The European brain drain: European workers living in the US

Gilles Saint-Paul 24 December 2008

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Since 1995, America has grown faster while enjoying lower unemployment than Europe. Adding to Europe's growth angst are worries about aging populations, its inability to adapt to technical change, the burden of its welfare state, and the pains of labour market deregulation. A particular worry is that Europe is losing its most talented workers to the US. Stories of succesfull expatriates in Silicon Valley and top academic departments abound. European politicians and businesses complain that they cannot compete with the US due to taxes and regulations (François-Poncet 1999, Mahroum 1999).

Is this brain drain for real? While Becker et al. (2002) look at data on the brain drain from Italy to the rest of Europe, this column draws on my research using US census data for 1990 and 2000 to measure the characteristics of European expatriates and see how they fare in the US labour market (Saint-Paul 2004, 2008).

The fractal nature of the brain drain

People who believe the brain drain is not a big problem argue that it is quantitatively modest relative to the size of the source economy. Furthermore, in many European countries the outflow of brains is often matched by an inflow. Yet when one looks at the problem from the inside (i.e. the French economics profession as far as I am concerned), we see that the inflow does not match the outflow in terms of quality, since the latter easily accounts for say 50% of the brightest French economists. Furthermore – though it is very difficult to measure and to extrapolate to other sectors – the problem is even more significant if one takes into account the importance of their publications. Thus losing 2% of graduates may seem unimportant at face value but it could be critical if those 2% are the bulk of innovators.

Indeed, the available evidence suggests that the brain drain appears fractal. That is, on average the best are more likely to leave regardless of which slice of the population is used to form the average. The brain drain becomes more severe as one looks at increasingly “select” segments of the population. That is, the brain drain intensifies as one moves from say BAs to masters to PhDs. While it is not possible to go further and select the top PhDs, extrapolations suggest that concerns about growth and innovation are not unfounded.

Basic demographics

Table 1 reports the number of US citizens of working age (25–64 years) born in six European countries in the two US censuses, and their share of the working age-population in their country of origin. These fractions vary from a small 0.36% in Spain to 1.66% in the UK. That suggests that the macreconomic effects of the brain drain are not likely to be very large, but they need not be insignificant either.

Table 1. The European-born population aged 25-64 in the US.

  1990 2000
Country Number % of home pop. Number % of home pop.
Belgium 21561 0.45 22631 0.62
France 115245 0.40 133873 0.43
UK 450804 1.53 524922 1.66
Spain 57375 0.29 78061 0.36
Italy 344406 1.15 303685 0.93
Germany 657937 1.40 720555 1.54

A comparison between the two census years also reveals that the drain is accelerating (though not dramatically) in all countries except Italy, reflecting the phasing out of low-skilled migration from Italy to the US. These numbers suggest that there is no strong acceleration in the latter part of nineties, and that the phenomenon is of the same order of magnitude as in the eighties.

Employment

The next two tables compare the employment rates of expatriates with those of other US residents and labourers in their countries of birth. We find that for men, employment rates for European expatriates are higher than average in the US labour market, and therefore substantially higher than in their home countries. For women, the employment rate is higher than in their home countries but lower than in the US labour market.

These results are not surprising: one does not emigrate to a country like the US if one does not have good employment prospects there. But, to the extent that it signals greater employability of expatriates relative to those staying behind, that effect should also be added when computing the adverse effects of the brain drain of GDP per capita.

Table 2. Employment rates

Men 1990 2000
  US residents Home country US Home
Belgium 87.4 77.1 87.5 78.1
France 88.3 80.5 85.1 78.5
UK 89.7 84.2 87.5 82.2
Spain 85.4 79.5 80.8 80.2
Italy 83.6 81.4 76.7 75.6
Germany 88.4 85.3 85.5 77.4
USA       85.2
Women 1990 2000
  US residents Home country US Home
Belgium 55.0 44.3 61.7 57.5
France 61.8 57.4 65.9 62.5
UK 64.3 62.0 64.8 66.9
Spain 60.9 32.7 61.4 45.1
Italy 53.3 39.7 56.6 43.2
Germany 64.0 57.7 65.8 60.7
USA   66.1   70.2

Education

Table 3 lists the share of expatriate population with tertiary education, i.e. highly skilled people with the most advanced degrees. As can be seen, it is far larger than in the US labour market at large and even larger than in the corresponding home country. For example, in 2000, 56% of French-born workers living in the US had a college degree, against 2 % in France. Most remarkably, the education level of the expatriates seems to have improved during the nineties at an even higher pace than in the source countries.

Table 3. Fraction of the expatriate population with tertiary education, vs. corresponding fraction in home country and whole US census.

  1990 2000
  US census Home country US census Home country
Belgium 47.6 17 59.6 26
France 42.7 14 56.1 24
UK 38.9 15 49.2 25
Spain 30.6 9 44.1 21
Italy 17.1 6 25.7 13
Germany 34.6 17 41.9 28
USA 29.7   33.8  

These data confirm that the expatriates are heavily selected among the most educated workers. This skewness increases when one moves up the skill ladder as seen in Table 4 which reports the fraction of expatriates who have a PhD and compares it to the average US workers.

Table 4. Proportion of expatriates with a PhD versus US labour market

  1990 2000
Belgium 4.33 5.78
France 3.1 4.9
UK 3.2 3.9
Spain 2.7 4.6
Italy 0.96 2.0
Germany 1.72 2.39
USA 0.82 0.98

Wages

Europeans also earn more than their counterparts in the US labour market. Table 5 reports the ''European premium'' which is uniformly positive and significant, ranging from 2% to 16%.

