The Brain Drain debate is taxing the Prime Minister

By Walter Robinson
web posted August 2, 1999

The "brain drain" debate in Canada has reached a fever pitch with new reports being released on an almost daily basis. There is no shortage of lobbyists, politicians and columnists who have waded into this debate.

Of particular note is Prime Minister Jean Chretien who continues to believe that the "brain drain" is some sort of hoax engineered by a conspiracy of well-to-do business types greedily looking for a tax cut.

He chose to ignore the World Competitiveness report that ranked us 36th out of 47 countries in our ability to retain well-educated people. And he somehow missed the Standard & Poors DRI report which warned that rising incomes in the U.S. could precipitate an exodus of Canadians stateside.

Jean "If you don't like taxes, tough" Chretien is bolstered by a study from the Canadian Association of University Teachers (CAUT) that states "the alleged brain drain is unjustifiably being used to promote a tax cut agenda." Instead of disproving a 1998 C.D. Howe Institute study that is considered the benchmark in this debate, CAUT's tome actually reinforced its findings.

In a paper entitled Canadian Human Capital Transfers: The United States and Beyond, the Institute showed that between 1980 and 1996 we lost 6 managers and professionals to the United States for every one that immigrated from the States. The CAUT paper shows similar data for 1996 and finds that emigration to the U.S. in selected occupation categories (engineers, computer scientists, natural scientists, nurses and physicians) totaled 2,475 individuals while immigration from the U.S. across the same occupations totaled 302.

The latest OECD figures show that government expenditures represent 42.6% of GDP in Canada and 31.6% in the U.S. This includes the 6.4% of GDP that we spend on public health care. The comparable American figure is 6.5%. If we were to factor in private health care costs (2.9% of GDP in Canada, 7.5% in the U.S.), total government outlays are still higher in Canada by 15%

So the ratio of U.S. emigrants to U.S. immigrants is now 8.2 to 1, not 6 to 1 as the C.D. study concluded. The brain drain is getting worse, not better.

To be fair, CAUT and other "brain drain is a myth" proponents point to Statistics Canada numbers that indicate net inflows of immigrants versus net outflows are negligible, hence they say there is no brain drain.

But these numbers don't capture a variety of qualitative concerns. Workers leaving Canada for the U.S. are leaving for solid employment offerings, the same can not be said for those entering Canada from abroad. Professional and academic credentials from abroad are not necessarily applicable to Canadian employment opportunities. And Statistics Canada data do not capture the significant amounts of cross-border traffic due to temporary work authorizations available under NAFTA.

The real kicker in the CAUT study is their conclusion that "the bulk of evidence suggests people emigrate primarily in search of work, not lower taxes." Yes people do leave for greener pastures in search of work opportunities. What CAUT conveniently fails to mention is that job opportunities, whether they are in the U.S. or Canada, are most abundant in low tax jurisdictions.

Yes the brain drain is real and this debate is definitely taxing on the Prime Minister.

Walter Robinson is the Federal Director of the Canadian Taxpayers Association.




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