The German “Brain Drain” Continues

While the tax competition debate usually focuses on capital flows, there is growing evidence that talented individuals are “voting with their feet” and leaving high-tax regimes. German and French taxpayers are among the most likely to emigrate, according to the New York Times, with Swtizerland and the United States being favorite destinations:

Benedikt Thoma recalls the moment he began to think seriously about leaving Germany. It was in 2004, at a New Year’s Day reception in nearby Frankfurt, and the guest speaker, a prominent politician, was lamenting the fact that every year thousands of educated Germans turn their backs on their homeland. …There has been a steady exodus over the years, but it has recently become Topic A in a land already saddled with one of the most rapidly aging and shrinking populations of any Western nation. With evidence that more professionals are leaving now than in past years, politicians and business executives warn about the loss of their country’s best and brightest. …The trigger for this latest bout of angst was the release last fall of new government statistics showing that 144,800 Germans emigrated in 2005, up from 109,500 in 2001. At the same time, only 128,100 Germans returned, a decline of nearly 50,000 from the year before. That made it the first year in nearly four decades that more people left than came home. Demographic experts also say the nature of the emigrants is changing. These are not just young unskilled workers like those who fled the economically blighted eastern part of Germany after the country was reunified in 1990 to work in restaurants in Austria or Switzerland. They are doctors, engineers, architects and scientists — just the sort of highly educated professionals that Germany needs to compete with economic up-and-comers like China and India. “It’s not a problem of numbers as much as brain drain,” said Reiner Klingholz, the director of the Berlin Institute for Population and Development. “What we desperately need in the near future are talented and qualified people to replace those who will retire in 15 to 20 years.” …Germany is not the only European country losing people. Nicolas Sarkozy, the conservative presidential candidate in France, recently held a rally in London, home to 300,000 French citizens living in Britain, urging them to return and “make France a great nation.” The number of French citizens living in Britain jumped 8.4 percent in 2005, according to government statistics. But the total number of French people living outside the country grew only 1.2 percent, or 15,300 people, roughly equivalent to Germany’s net loss of about 16,700 citizens. Caveats aside, there is plenty of anecdotal evidence that Germany has become less attractive for people in fields like medicine, academic research and engineering. Those who leave cite chronic unemployment, a rigid labor market, stifling bureaucracy, high taxes and the plodding economy — which, though better recently, still lags behind that of the United States. …While the European Union’s expansion has given Germans more options, their two favorite destinations are outside it: Switzerland and the United States.