Effects of Brain Drain on the Labor Market

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Figure 1 Emigration rate by educational level 1995–2005[pic 1]

Source: (Docquier et al., 2011.)

Table 1 International skilled migration, estimates controlling for age of entry, percentages[pic 2]

Source: (Beine, Docquier and Rapoport, 2001)

Table 2 Migration flows 2000-2010, Macedonia[pic 3]

Source: (Data.worldbank.org, 2011a)

The breakdown of the past regimes, weak economic structure, low level of production, low performance results of the educational system, high level of public debt, high unemployment level, low contribution of SMEs to innovation, and the lack of motivation, commitment and trust, had enormous negative impact on human capital development on the Balkan countries.

Two processes have been taking place, one associated with “external” brain drain, i.e. experts leaving the country for better professional fulfilment abroad, and the other associated with “internal” brain drain, i.e. specialists leaving their professions for better paid jobs in the private and/or informal sector of the economy (UNESCO, 2004). The educational and scientific systems of the West Balkan countries generally share low level of investments in R&D (research and development) undertaken by the private sector and the public authorities.

This is a result of several combined structural problems, including restrictive monetary and fiscal policies, de-industrialization, high transaction costs of societal transition, external accounts imbalances, low national investment and savings rates, and limited FDI inflows (UNESCO, 2004). In contrast, developed countries invest substantially more in R&D. We have found information of economies of South Korea and Germany that we will use for comparative purposes. For example, both South Korea and Germany invest substantially more in R&D in comparison to our countries (2.5-3.5% of GDP, Figure 2). Slovenia invests reasonable amounts in R&D (1.5- 2.0%); the other countries significantly lag behind, with markedly less than 1% investment (Figure 2).[5]

[pic 4]

[pic 5]

Source: (Stats.uis.unesco.org, 2011)

[pic 6]

[pic 7]

Source: (Stats.uis.unesco.org, 2011)

In developed countries, the private sector is the key innovation catalyst, and holds the highest percentage of the total GERD, i.e. gross expenditure in R&D (Figure 3). In contrast, the public sector has relatively higher investments in R&D when compared to the private sector investments (Figure 4).

Figure 4 GERD in the public sector, percentages

[pic 8]

Source: (Stats.uis.unesco.org, 2011)

Almost all Western Balkan countries are facing high unemployment rates and a large number of immigrants. (Table 1)

Although many programs have been implemented by donors and native financing, the high unemployment still remains a serious problem. The priority of economic policies of the government is the reduction of unemployment, it declines slowly. Thus, the long-term problems of unemployment and the emergence of migration are positively related, since a great number of populations are seeking alternative destinations for employment.

We have analysed the status of employed and unemployed people in this area. [pic 9][pic 10]

Source: World Development Indicators[6]

If Balkans is seen as a general area, most residents preferred destination are Germany and Switzerland in Europe, as for overseas countries, most popular are United States and Australia.

Number of immigrants is most attached to the labor force which is necessary to mentioned countries, but also due to family relations that date back to the nineties when the SFR of Yugoslavia circulated with War and when the population of the Western Balkans massively emigrated. For the Western Balkans, the European Union is a source of hope. However, although it sets as promoter and protector of human rights, respecting for the rights of migrants are facing major difficulties. Migrants as a cheap and flexible labor force, are often forced to work unskilled and low-paid jobs. The other effects we will see in the third section of this work.

Figure 5[pic 11]

Source: (OECD, 2010)

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Migrants’ characteristics

Table 4 Emigration rates(15+) by country of origin, 2000/01 and 2010/11 [pic 12]

Source: (OECD, 2014)

Table 5 Characteristics of migrants by country of origin, 2000/01 and 2010/11 (15+)[pic 13]

Source: (OECD, 2014)

Sadly, reliable evidence about the volume, chronology and power of the brain drain in Balkan countries cannot be found, which prevents the generation of a comprehensive matrix of similar data for all SEE countries. Moreover, the data analysis does not have information on the impact of temporary or permanent migration on human capital.

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Effects of brain drain on the labor market

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Sending countries

Effects of the brain drain in the sending countries can be felt in different ways:

- Regarding the tax revenues:

With loss of the human capital, happening through this phenomenon, country’s tax revenue decreases. How? People who are leaving the country are those who contribute to its tax incomes- they are the tax payers. Significant effects on the tax revenues could be felt if the migration happens.

- Shortage of new potential entrepreneurs

Economies could benefit by those people who decide to invest in new ideas and so create potential new opportunities for employment. However, as this phenomenon can lead to the loss of confidence in the