workforce. (3) At the same time, the most skilled professionals from the developing world, such as scientists, engineers, and academic researchers, tend to look to the United States as their second home. (4)

Now, the Digital Revolution and the economic restructuring imposed by the Eurozone crisis are amplifying the costs of these human capital losses by boosting the demand for those very same skills that are usually possessed by European emigrants. On the one hand, the proliferation of digital startups and the emergence of disruptive technologies, such as advanced robotics or machine intelligence, are radically reshaping the business landscape. On the other hand, the bursting of bubbles in oversized real estate sectors and a general lack of competitiveness in the Eurozone periphery call for a radical economic overhaul. These two sets of transformative forces together create skill mismatches that generate high social costs, such as long-term unemployment for displaced workers in declining sectors who are unlikely to find jobs in emerging fields.

Growing skills shortages are already plaguing the European economy. Despite an extremely underutilized labor force, around 27 percent of yearly vacancies in the major European economies go unfilled due to skill mismatches. (5) The Skills Mismatch Index (SMI) for the Eurozone as a whole--an indicator commonly used by the EC and the European Central Bank to gauge skills shortages--is now five times higher than in 2007. (6) Contrary to conventional wisdom, the skills mismatch affects both skilled and unskilled workers, indicating that universities often fail to equip students with adequate and marketable competencies. The situation is expected to deteriorate in the near future. By 2020, Europe's digital sector alone will experience a shortage 900,000 professionals, whereas the dynamic German economy will need 1 million skilled workers in science, technology, engineering, and mathematics (STEM). (7)

Addressing Europe's skills shortage requires both long- and medium-term strategies. National governments, coordinated by Brussels, must invest in lifelong learning programs and reform the education system to better meet the actual needs of today's employers. But retraining a whole workforce is a challenging task that requires several years to generate some return on investment, if at all. In the meantime, Europe should focus on attracting talent from abroad--although not necessarily foreigners. As a thorough analysis of the human capital flows to and from Europe will show, remigration is far more efficient--politically and economically--than further immigration. (8)

WAVES OF ELITE MIGRATION FROM EUROPE

Without exaggeration, Europe's brain drain is a structural, unresolved problem. Since the end of the World War II, it has been a recurring phenomenon on the continent, albeit with varying degrees of intensity across time and country. By focusing on those periods characterized by the greatest outflows of human capital, this article identifies three great waves of brain drain in Europe over the last eighty years. Table 1 schematically summarizes the features of these mass migrations of talent by reporting their duration (cutoff dates are chosen on the basis of the shocks that triggered the migration wave); the push factors (unfavorable domestic conditions that induce workers to leave); the pull factors (the magnets that attract migrants to a specific place); and the main host countries of such migration.

Europe's first mass migration of high-skilled workers in the twentieth century (the "Reconstruction Wave"), began in 1945 and lasted until 1965. Over this twenty-year period, several scientists and engineers from western and northern Europe escaped the misery of the post-war years (push factor) by moving to the other side of the Atlantic. They also desired to take advantage of the many research opportunities created by generous U.S. federal funding to win the technology race against the Soviet Union (pull factor). (9)

To draw attention to and halt this hemorrhaging of human capital, in 1963, the United Kingdom's (UK) Royal Society published The Emigration of Scientists from the United Kingdom, a report denouncing the loss of British scientists and engineers to the United States and Canada. (10) In the wake of a heated public debate, an article in the Evening Standard coined the term "brain drain" for the first time. (11) In the beginning of the first wave, the main losses of human capital were concentrated in the richest European countries; by 1970, however, southern and eastern European countries were supplying the bulk of qualified immigrants to the United States. (12)

Thanks to a comparatively satisfying economic performance in the 1970s and 1980s, Europe regained its appeal, and Third World countries replaced Europe as the main suppliers of skilled professionals to the United States. (13) However, the severity of the brain drain depends more on the amount of human capital conveyed by the emigrants (the quality of the emigration) than on the emigration rates themselves (the quantity). Therefore, by excluding periods characterized by low outflows of workers, one might underestimate the losses of human capital experienced by a country, if the quality of the emigrants was exceptionally high.

With the fall of the Berlin Wall, the global competition for talent once again impeded Europe. Politically, the Pax Americana promoted the principles of economic integration and labor mobility. Economically, the rapid expansion of the Internet industry generated increasing demand for sophisticated skills, boosting salaries for knowledge-based jobs and widening the wage gap between...