Table 5. Wage premia for European expatriates, percentage

  1990 2000
France 4.9 10.7
Italy 16.7 11.5
Germany 3.12 2.14
UK 12.6 16.3
Spain 6.2 7.9
Belgium 15.1 13.8

Entrepreneurs

In light of the view that the brain drain is a matter of concern because a number of expatriates are exceptional individuals, we may ask whether entrepreneurs are over-represented among expatriates. Table 6 reports the proportion of workers who have an entrepreneurial activity, and compares it to the US labour market.

Table 6. The proportion of entrepreneurs (%).

  1990 2000
Belgium 13.18 11.51
France 10.67 11.39
UK 9.84 10.55
Spain 10.96 10.29
Italy 13.42 14.21
Germany 9.85 9.39
USA 8.08 9.08

The proportion of entrepreneurs among expatriates is slightly higher than among Americans and is stable over time. The Global Entrepreneurship Monitor (2002) suggests that European entrepreneurship is about half that of the US. If one takes that proportion seriously, then European expatriates are a bit more than twice as likely to be entrepreneurs than those who remain in Europe.

Conclusion

The data confirm the presumption that the skill composition of expatriates is much better than the source countries' general population. The quantitative significance of that, however, is open to debate, as the total number of expatriates ranges between 0.5% and 1% of the population. If one takes the view that labour is a small number of homogeneous inputs, such as skilled labour and unskilled labour, then our back-of-the envelope computations suggests a moderate adverse effect of the brain drain on inequality and income in home countries, with say a 2-3% increase in the relative wage of the skilled and a 0.5-0.7% decline in GDP per capita. On the other hand, if one assumes that labour is not a collection of homogeneous inputs, but instead that very talented individuals are crucial for innovation, business formation, and management1, the loss could be considerably bigger, though much harder to estimate (an interesting first step is Zucker et al. 2003). My speculative extrapolations suggest that the proportion of Europeans who ‘’matter’’ and who are in the US could be as high as 50%; that is huge and could in principle have dramatic consequences for Europe’s growth potential – while such a number can be disputed, casual observation suggests that in my field (research in economics), it is about right.

References

Becker, S., A. Ichino and G. Peri (2002), ''How large is the brain drain from Italy?'', Munich University Working Paper.
Borjas, George J. (1987), ''Self-Selection and the Earnings of Immigrants'', American Economic Review, Volume 77, Issue 4, September 1987, Pages 531-553.
François-Poncet, J. (1999), ''La fuite des cerveaux : mythe ou réalité ?'' Report to the French Senate
Global Entrepreneurship Monitor Consortium (2002), Global Entrepreneurship Monitor.
Mahroum, S. (1999) ''Europe and the challenge of the brain drain'', IPTS Report 29.
Saint-Paul, Gilles (2004), “The Brain Drain: Some Evidence from European Expatriates in the US”, CEPR Discussion Paper 4680, reprinted in Saint-Paul (2008), CES-Ifo Forum 3/2008, 19-27
Stephan, P. and S.G. Levin (1999), ''Exceptional contributions to US Science by the foreign-born and foreign-educated'', Science, 285.
Zucker, Lynne G.; Darby, Michael R.; Brewer, Marilynn B (1998), ''Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises'', American Economic Review, Volume 88, Issue 1, March 1998, Pages 290-306.


1 Stephan and Levin (1999) document the exceptional contributions to US science by foreign-born researchers.

 

 

 

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Topics:  Migration

Tags:  US, European Monetary Union, brain drain

Comments

Count me among those who believe net brain drain is all that really matters. You imply that there is a net brain drain but show nothing to demonstrate it or to quantify the size of it. My gut tells me the results might be similar but without the presentation of any evidence to support that it is hard to consider the research presented hear as overly meaningful.

The evidence of a European brain drain is no surprise. The data hint at the explanation – opportunity. That Europe’s most talented workers leave, and that they do so in search of better opportunity means Europe’s growth prospects are not merely reduced, but perhaps non-existent.

Solving the brain drain problem requires improving opportunity. From the vantage point of an American living in France after two decades of activity in the American business sector, that is not likely to happen anytime soon, at least not here. The difference in mentality is simply too fundamental and too deeply ingrained.

The critical factor is willingness to take risk. The risk of trying a new idea. The risk of operating outside the traditional model. The risk of relying on creative and analytical ability instead of credentials. The risk of taking initiative. The risk of being wrong. The risk of failing.

In France, at least, changing that mentality is going to require change at every level. Schools need to start teaching pupils to think, not merely memorize. Hiring practices need to start taking into account motivation and ability, not just whether the candidate has nice handwriting and the correct diploma for the job. Labor laws need to change to allow businesses greater flexibility to expand and contract. Workers need to start viewing “The Company” less as an enemy trying to suck them dry, and more as a collective endeavor that offers them the opportunity not merely for a paycheck but for advancement as far as their desire and ability can take them. Managers need to start viewing employees less as narrowly-educated labor producing units with predefined input/output capabilities and more as capable individuals with individual potential. All of these things involve taking risk.

But, this requires too great a shift in thinking on a societal level to happen other than painstakingly slowly. (And besides, it’s time for lunch, and this afternoon everyone’s going on strike in protest.) Certainly the current generation, and perhaps the next, is lost . . . except for those with the talent and the initiative to go elsewhere in search of better opportunity.