Categories: Business News

Definition, Causes, Effects, and Examples

What Is Brain Drain?

Brain drain is a slang term that indicates a substantial emigration or migration of individuals. A brain drain can result from turmoil within a nation, the existence of favorable professional opportunities in other countries, or a desire to seek a higher standard of living. In addition to occurring geographically, brain drain may also occur at the organizational or industrial levels when workers perceive better pay, benefits, or upward mobility within another company or industry.

Key Takeaways

  • Brain drain is a slang term indicating substantial emigration or migration of individuals.
  • Brain drain can result from political turmoil or the existence of more favorable professional opportunities elsewhere.
  • It causes countries, industries, and organizations to lose a core portion of valuable individuals
  • Some of the consequences of brain drain include the loss of tax revenue.
  • One of the best ways to reduce brain drain is to boost government investment in the local economy.

Understanding Brain Drain

As noted above, brain drain is the movement of people from one area to another. Brain drain often occurs between countries and cities where they can find better opportunities. They may move to look for work or a better standard of living. Brain drain can also refer to the movement of professionals between corporations and/or industries for better pay or opportunities.

Brain drain causes countries, industries, and organizations to lose a core portion of valuable individuals. The term is often used to describe the departure of certain professionals, including groups of doctors, health care workers, scientists, engineers, or financial professionals. When these people leave, the places they leave are harmed in two main ways:

  1. Expertise is lost with each emigrant, diminishing the supply of that profession.
  2. The (country’s) economy is harmed because each professional represents surplus spending units.

Professionals often earn large salaries, so their departure reduces consumer spending in that region or the country overall.

Geographic, Organizational, and Industrial Brain Drain

Brain drain can occur on several levels: geographic, organizational, and industrial brain drain.

Geographic Brain Drain

Geographic brain drain happens when talented professionals flee one country or region and end up moving to a country that they feel gives them better and more opportunities.

Several common causes precipitate brain drain on the geographic level including political instability, poor quality of lifelimited access to health care, and a shortage of economic opportunity. These factors prompt skilled and talented workers to leave source countries for places that offer better opportunities.

Organizational and Industrial Brain Drain

Organizational brain drain involves the mass exodus of talented workers from a company, often because they sense instability, a lack of opportunity within the company, or they may feel that they can realize their career goals more easily at another company. Industrial brain drain happens when skilled workers exit not only a company but an entire industry.

These two forms of brain drain are usually a byproduct of a rapidly evolving economic landscape in which companies and industries unable to keep up with technological and societal changes lose their best workers to those that can.

Causes of Brain Drain

So what causes brain drain? As noted above, there are several underlying factors that lead to this phenomenon. They can vary, though, based on the type of brain drain.

Some of the main reasons why people choose to leave their home countries/regions include:

  • Economic opportunities, including new and better jobs, higher standards of living, access to housing and health care
  • Political strife and instability
  • Persecution based on religion, gender, or sexuality

While most brain drain is geographic, there is some brain drain that occurs as a result of situational factors. For instance, skilled workers may leave companies and industries when machines and technology replace human labor.

Brain drain is also known as a human capital flight,

Effects of Brain Drain

Brain drain can have major consequences. The effects are felt not only in the area where the brain drain occurs but also where the brain gain (where individuals move to) takes place. And it can often have a chain reaction.

Areas affected by brain drain end up with a dearth of human capital. Professionals who go elsewhere end up leaving a large hole to fill—one that isn’t always easy to fill. Consider medical professionals in developing nations who move to parts of the developed world for better opportunities. There may not be enough (qualified) people to replace them when they leave, which affects the quality of health care for those left behind.

Another effect on areas that experience brain drain is the loss of revenue. Governments rely on income taxes to fund their social programs and infrastructure projects. A mass exodus leads to a drop in tax receipts which can stunt economic growth and development.

Areas that see brain gain are also impacted. Some of these factors include overcrowding (especially in major metropolitan areas where more opportunities are available). More people in one area puts a strain on resources, which can lead to higher prices and taxes.

Measures to Reduce Brain Drain

While there isn’t an easy fix for brain drain, there are some things that business and government leaders can do to reduce or minimize it. These include:

  • Increasing investments into certain areas of the economy
  • Offering competitive wages
  • Paving the way for legal and social reform
  • Improving the quality of resources, such as housing and health care
  • Providing affordable housing solutions

Examples of Brain Drain

Ukraine Brain Drain

War and conflict are big catalysts for brain drain. This was evident following Russia’s invasion of Ukraine. Studies conducted by the European Parliament indicate a massive displacement of the country’s population across the European Union (EU). One of the main areas the study examined was the movement of students. The number of students leaving Ukraine doubled from 25,000 to 50,000 between 2007 and 2014. That number jumped to about 78,000 by 2019. The majority of these students were enrolled in post-secondary institutions in Poland.

Some professionals leaving Ukraine are having a tough time finding work in their fields in other countries because of a lack of available work or transferrable skills. As such, some are choosing to take on lower-paying jobs to find a sense of security and safety.

But it isn’t just Ukraine that’s experiencing a brain drain. In fact, Russia is experiencing a flight of human capital, too. Economic sanctions placed on the country by the U.S., the United Kingdom, and Canada, are having a profound impact on Russian citizens. The federal government also has laws in place punishing citizens who support Ukraine. It’s estimated that as many as 200,000 Russians left the country.

Puerto Rico Brain Drain

Brain drain was a significant consequence of the ongoing Puerto Rican debt crisis as of 2019. This was particularly evident in the exodus of skilled medical professionals, which hit the island hard. While almost half of Puerto Rico’s residents receive Medicare or Medicaidthe island receives significantly fewer federal funds to pay for these programs than similarly sized states on the mainland, such as Mississippi.

This lack of funding combined with the island’s dire financial situation precludes its ability to offer competitive compensation to doctors, nurses, and other medical staff. As a result, such professionals were reported to be leaving the island en masse for more lucrative opportunities on the mainland.

This form of brain drain was also exacerbated by Hurricane Maria, which hit the island in September 2017, creating even more incentives for emigration.

What Does Brain Drain Mean?

Brain drain is a slang term that alludes to the loss of human capital from one area to another or from one industry to another. Brain drain usually happens when skilled individuals and professionals leave the home countries (in most cases, developing nations) and go elsewhere to take advantage of better opportunities. It also occurs when individuals leave one area of the workforce and go to another for some of the same reasons.

How Does Economic Growth Help Fight Brain Drain?

Brain drain occurs when there is a lack of opportunity in a certain area. For instance, professionals living in a developing nation may leave in search of better opportunities in parts of the developed world. Making economic investments to boost growth often provides incentives for people to stay, as it means access to better (and more) resources, personal economic prosperity, and the potential for a higher standard of living.

What Impact Does Brain Drain Have on Developing Nations?

Brain drain or the exodus of human capital often has a big impact on developing nations. It often leaves a hole that is hard to fill since there may not be as many people with similar skills to fill that void. It also leads to a loss in tax revenue, which can lead to higher taxation to make up for the shortfall. Citizens may not be able to access quality resources, such as education and health care, which also affects their quality of life.

The Bottom Line

Human capital is a vital part of the economy. But when conditions get tough, these individuals may look elsewhere for better jobs, higher pay, and an improved standard of living. A mass exodus of people can lead to what’s called brain drain. When human capital is depleted from a certain area, it can have lasting effects on the local economy.

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