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Emigration won’t dilute human capital, says Davy analysis
By Noreen Bowden | February 19, 2010
An analysis from Davy has gotten a lot of news attention today. The research report into the Irish economy says that we wasted the boom, and issues a damning verdict on how Ireland misallocated its investment from 2000 to 2008, resulting in poor infrastructure with inadequate roads, rail, schools, hospitals and telecoms.
One area where the report is suprisingly reassuring, however, is in the analysis of emigration.
This analysis of our capital stock has one glaring omission: human capital. Looking to the medium term, this is Ireland’s greatest strength. The economy has the highest number of graduates in the 25-34 population in the EU-27, with the exception of Cyprus. That proportion (and its average quality) may depreciate somewhat if recovery does not take hold and emigration accelerates. But so far the outflow through emigration has been hyped while ignoring the mix.
First, net inward migration has turned negative mainly because immigration (people coming to Ireland) has collapsed rather than due to a surge in emigration (people leaving).
Second, a high proportion of those who have left are low-skilled and worked in construction where employment has more than halved. Construction, by its very nature, is a highly labour-intensive and low-productivity industry. Workers tend to be mobile, and emigration from this sector will not particularly dilute the quality of human capital in Ireland.
Moreover, the nascent recovery of the international-traded sectors will keep many of our graduates at home. Longer-term, investment in education must remain the salient priority.
I would dispute the assertion that there has been no surge in emigration. The emigration figures from Ireland were up 43% between 2008 and 2009, and up 145% between 2004 and 2009. The new phenomenon, of course, is that the majority of emigrants were going to the newer countries of the EU, and were thus presumably immigrants returning home. This is obviously not the same thing as suggesting there has been no upsurge in emigration.
The characterisation of the current emigrant outflow being comprised mostly of construction workers and therefore not “diluting the quality of human capital” rests uneasily with me. First, I’m not aware of recent studies that break down emigration by occupational sector (please let me know if you know of any), so I’m presuming this is based on anecdotal evidence. There appears to be plenty of anecdotal evidence asserting, however, that it is not just manual labourers but also third-level graduates who are leaving. (In today’s Irish Times alone, for example, two graduates tell their emigration tales.)
It’s also at odds with the Tanaiste’s recent comments that emigration today is comprised of those Irish young people who are emigrating “to gain experience” and “want to enjoy themselves’ and are leaving “with degrees, PhDs. They are people who have a greater acumen academically and they have found work in other parts of the world.”
So on the one hand, we are reassured that we need not trouble ourselves with the upsurge in emigration because (a) it’s really not happening and (b) it’s not going to lower the quality of our labour force, and on the other hand, we need not trouble ourselves with the upsurge in emigration because these are highly educated people “who want to enjoy themselves”.
Obviously, this is a complex issue. We’ve heard very little of ‘brain drain’ with this upsurge of emigration, because the model of “brain circulation” has largely displaced the concept of permanent loss in migration thinking. We know from the boom that networks of well-educated Irish people can be an asset for our economy, no matter where they live, and many of them may eventually return if there is a return to substantial growth.
In terms of economic costs, emigration’s toll may not be all that harsh. Obviously, in the short term, emigration is a tried-and-true safety valve; sending off surplus labour will save social welfare money, and relieving the pressure on the unemployment rate will certainly make our economic performance look better on paper. And each unemployed person who leaves is one fewer potentially angry voter when it comes to election time.
But involuntary emigration carries very high potential human costs, and any analysis that does not take those into account is not looking at the full picture. Davy might call it “hype”, but the concern over rising emigration rates reflects Ireland’s long experience with a phenomenon many of us thought was gone forever.
See the report on the Davy.ie website
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