Educated youth leaving the shores of Sri Lanka: Is it brain drain or brain gain?

It is time for Sri Lanka to convert its brain drain into brain gain

Many have expressed their concern about the rising incidence of educated youth leaving the country for employment in developed countries. This is specifically a relevant issue in a background of Sri Lanka’s labour force falling as observed by the World Bank in its recently released Sri Lanka Development Update 2019. 

On top of this, labour force participation in Sri Lanka has historically been low with only about a half of the eligible people between the ages of 15 and above offering their services to the market. While the male participation has been around 72%, the female participation has been low at about 35%. Of them, the youth consisting of those between the ages of 25 and 40 have been the largest segment in the labour force, making up of almost the entirety of the people in that age group. Hence, if they leave the country, it is considered a severe loss to the economy.  

The Central Bank in its Annual Report for 2018 has stressed the need for changing the structure of foreign employment from unskilled and semi-skilled categories to skilled categories to enable the country to maximise the earnings from foreign remittances

People who leave their home country to settle in a foreign land are referred to as the ‘diaspora’ of that home country. In times to come, they become a formidable force representing the home country in the foreign land ready and willing to support the home country whenever that country needs external support. This was amply demonstrated when India issued India Resurgent Bonds in 1990s to build its foreign reserves after the reserve level fell to a very low critical level. The bond issue was oversubscribed by the diaspora

However, the Central Bank in its Annual Report for 2018 has stressed the need for changing the structure of foreign employment from unskilled and semi-skilled categories to skilled categories to enable the country to maximise the earnings from foreign remittances. 

At present, of the annual migrant workers, about 55% constitutes unskilled and semi-skilled categories, while about 32% belongs to the skilled categories. Hence, the debate continues and some times, some even suggest that Sri Lanka should ban the foreign employment of its workers altogether.  

The protest against the practice, commonly known as ‘brain drain’, is based on both economic and non-economic reasons.

Economic reasons

The economic reasons adduced against the brain drain take the following form.

The educated youth are the pillars of the country’s wealth creation. When they leave the country’s shores for work in other countries, the home country loses their talents stunting its ability to create further wealth. Hence, instead of the country that took trouble to breed and nourish them, other countries that did nothing about it become beneficiaries. Economists call this phenomenon getting free benefits or ‘free riding’.  

The poor countries are poor because they have not been able to get the benefit out of the talents they have created by spending money on educating the youth. As a result, firms that could have produced an exportable output by using their talents are unable to export. 

The government, which could have raised its efficiency by hiring the educated youth, will not be able to serve the people properly. Hospitals, both public and private, are unable to treat the patients because of the shortage of qualified physicians. Engineering firms are unable to build new structures because of the shortage of engineers. Schools are unable to teach students, specifically subjects like mathematics, science and English, because of the shortage of qualified teachers. 

In this manner, the brain drain has adversely affected the whole economic life hindering the economy’s ability to grow. 

Non-economic arguments

The non-economic arguments against the brain drain have been made on patriotic and social grounds.

The youth have been educated by the nation at great costs under its free education policy. They are, therefore, expected to pay back their debt to the nation by serving the home country. Hence, if they leave for foreign countries, they do not repay their debt to the society. It is, therefore, an unpatriotic act on their part to serve some other country that has done nothing for their uplift.  

Sri Lanka’s history has recorded a plenty of instances where the country had used the foreign skilled workers to construct giant reservoirs, huge pagodas, sophisticated irrigation channels, marvellous monumental buildings and artistically sculptured statues. These skilled engineers and artistes were paid at that time in gold which was an outflow of resources from the country. Yet the payments were made because their services were needed by the country due to a shortage of such skills compared to the requirements. In today’s parlance, it was a reverse brain drain for Sri Lanka and a brain gain for the home countries of those skilled workers and artistes. Sri Lanka should therefore encourage those Sri Lankans working abroad to return with experience, capital and better management techniques. These are woefully lacking in the country at the present state of economic development

Further, the developed countries, having used their talented labour relatively at lower wages, will produce exportable products and export the same to poor countries at artificially fixed high prices. Hence, poor countries are exploited by developed countries twice: first, by robbing the poor countries of the talented labour; second, by selling the goods produced by hiring such talented labour at artificially high prices.

On social grounds, the educated youth who leave their shores for foreign countries are not treated well by their host countries. Many of them have to settle for jobs totally unrelated to their skills and talents. Instances of neurosurgeons working as taxi drivers in the initial phases of their life build-up in the host country are often mentioned. This is a type of discrimination which these educated people would not be subject to in their home country. They have, therefore, become the victims of the ‘double standards’ which the rich countries are practising on the migrant workers from poor countries.

Many have, therefore, suggested that the government should prohibit the educated youth leaving the country for jobs elsewhere.

Is the ‘unpatriotic’ argument valid?

The unpatriotic argument is based on two facets of reasoning related to each other. In one way, it says that one could serve his country only by residing within the territory of his country. It also reasons out that one could serve his country only by serving his government or a firm belonging to a fellow citizen. Any other way of earning livelihood is an unpatriotic act.

This argument is valid only if all the different production processes involved in a product are completed in a single country. But today, production takes place in what is known as ‘global factories’. These factories simply assemble different inputs from different countries into a final product. Hence, a product today does not belong to a single nation. No country today can take pride in calling a product ‘made in that country’ alone, since it is the outcome of contributions made by many. 

For instance, a shirt labelled as being ‘Made in Sri Lanka’ does not belong to Sri Lanka alone. Its fabric would have come from China; buttons from India; thread from Malaysia; design from France; sewing machines from Japan; electricity out of oil imported from Iran and so forth. It is only what the economists call the final value addition – that is, salaries paid to workers, remuneration to owners, interest paid to banks and rent paid to land owners – that truly belongs to Sri Lanka. 

