Canada's Brain Drain Issue

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What is a brain drain? It is the emigration of highly educated and skilled Canadians to the United States. Does Canada suffer from a Brain Drain? This is a question that economists have been trying to answer for a decade now and have conducted different studies resulting to different conclusions about this issue. There are some economists that believe that yes Canada is suffering from a brain drain if not now it will be soon, amongst those economists are Don DeVortez and Samuel Laryea who prepared a study of C.D howe Institute. They claimed that Brain Drain is real and is costing Canada Tax Payers millions of dollars. Then on the other side of the debate we have economists like John Helliwell, who compares the current perceptions to past movements of educated Canadians to the United States, and the past and current immigration to Canada from other countries, concluding that the 90’s movement of educated Canadians to the United States, is relatively small. He strongly believes that the existing data and analysis provides no evidence of a current crisis or any great changes in the tax system. So why is it that the media are convinced that there is a brain drain? This “brain drain” leads to the conclusions that there must be something wrong with Canada and that if nothing is done the nation is doomed. A brain drain means that Canadian productivity will slip even further behind American, that will cause even more of Canadians to leave, and the cycle will continue. Although brain drain believers don’t have much data to back them up, they have two strong arguments 1. The apparently small numbers of emigrants are a catastrophic loss for Canada, cause the issue is not how many we are losing, but who we are losing. 2. A definite crisis will come unless governments do something -cut taxes- for example. The main concern economists have is the future outcome of this brain drain. They understand and even some might agree that Canada is not currently suffering from a brain drain but there definitely is a problem and if it is not addressed by the government fast then there will be a major threat to the economy of Canada and then there will definitely be a BRAIN DRAIN. McKinsey & Company describes the Brain Drain as “WAR FOR TALEN”, it is a battle of quality rather than quantity so even though the statistical evidence might show that we are better off than many years ago, the truth is that we are not. The fact of the matter is that American firms are out there targeting Canadian workers, they understand the value of star players and they welcome them, nurture them, celebrate them and in return the outflow from Canada to the United States increases. “I believes in the queen bee theory, that one real talented leader, can create all kinds of enterprise and wealth” said the CEO of a major corporation in Western Canada. “ If you lose that one person or that small group of people to places that they would rather be, they’re not going to come back and you’re going to lose a tremendous amount of wealth creation” He was responding to Helliwell’s theory saying that the flow of migrants from Canada to the United States, whether overall or only among the highly educated, are less than a quarter as large as those in the 1960’s. The CEO is trying to say that maybe the flow of migrants are less but we are losing key players and that in the long run it will definitely hurt our nation. If the talent is moving away from Canada because of better benefits less tax then the companies will follow the people that drive success and hence the low number of migrants will eventually add up to millions of dollars of loss, and at this point millions of dollars is definitely a problem that the government needs to address and fast. Helliwell argues that over the last 30 years, there has been a steady continuation of the century-long downward trend in the number of Canadian–born residents in the United States. He shows that between 1950 and 1963, the number of managers and professionals moving to the United States averaged 2,582 per year, while between 1982-1996 that figure rose to 3,907 (DeVoretz and Laryea, 1998: 6). However, given population increases, the proportionate number of skilled people leaving Canada has fallen significantly. In 1950-63, about 10% of the available professionals emigrated, compared to just 1% in the 1982-96 period. The recent outflow is actually very modest when compared to historical trends. However, his argument is based on permanent visas issued to Canadians by the United States and does not include the “TN” visas and “L” visas that are both temporary visas. The emigration of skilled Canadian labors includes engineers, computer scientists, physician, nurses, professors, teachers, managerial personnel and social scientists. It’s true that there hasn’t been much growth in the number of “permanent” emigrants to the United States in these categories, however, when non-permanent emigrants are included in the analysis, the picture changes dramatically specially after the implementation of NAFTA (North American Free Trade Agreement) – 1993. In 1997, non-permanent emigrants accounted for 94% of the total outflow of skilled Canadians to the United States, as compared to 77% in 1986. The total number of emigrants, both permanent and non-permanent, jumped from 17,000 in 1989 to 98,000 in 1997. This growth definitely shows a brain drain in Canada and it proves Helliwell wrong. Statistics Canada opted to exclude NAFTA workers from the emigration data, which is why the consensus data Helliwell had referred to showed a decrease in migration. This exclusion is misleading because of two reasons. First, these workers account for more than 90% of the total emigration of highly skilled Canadians to the United States. Second, even a temporary absence of these workers during periods of shortage in their fields could have serious negative outcomes. Why are Canadians moving away? What is motivating them to pack up and leave their homeland behind? Simple econometric work indicates that the flow out of Canada is related to the higher tax rate, the difference in professional incomes, gap in unemployment rates between the two countries, growth opportunities, greater exposure to leading-edge technology, and a warmer climate are all factors that influence their decisions. However, a serious study requires historically consistent national data on differences in earnings, taxes and employment opportunities between the two countries, these are the main factors often identified as being responsible for the brain drain. Another factor that makes it easier for Canadians to migrate to the States is the great familiarity with the Unites States and its job opportunities thus making the states known territory for the Canadians. That is also why Canadians who move to the United States outperforming similarly trained US-born workers. Amongst those who migrate to the U.S, the highly skilled have a higher proportion than the less educated ones, because they are more mobile, have higher qualifications, international experience and more connections. Also, the people that fall in the higher income bracket are the ones that pay most taxes so for them moving somewhere with less taxes will be of no problem what so ever. Richard Taylor, who moved to the United States in 1952, and who won the Nobel Prize for physics in 1990 said, “it’s not greed that drives people away. It’s lack of opportunity”. He is referring to the fact that Canadians, especially new graduates move to the States not because of higher salaries and lower taxes but because of Opportunity. Nortel’s vice president told a US audience, “ just because we were born there [Canada], doesn’t mean we will remain there. Canada shouldn’t feel they own us”. This statement is a threat to the Canadian Economy, since Nortel is the number one company in this country – accounting for 25% of all industrial research and development. So if a statement like this is made by the vice president then we have something to worry about and the government should deal with this issue as soon as possible before it is too late. In conclusion, I believe that Canada is suffering from a Brain Drain, even though there is a lack of qualitative and quantitative evidence showing a Brain Drain. Canada is experiencing a serious outflow of highly skilled people to the United States, which is being offset by an inflow from the rest of the world that costs $1.5 billion per year. In many of my sources, economists are justifying the flow of bodies from Canad

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