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Should Barbados and the region be worried about brain drain?
The rate of skilled emigration from small states and territories, defined either by territory size, population size, national income or some combination thereof, tends to be persistently high over time. In the Caribbean, a region dominated by small states, the per cent of tertiary educated that emigrate ranks among the highest in the world.
High-levels of emigration imply both benefits and costs for the source country. On the positive side, overseas workers remit large amounts of transfers that smooth consumption and alleviate poverty for relatives in the homeland, and help maintain macroeconomic stability by increasing the inflow of hard currency.
In the Caribbean, Jamaica, Haiti, and Guyana have remittance flows that account for more than ten per cent of their gross domestic product each year.
Why does brain drain happen in small economies?
First, small economies tend to be more dependent on trade and less diversified than larger economies. This makes them require less skilled labour.
The small territorial size, the small population, and the limited natural endowment of “small countries” forces them to specialise in the production and export of a few goods and services and to rely on imports for a large array of intermediate and finished goods they cannot cost effectively produce.
In this setting, the demand for a variety of skilled labour is reduced.
Second, small economies, due to the high degree of trade openness and specialisation in commodities and services with low demand elasticity, tend to be more vulnerable to external price fluctuations, adverse weather shocks, and natural disasters.
Therefore, they tend to experience more growth volatility and economic instability compared to countries with larger internal markets, a more diversified manufacturing base, and less trade openness.
The decision to invest in human capital formation takes years to play out and retooling of labour forces to match a particular local market demands is not instant or costless.
When bad times hit, skilled labour in small economies often opt to emigrate. When larger economies experience downturns, mismatches in labour can be answered by internal migration and by temporary welfare assistance programmes.
Third, if small economies cannot compensate for the emigration of skilled labour by attracting an equivalent inflow of skilled immigration or by stronger human capital accumulation, then the capacity to grow and develop can be impaired.
The quality of institutions, the effectiveness of government, the ability of the private sector to innovate and compete, and the nature of political culture can all be diminished contributing to mismanagement, corruption, low growth, and instability. Since attracting skilled foreign labour is an unlikely outcome for most low-income developing countries, the source countries find themselves on a treadmill.
They must produce even more tertiary graduates each year just in the hope of retaining a small fraction at great public expense.
In short, small island states have structural weakness that must be addressed through short, medium and long-term measures.
The highest priority is to slow the flow through contingent financing for education abroad and create better opportunities at home.
Small states such as the Caribbean countries must aggressively improve governance, business climates, and strategically build a diversified economy based on knowledge intensity.
Long-term, more economic integration and ultimately economic union is the answer.
Mark Wenner is a Caribbean economist employed by the Inter American Development Bank in Guyana.