The phenomenon of brain drain started in the 1950s and picked up speed in the later decades but appears to have slowed down over the past few years reflecting, in part, improvements of living conditions in many of the poor countries and, especially, in emerging economies of East Asia, Mid-East and parts of Africa and Latin America.
Looking at the evidence of this closer to home—India—much smaller number of professionals, business elites and venture capitalists now dream of better opportunities in America and Europe as incentives for migration. On the contrary, there is some evidence of “reverse brain drain”, meaning that a sizeable number of earlier migrants who had left for professional reasons are returning home where economic conditions have improved.
Scarcity of manual labor in the industrial and service sectors should also encourage investment in new equipment and technology, which would help productivity growth in these sectors.
However, over the past decade or two, brain-drain is being replaced by outflows of unskilled and semi-skilled workers from many of the poorest countries to far away destinations—most of them for short periods of less than a year. Labor contracts are arranged by intermediaries, with requirement that worker would return to home countries after the expiry of contract. Unofficial estimate for Nepal put the number of temporary migrants between four to five million, which is about a third of the country’s working-age population.
No term currently is in use – parallel to brain drain – to describe the outflow of unskilled labor on such a large scale but we can capture the essence of this phenomenon by coining a new phrase: muscle drain. Difference between brain drain and muscle drain can be stated succinctly—the first one is the loss of educated and skilled manpower, more or less on a permanent basis, while the second one describes the migration of uneducated and unskilled workforce on a temporary basis, who continue to maintain strong ties with families back home, support them financially and return home with most of what they earn.
MUSCLE DRAIN BENEFITS
While brain drain can be argued as amounting to a net loss for the economy and society (there is minuscule level of offsetting gain from the migration of educated and skilled professionals on a permanent basis), short-term migration of workers, in large part, is beneficial.
The magnitude of benefits can be assessed from a number of points of view. First, most of the temporary migrants are likely to be rural residents, where they can be fully or seasonally unemployed in agriculture or petty trades. Their presence may be adding very little to total production and, to the contrary, those working in overcrowded condition may have a negative effect on productivity, meaning that drawing them away from farming and petty trades can actually increase total production. Given this perspective, the mere withdrawal of “excess” workforce from the countryside would help increase national production and accelerate economy’s growth rate.
The other and well-recognized benefit ensuing from the muscle drain is the remittances workers send home, which can be sizeable. Nepal is not the largest recipient of workers’ remittance on a per capita term but it happens to be quite large – some US$2 billion on an annual basis, which is about a fifth of national economy or GDP. In terms of balance of payment support, workers’ remittance is larger than total export of the country and it makes significant contribution to the build-up of nation’s foreign currency reserves, now exceeding US$3 billion.
Finally, counting the benefits from temporary migration of unskilled workers, one can safely assume that these workers return home with knowledge, skills and superior work habits otherwise not acquired within the existing constraints of their home environment. They accumulate savings that help to improve work skills, acquire physical capital, become small entrepreneurs and send children to school—big achievements compared to the situation of extremely low level of savings of farm households and their limited access to borrowed capital back home.
MIXED BLESSING
While worker migration contributes to the national well-being in a number of ways, it can be harmful for the society at large (for example, family separation) and can have adverse effects on the economy unless managed properly.
The alarming evidence of the ill-effects of worker migration is the emptying of our countryside and small towns of able-bodied young males of 20 to 50 years of age. A significant amount of this population was engaged in agricultural activities which have shrunk during the past decade, a period of rapid rise in the number of workers seeking foreign employment. In the absence of mechanization, shortage of labor for agricultural work has meant a proportional decline in production of most basic commodities, with grain output losing much of its growth momentum and food shortages becoming a common occurrence in many parts of the country.
One largely overlooked effect of worker migration has been the reduced profitability of farming operations. Because of the absence of mechanization and skewed ownership of cultivation land, much of the farming is dependent on the use of wage labor. Migration of farm workers has pushed up the wage rate far in excess of productivity. The consequent decline of profit margin has discouraged affluent farmers from making use of hired labor and even stopping cultivation altogether. There are definite indications of farm output in the country declining, especially in the southern plains where most of the cultivation had depended on the use of hired labor.
However, considering the opportunities for structural transformation, the overall economic effects of large-scale labor migration still appears positive.
Historically, economic growth has come about from the relocation of agricultural labor, from rural areas for factory work in city and town areas. Such relocation benefited farm productivity by reducing over-crowding while, at the same time, industrial sector got cheap labor for factory production. While industrial employment created better value for under-employed agricultural workers, scarcity of workers on farms encouraged the use of labor-saving devices, adoption of improved technology and production for the market. Higher productivity and incomes in dominant sectors of the economy set the stage for rapid economic growth.
CONTRIBUTION TO DEVELOPMENT
In the agricultural sector, a shortage of farm workers should induce mechanization and use of improved farming methods, without fear of displacing usefully employed workers. This should help improve farm productivity, promote commercial production and stop migration of rural population to urban areas in search of better-paying jobs. Scarcity of manual labor in the industrial and service sectors should also encourage investment in new equipment and technology, which would help productivity growth in these sectors.
Given the prospects for structural transformation, economic benefits from labor migration need not be limited to the volume of remittances received—its longer-term benefits are far greater, in view of the opportunities it offers for the development of key sectors of the economy. The challenge then is to put in place appropriate policies to exploit those opportunities.
Looking at such opportunities, government policies should create favorable conditions for attracting capital and technology to compensate for the loss of manual labor due to migration. In the farming sector, especially in southern plains, legislation for compulsory land consolidation should be enacted to encourage large-scale commercial farming. Additional help can be given for the commercial development of agriculture by substantially increasing or eliminating the current ceiling on landownership.
Part of the capital needed for new investments in agriculture can be available from the investors but the greater part of investment capital would need to be financed from outside sources. Government can play a catalytic role in tapping at least a part of workers remittances for investment in agriculture and industry. Such use of remittance money can be far more productive than spending it for current consumption and for purchases of real estate which, apparently, are the most popular channels of absorption.
(Writer is an economist.)
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