Why research is key to retaining talent

Throughout the 2000s, European countries have been broadly
successful at attracting large numbers of highly-skilled
individuals. The euro area crisis has most likely significantly
altered these pre-existing trends. As growth remains subdued
and unemployment stabilises at high levels, spending cuts in
R&D might leave countries in the periphery more exposed to
“brain drain”.
Over the past decade, as part of a broader globalisation trend,
migration has been intensifying at global level. The number of
migrants (aged 15+) in OECD countries increased by 38%
between 2000 and 2010, to 106 million (see Arslan et al., 2014).
Of these, about 35 million had tertiary education. However,
some countries were more successful at attracting and retaining
highly-educated workers than others. Although far from perfect,
this measure can give us a sense of whether a country is on
balance a brain gainer.
Building on the Database of Immigrants in OECD countries
(DIOC), released a few weeks ago, Figure 1 details the net flow
(immigrants minus emigrants) of highly-educated workers for
selected OECD countries in 2010, normalized by population.
Several interesting trends can be identified: (i) small countries at
the heart of Europe (Switzerland, Luxembourg) had a particularly
positive balance; (ii) within Europe, among the large countries,
the UK was a top brain gainer; (iii) Ireland and Finland, in 2010,
were seeing a larger outflow than inflow of highly-educated
individuals.
Data on migration by educational attainment level is currently
available only up to 2010. Although in normal times this would
not be a major problem, given that migration patterns tend to be
relatively stable in time, at the current juncture 2010 sounds like
a remote past. As suggested by Machado and Walsh (2014) , the
euro area crisis, with its disruptive effects on the labour market
and growth rates in several countries, is likely to have acted as a
structural change also in terms of migration patterns of the
highly educated. As now countries progressively return to
growth, it will be interesting to observe whether these changes in
migration patterns will prove temporary in nature or more
permanent.
In certain European countries, my hunch is they will not be
temporary. Veugelers (2014) shows how fiscal consolidation has
led countries that were already ‘innovation laggards’ within the
EU to cut disproportionately their Research and Innovation (R&I)
expenditure with respect to other categories of public
expenditure. Lower private and public spending on research is
likely to have a significant impact on the capacity of countries to
attract and retain talents in the longer term. With no pretence to
trace a direct causality link, Figures 2 and 3 (below) illustrate the
strong correlation between highly-skilled migration flows and
R&D expenditure (both public and private).
Note: Emigration rates are constructed as the ratio of high-
education emigrants over the number of people within their origin
country with similar educational characteristics (taken from
Barro and Lee, 2013).
Source: DIOC 2010, Bruegel calculations
What the charts illustrate is that low spending on R&D is
correlated both with a weaker pull factor (capacity to attract
talents) and a stronger push factor (retaining talents). Survey
evidence [1] on the mobility determinants of researchers
somewhat points in a similar direction: career progression,
research funding, facilities, and equipment (all of which are likely
to be highly associated with R&D spending) appear among the
top reasons for moving both to another EU country and outside
the EU.
A country that gives a high priority to R&D is one that is likely to
generate growth in innovative sectors over the medium to long
term (see Veugelers, 2014). This is true for both the public sector
(within universities’ fields of research) and the private sector (in
innovative business sectors). In turn, an economy where growth
originates from innovative sectors is well placed to attract
talents from abroad or create jobs for the highly-qualified
individuals it has trained.  As such, one can envision that
countries in the EU periphery where R&D spending has been
slashed will see a higher incidence of brain drain in the years to
come. Veugelers (2014) suggests these to be Ireland, Spain,
Italy, and Greece.
Interestingly, Veugelers (2014) shows how also the UK saw its
R&I spending slashed over the period 2007-2012. This, coupled
with the potential for tougher migration laws, could harm the
country’s position as a leading brain gainer in Europe going
forward.
The impact of R&D on innovation, migration patterns, research
facilities, and high-skilled wages is likely to manifest only over
long periods of time. As such, our analysis traces the likely
scenario for these European countries only in the case in which
the cuts to R&D spending are not reversed: something that
would be advisable, as fiscal space materialises.
Research assistance by Alvaro Leandro is gratefully
acknowledged.
This blog post presents some of the broader findings of a
chapter written for ‘The Handbook of Global Science,
Technology, and Innovation’ (Archibugi D. and Filippetti A. eds.).
The Handbooks of Global Policy series, Wiley-Blackwell,
forthcoming 2015.