Brain Gain: The Upside of Losing Talent Abroad

Human capital flight – otherwise known as “brain drain” – presents a challenge for developing countries.  In countries with a lower per-capita GDP, wages are also typically lower.  So highly-skilled labor immigrate to richer nations where their specialized talents yield a salary several times what they could earn in their home countries.  Frequently, these professionals – doctors, lawyers, computer scientists – have been educated at the expense of the government, and losing them is a big hit to the country.  For this reason, people often see brain drain as a problem, and try to incentivize top talent to stay in-country.

But there is another theory about international labor mobility that posits the opposite.  The Economist explains the thinking behind “brain gain”:

Several economists reckon that the brain-drain hypothesis fails to account for the effects of remittances, for the beneficial effects of returning migrants, and for the possibility that being able to migrate to greener pastures induces people to get more education. Some argue that once these factors are taken into account, an exodus of highly skilled people could turn out to be a net benefit to the countries they leave. Recent studies of migration from countries as far apart as Ghana, Fiji, India and Romania have found support for this “brain gain” idea.

The most obvious way in which migrants repay their homelands is through remittances. Workers from developing countries remitted a total of $325 billion in 2010, according to the World Bank. In Lebanon, Lesotho, Nepal, Tajikistan and a few other places, remittances are more than 20% of GDP. A skilled migrant may earn several multiples of what his income would have been had he stayed at home. A study of Romanian migrants to America found that the average emigrant earned almost $12,000 a year more in America than he would have done in his native land, a huge premium for someone from a country where income per person is around $7,500 (at market exchange rates).

Living in the Philippines, where international remittances from Asia, the Middle East, and the United States have brought an incredible amount of foreign exchange into the country, I saw the dramatic effect Filipinos abroad had (and still have) on the economy.   I have also met many Kenyans, Ghanaians, and Filipinos who pursue degrees in engineering and computer science to develop a competitive skillset for a global economy.  Most of them want to go to the U.S. or Europe to make a small fortune.  And once they have had enough of the rat race and have built up a nest egg that will allow them to buy a house and raise a family comfortably, many want to return to their country of origin and spend the rest of their lives back home.

Putting aside the fact that global diasporas are good for the world, I want to discuss a benefit that the Economist article leaves out.  When skilled talent from developing countries move abroad to work for international companies, they gain valuable work experience that they could not get in their home countries.  When a software engineer comes to Seattle to work for Microsoft, he or she experiences work in a fast-paced environment, surrounded by talented people with different skills, managers who become valuable mentors throughout their careers, and, most importantly, a demand for quality that is often absent from companies that do not compete in a global marketplace.  After 10-15 years in this type of environment, they return to their home countries, where they mentor a new generation of young talent, teaching them the Microsoft way.

Microsoft is only one example.  The company and industry are secondary to the work environment, which emphasizes the importance of intangibles, like time management, prioritization of tasks, and quality control.  Working for an American company like General Electric, for example, might teach someone the importance of optimization in manufacturing, while working for Target shows them the importance of customer service in maintaining client relationships.  Then, when they return to their home countries and start their own business, they bring with them those industry-specific best practices.  As a result, they are more competitive in the domestic market, forcing competitors to either adapt or die.  Ultimately the economy becomes stronger and more competitive.

This is not simply a theoretical framework for the benefits of brain gain.  I see it in action every day.  Senior software developers in Kenya have often spent years working for tech companies in the United States.  Leading managers in nearly every type of business, from coffee shops to breweries, manufacturers to telecoms, have spent some time working in Europe, Asia, Canada, or, most often, the United States.  Often, they are the decision-makers.  And decision-makers drive innovation in any industry.

Clearly, brain drain is not ideal

I am not trying to say that brain drain is necessarily a good thing.  Most immigrants probably choose not to every return to their home countries.  For most, leaving the comfort of a well-paying job, a decent healthcare system, and a Western education for their children is not an appealing option.  But, I will say that experience working for a multi-national, or, frankly, any company, in the U.S is going to teach any young professional – including Develop Economies – a thing or two about how to succeed in business.

In a perfect world, financial incentives would keep talent from moving abroad.  Unfortunately, that simply is not the case.  But the upside of this movement is that, when they do come back, returning ex-patriates are far more capable than they would have been had they decided to stay.


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