The hottest comodity: how emigrants can be a country's most valuable resource.

• Author: Postelnicu, Andrei
• Position: Report

1. TWICE THE PRESENTS, HALF THE SANTA--INTRODUCTION

   The picture of the world today is, broadly speaking, of limited resources meeting ever more numerous and more complex challenges. Moreover, these challenges and risks are almost always interrelated: there is increased scientific evidence that the incidence of extreme weather is related to manmade environmental damage , such as that created by the same rapid economic expansion which in turn fuels the rise in raw-materials and energy prices food shortages and high food prices in developing regions of the world can, and often do, generate socio-political unrest , and so on. In other words, the vast majority of challenges faced by any country or company can best be tackled effectively without a multi-faceted, inter-disciplinary approach that takes into account secondary, alongside primary or "headline" effects.

   In this context, another resource facing increasing demand is the human ingenuity to make the most out of every limited resource, to invent ever more creative ways to solve problems. It is this resource, and the efforts made by countries around the world to accumulate more of it, that is the focus of this paper.

   Of the global pool of skilled labour, this paper focuses on return migrants, or those workers who opted to leave their country and later on returned, in a position to employ the skills, knowledge and capital acquired abroad back home again. For the sake of clarity and owing to the complexities of the global migration phenomenon and the varieties of motivations fuelling migrant flows across borders, this paper will dwell mainly on one of the four types of return migration identified by Cerase as early as 1974 (5)--the return of innovation: "In this case, the immigrant sees in his return home the possibility of a greater satisfaction of his needs and aspirations. [...] In order to realise them, he is prepared to make use of all the means and new skills he has acquired during his migratory experience." (6)

   This paper addresses the question of so-called "feedback loops" (7) between return migration and a country's degree of development as evident in its socio-economic policies and soundness of democratic political institutions. The questions at the heart of this article are: Is the return of former emigrants and their transfer of skills acquired abroad a deliberate result of specific policies? If yes, can they be replicated? If no, can the result be attained through policy? Should countries adopt policies that pro-actively seek to encourage the return home of former emigrants and seek to use those flows as an instrument of development? Based on the experience of other countries, what policies will be most effective in attaining this goal?

   Countries' need for skilled labour stems from well-documented economic considerations, but also from socio-political ones. As noted by David and Foray, the discrepancy in the productivity and growth of countries in recent times has less to do with the abundance or shortage of natural resources than with the capacity to ..."create new knowledge and ideas and incorporate them in equipment and people" (8). The same point was made by Kelo and W6chter in a study on migration in the European Union following its enlargement. They noted that in a framework of so-called knowledge economies, "the economic future of Europe, as that of any other region or country in the world, will critically hinge on its ability to produce sufficient numbers of highly skilled people, but also to retain them, and to attract further ones from other countries" (9). Furthermore, Kapur and McHale point out that " vast differences in the soundness of ... institutional foundations" are increasingly recognised as a key factor behind "massive gaps" in the living standards of developed and developing countries (10). They add that people build institutions and that the most talented individuals in a position to help with this process are those in the highest demand from other countries before concluding that "the places that potential institutional builders are most likely to leave are those where institutional quality is worst" ". A country's ability to develop, retain and attract skilled workers or talent is therefore critical to its future development prospects.

   This paper hypothesises that there are feedback loops between the return migration of skilled workers to their home countries and the policies undertaken in these countries to stimulate investment, economic and political development and generally improvements in the standard of living. This would suggest that migration policies aimed at persuading former emigrants to return, or at least at engaging them with the home country, could have a significant contribution to a country's advancement. Viewed in this context, migration policies directed towards engaging a developing country's former emigrants should become an integral part of its development strategies from both an economic and socio-political perspective.

2. THE MOTHER OF ALL SHORTAGES --BACKGROUND

   A mix of demographic and economic factors paints the picture of the magnitude of the global "war for talent" being waged both overtly and covertly by companies and countries.

   Demographics are the driving force behind a worsening shortage of labour in all guises, be it skilled or unskilled. The Growth Report calculates that about 70 percent of the world's gross domestic product comes from societies that are ageing and facing a deteriorating ratio between active and retired workers.

   On a regional level, the Economist Intelligence Unit noted that the US alone was expected to face a shortfall of about 5.6 million workers by 2010 (12), while Kelo and Wachter hone in on the shortage of workers in the "critical" science, engineering and information and communications technology fields, citing estimates that the EU will also be confronted with "a very serious shortfall in the order of magnitude of some 700,000 scientists in the not-too-distant future." (13) Meanwhile, India's National Association of Software and Service Companies, cited in The Economist, estimated the shortfall faced by Indian IT companies to reach 500,000 by 2010 (14), while Japan was estimating in 2001 that it would have to import a minimum of 30,000 high-technology personnel in the following five years (15). Overall, figures point to a widespread problem that has made itself felt irrespective of an economy's position on the map, degree of economic development or political orientation.

   Like many, Kelo and Wachter point out that the "obvious remedy" to the scarcity of talent in the EU is by policies that stimulate the immigration of the highly skilled into developed economies. There is evidence of widespread efforts by developed countries to intensify their quest for skilled workers. Having ranked countries according to the potential of their current immigration policies to result in brain drain, or the flight of skilled workers from the developing to the developed world, Lowell also ranked them according to the potential of prospective policies to worsen this trend and transform it into what he calls brain strain--emigration of skilled personnel that causes hardship upon the sending countries. Lowell found that all of the 22 countries surveyed planned policies with brain strain potential (16). Furthermore, he found that countries whose current immigration policies had a relatively low risk of causing brain drain were adopting aggressive policies with a much higher risk of resulting in brain strain (17).

   When it comes to the incidence of skilled migration, empirical research has shown that skilled migration from developing countries tends to be higher the closer they are to the developed countries in the OECD, and also increases in small countries, those with a low average level of education and with a high degree of political instability (18). The conclusion supports the idea that talented individuals tend to leave the countries that can least afford to lose themand that could gain the most by their presence at home.

   Classical economic theory posits the migration of educated workers is not cause for concern because these workers take away from the home country only the marginal value that they earn anyway and because they earn a better return on their education than they would have done by staying home, thereby leading to a more efficient allocation of resources. The first of many challenges to this thesis came from a landmark study by Bhagwati and Hamada, who concluded that "the emigration of educated labour can easily lead to unfavourable effects on national income, per-capita income and the employment ... of educated and uneducated

   labour." (19) These negative effects come primarily from distortions in the way wages are set for both educated and uneducated workers as a result of the emigration of skilled labour. Furthermore, they noted that the country these skilled workers are leaving fails to recoup its investment in their education and said compensation payments from the country benefitting from the skills of these workers will not erase the adverse effects of the emigration (20) which, in the view of other researchers, amounts to a subsidy of the growth of industrialised countries awarded by developing countries (21).

   It is noteworthy that Bhagwati and Hamada found some positive effects of skilled-labour migration, but they concluded these effects do not compensate for the negative ones and these findings were echoed by other studies from the same period (22).

   More recent research has shown that the emigration of skilled workers can help the developing country they are leaving through a range so-called "incentive effect" that the perspective of emigration has on the native workforce. Thus Mountford finds that even the uncertain perspective of emigration can lead to increased productivity in an economy (23), and Beine et al conclude that emigration can cause...