Brain drain, a new challenge for the eurozone

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Only a genuine growth agenda can nurture labour mobility, a pre-requisite for the efficient operation of the eurozone and ultimately, for the vision of a conflict-free Europe. Without such agenda mobility could become one of the principal factors of the eurozone's disintegration, writes Dimitris Katsikas.

"As the crisis persists, news of increasing movement of the European labour force across borders becomes more common. Moreover, it emerges that increasingly, these migrants are young scientists and researchers from the crisis-hit countries of southern Europe moving to the countries of the North. While in theory such a development should be viewed positively, the combination of a competitiveness deficit in Eurozone’s southern periphery and the region’s brain-drain is a cause for concern.     

In theory, labour mobility is one of the basic economic balancing mechanisms, which allows a currency area to survive crises. When one area suffers an economic downturn and unemployment rises, the surplus labour force that cannot be employed moves to another area, which experiences growth and thus increased demand for labour, helping to restore balance in both cases.

However, European states are not united by common language, culture and labour market institutions, which facilitate labour mobility in federal states. As a result, labour mobility between Eurozone countries has traditionally been low and continued to be so during the early stages of the financial and economic crisis. This has started to change as the crisis dragged on and people in crisis-hit countries begun to realize that they could remain unemployed for many years. This realization has led to increased labour migration from these countries. In the past couple of years the numbers of labour migrants in the Eurozone have increased and the direction is always the same, from the countries of the periphery towards the countries of northern Europe.

It seems therefore that a key Eurozone deficiency may have been remedied. Surely that is good news then, isn’t it?

Well, perhaps it is, but there is also a very good chance that it is not.

This last wave of labour mobility has been characterized by the migration of many young scientists and researchers from the European periphery to northern Europe, the so-called brain drain. This is not an entirely new phenomenon–even before the crisis, this kind of migration was not uncommon for highly skilled, multilingual professionals who pursued international careers and could identify themselves as members of a jet-set elite united by income levels, education standards and career perspectives.

However, now there is a difference; these young scientists are not migrating anymore by choice, but out of necessity. As a result, their numbers tend to be much higher than before. Although comprehensive data is not available yet, anecdotal evidence, which seems to be corroborated by early research findings, suggest that migrants from the crisis-hit countries are predominantly highly educated.

A positive reading of this development would stress the potential long-term benefits for the periphery, when growth is restored and these scientists, having gained experience in the countries of the North will return (reverse brain-drain), boosting the economic potential of their home-countries.

However, this is not the only way things may play out. First, there is concern about the consequences of brain drain on the short- to medium term prospects of the countries in the periphery. It is obvious that the migration of large numbers of well-educated and skilled workers will make the effort of crisis-hit countries to recover, that much harder. Secondly, the longer-term consequences might be even worse. The countries of the South need a reorientation of their productive model towards high value-added, extrovert industries, in order to secure sustainable, long-term growth, capable to sustain their current living standards. The flight of their best and brightest will not facilitate this transition. The danger is that some of these countries will get stuck in a low growth model, characterized by low-skilled economic activity. Indeed, data about new enterprises created during the crisis in Greece, demonstrates an alarming domination of new entrepreneurship by consumption-oriented, low skilled services such as restaurants, bars and clothing retail. Overall, 90% of new companies created in 2012 were in low value-added sectors.

In this context, the flight of their most talented young minds may undermine the effort of these countries to change their growth model. As a result, it may entrench an already substantial rift in productivity and competitiveness between the northern core and the periphery, particularly in the South, setting in motion a negative disintegration cycle. The poor prospects of the southern countries, will keep their well-educated and highly skilled migrants away, a development which, on the one hand will diminish the ability of these countries to change their growth model, and on the other hand will raise further the attraction of the northern core countries as clusters of high-value added economic activity. Such a two-speed Eurozone would be sustainable neither in economic, nor in political terms.

The avoidance of this adverse scenario necessitates policy action today. Ultimately, the solution to the brain drain problem is the reversal of the increasing unemployment trend in the southern European countries. Young scientists will stop migrating only if they know that they have a decent chance to get a good job, or start a business at home.

This is unlikely to happen with policies followed to-date. Eurozone needs a growth agenda, with specific policies to be implemented immediately. Unless this happens, labour mobility, normally a pre-requisite for the efficient operation of the Eurozone and ultimately, for the vision of a conflict-free Europe, based on mutual understanding and tolerance, could become one of the principal factors of its disintegration."

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