About a decade ago—long before the word “Brexit” entered the popular vernacular—it seemed like the European project was on the brink of collapse.
Between 2009 and 2013, Portugal, Italy, Ireland, Greece, and Spain (a group derisively known as the PIIGS) were in danger of defaulting on their sovereign debt, and of bringing other Eurozone countries down with them. The EU and the IMF bailed out Greece, Ireland, and Portugal, ushering in an era of economic austerity that wrought wide-ranging social and political consequences. One result was that many workers, especially the young, left in search of better economic opportunity elsewhere.
Now, many of the Southern European nations hurt by this so-called ”brain drain” are implementing policies to incentivize their citizens to come home. From tax relief to wage subsidies, these countries have one message for those who left: You can come back now. But will they?
The European “brain drain” of the 2010s
In 2010, 5.8% of Europeans with a college degree left their home country. Economic need largely motivated them. Workers were fleeing high unemployment, low wages, and poor living standards.
At the same time, in Central and European states, the debt crisis accelerated a trend that began in the mid- to late-2000s, when countries like Bulgaria and Latvia joined the European Union and, later, the Schengen area, which allows for the free movement of labor. People in these countries could suddenly settle and work anywhere in the EU, and they did, going to places where there were more higher-paying jobs, especially for young people.
This depleted the young worker population in the region. According to a report by the European Commission (p. 9), if current emigration trends remained the same, the population of Romania would decrease by 30%, from 19.9 million in 2015 to 13.8 million in 2060. But if Romania wasn’t an EU member state, and its people didn’t have the freedom to move around the EU, the loss would be only 14%.
These countries can ill-afford to lose their best and brightest. Across Europe, populations are aging and fertility is down, leading to what some have called a demographic time-bomb (paywall).
Southern Europe’s fertility rate is one of the lowest in the world, at 1.37 child per woman, well below the population replacement level. Immigrants from poorer EU countries could help offset this loss. But there is no such option for Eastern and Central European states, where fertility is higher but emigration more dramatic. Because workers who emigrate tend to be younger, these countries are left with a reduced population and an aging workforce, which “leads to lower productive potential and accelerated population aging,” according to the European Commission report.
According to the United Nations, of the top 10 countries with the fastest shrinking populations, six are EU member states—Bulgaria, Latvia, Croatia, Lithuania, Romania, and Greece—and one, Serbia, is on the EU accession list.
What are “reverse brain drain” policies and do they work?
Policies that seek to reverse the emigration of highly-skilled labor can take many forms.
Last year, Greece launched Rebrain Greece, a program that offers 500 workers between 28 and 40 years old a job and a pre-tax monthly wage of €3,000 ($3,318) if they return to Greece and “bring with them the knowhow gained abroad, innovations and fresh ideas.” The Greek government has committed to covering 70% of these salaries, with companies contributing the other 30%.
Meanwhile, since July 2019, Portugal’s Programa Regressar (“return program”) has offered returnees who sign a full-time work contract in Portugal a cash incentive worth €2,614 ($2,891), a 50% income tax reduction for five years, and a cover for relocation costs worth up to €3,886 ($4,299).
The Italian parliament expanded its rientro dei cervelli (pdf) (“return of the brains”) program in May of last year. Italian nationals who relocate to Italy with a work contract and agree to stay there for at least two years can now get a 70% break on their income tax for up to 10 years. And in August of last year, the Polish government declared that it would eliminate income tax for roughly two million Polish workers under the age of 26—a move aimed at attracting its citizens back but also encouraging young Poles to stay and work in their home country.
It’s not clear that programs like these actually work. Only 71 people took advantage of Portugal’s offer to move back home when the return program launched, and so in October the government eased some requirements, making it easier for people to qualify for the program. Italy also eased conditions on its rientro dei cervelli program.
Cyril Muller and Asli Demirgüç-Kunt, experts on Eurasia at the World Bank, wrote in a recent blog post that countries focus too much on additive programs and not enough on the underlying socio-economic conditions that led people to leave in the first place. All the tax incentives in the world can’t make up for stagnating economies and democratic backsliding, says Pawel Zerka, a policy fellow at the European Council on Foreign Relations (ECFR), who left Poland in 2017 to work in France and has no immediate plans to return.
“This is about much more than just economic incentive,” he says. “Everyone wants to lead a life…which is agreeable, secure, and decent.” He argued in a recent article that governments should focus instead on improving public services like healthcare and education, reducing air pollution and corruption, and ensuring law and order.
“If people feel that they lack a better future where they are, many of them will continue to vote with their feet,” Zerka explained in his article. “And even the fanciest system of fiscal incentives for people to come back home … makes little sense if it is not accompanied with structural reforms.”