Does rice produced by Sri Lankan farmers belong to Sri Lanka in its entirety? The popular view suggests ‘yes,’ but the truth is in the negative. What belongs to Sri Lanka is only the labour of the farmers, the value of seed paddy, water and land used and the services such as milling, wholesale and retail trading provided by other participants. 

In addition, a lot of other inputs used in rice production come from other countries: fertiliser from Iran, tractors, trucks and paddy mills from Japan and China, fuel from Malaysia and pesticide from Germany. Hence, every grain of rice produced in Sri Lanka is a global product of which only the final form is turned out on Sri Lanka’s soil.

Hence, today’s products are not national, but global products. 

It, therefore, does not matter whether a person works in Sri Lanka or elsewhere. As long as he works in the production chain, irrespective of the country and irrespective of the employer, he serves Sri Lanka. 

Is allowing the educated Sri Lankan youth to work abroad a sin?

Sri Lankan educated youth working abroad bring many benefits to the country.

First, Sri Lanka, through its well established higher education machinery, turns out a large number of professionals such as accountants, doctors, engineers and managers. The country’s economy does not expand sufficiently to absorb all these people into productive employment. Hence, the unemployment among the educated youth of the country is the highest among all sub-categories. Unless they are provided with job opportunities, it is inevitable that they become socially hostile and economically burdensome. It could lead to social tensions that could tear the otherwise coherent social fabric into pieces. Hence, foreign employment for the educated youth is a ‘safety valve’ to release the social tensions. 

Though the country had the goal of elevating its growth rate to above 8% in the medium, as the World Bank has predicted in its Development Update 2019, the expected growth in the next three year period will at best be around 3.5%. This cannot be raised unless the country gains from those who had left its shores previously. If they remit their earnings to Sri Lanka, that should not be subject to taxation. If they return with capital, they should be afforded all incentives to do so, including the tax break presently available to foreigners. This is a matter which the Finance Minister should take into account when prepares his Budget for 2019

Second, foreign employment also serves as a ‘shock absorber’, when the economies are subject to periodical economic downturns. When an economy improves year after year, it provides increased and lucrative job opportunities to people. However, when it is in the reverse, jobs become scarce and less remunerative. In such a temporary shock, some facility should be made available to keep the redundant workers occupied. The opportunities afforded to local labour to work in foreign countries help the economy to absorb the shock.

Third, labour is human capital and like any other capital unit, it is also subject to fast obsolescence. The knowledge base of the world changes rapidly, making the old workers unfit to fulfil modern jobs, unless they have re-educated themselves. Workers in developed countries automatically get exposure to new technology, better work practices and modern management techniques. This, therefore, serves as a university of learning for the educated youth who seek employment in developed countries. Many such workers from India and China have now returned to their home countries, bringing back with them, the new skills they have mastered whilst they were employed abroad. It actually adds value to the home economy by raising the quality of its work force. 

Fourth, like the ‘return of the prodigal son’, workers who had held high-tech and high-skilled jobs in developed countries have started to return to their home countries with their savings and a skills base to commence world class businesses in those countries. The experience and exposure they have got have helped them to integrate the local businesses with the global economy, thus reaping the benefits of the rising global trade in goods and services.

Fifth, when the educated youth leave a job market, it reduces the excess supply and raises the salaries of those left behind. It also provides incentives for others to acquire skills and enter the job market. Hence, the exodus of existing workers from one market to another always raises the welfare of those remaining behind. 

Brain gain

People who leave their home country to settle in a foreign land are referred to as the ‘diaspora’ of that home country. In times to come, they become a formidable force representing the home country in the foreign land ready and willing to support the home country whenever that country needs external support. This was amply demonstrated when India issued India Resurgent Bonds in 1990s to build its foreign reserves after the reserve level fell to a very low critical level. The bond issue was oversubscribed by the diaspora.

In addition, those who work abroad send regular remittances to maintain their family members at home. Those remittances in hard currency form a significant flow of foreign exchange in the home country to finance its balance of payments deficits, specifically at a time when the country has been hit by an unexpected increase in the prices of essential import goods or a fall in the prices of its export goods. Sri Lanka was one of the beneficiaries on this count in the last two decades. The annual flow of such remittances in 2008 was closer to $ 3 billion. These remittances financed about a three-fourth of the high oil bill in that year. 

Remittances by migrant workers have been an important source of foreign exchange for many poor countries. The notable examples are Bangladesh, Pakistan and the Philippines.

Sri Lanka’s history has recorded a plenty of instances where the country had used the foreign skilled workers to construct giant reservoirs, huge pagodas, sophisticated irrigation channels, marvellous monumental buildings and artistically sculptured statues. These skilled engineers and artistes were paid at that time in gold which was an outflow of resources from the country. Yet the payments were made because their services were needed by the country due to a shortage of such skills compared to the requirements. In today’s parlance, it was a reverse brain drain for Sri Lanka and a brain gain for the home countries of those skilled workers and artistes.

Sri Lanka should therefore encourage those Sri Lankans working abroad to return with experience, capital and better management techniques. These are woefully lacking in the country at the present state of economic development. 

Though the country had the goal of elevating its growth rate to above 8% in the medium, as the World Bank has predicted in its Development Update 2019, the expected growth in the next three year period will at best be around 3.5%. This cannot be raised unless the country gains from those who had left its shores previously. 

If they remit their earnings to Sri Lanka, that should not be subject to taxation. If they return with capital, they should be afforded all incentives to do so, including the tax break presently available to foreigners. This is a matter which the Finance Minister should take into account when prepares his Budget for 2019.

Thus, it is time for Sri Lanka to convert its brain drain into brain gain.

(W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at [email protected].)