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Blocking the brain drain

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by John Adams, director of research, ippr north
Progress Journal - 21 October 2004

Regional policy is undergoing somewhat of a renaissance at the moment, with a specific commitment in the Spending Review of 2004 to “make sustainable improvements in the economic performance of all English regions and over the long term reduce the persistent gap in growth rates between the regions”. This target can be criticised for a lack of ambition, as it simply aims to reduce the rate at which the south gets richer and the north gets poorer, rather than aiming to reverse regional disparities. Nevertheless, we do have an explicit government commitment which focuses on regional economic disparities.

A number of factors have contributed to the rise of regional issues, but the most important is the rise of HM Treasury as champions of Labour’s ‘New Regional Policy’. Though some have sought to question the existence of any ‘north-south divide’, there are clear and significant regional economic differentials within the UK.

Using the government’s new preferred measure of output, ‘Gross Value Added’ (GVA), levels of output are well above the national average in a ‘winner’s circle’ in the greater south-east - consisting of London, the east of England and south-east regions. The rest of the country has lower levels of prosperity, and three regions lag significantly: Northern Ireland, Wales and the north east of England.

But while there is a growing consensus that the UK’s serious regional economic disparities need to be tackled, there is less of a consensus over the causes of these disparities and what policy instruments would make a real difference. Skills and training issues are of crucial importance in these debates, as human capital is obviously an important determinant of economic growth. Indeed, HM Treasury would argue that skills are the key factor affecting levels of regional economic growth.

There is a fairly clear ‘north-south’ gap across the English regions in terms of qualifications. London, the south east and the south west have significantly higher proportions of the working age population with higher education qualifications and lower proportions of the population with no qualifications. The three northern English regions and the Midlands regions have fewer graduates and more unqualified people. Official figures released by the DfES in May 2004 show that nearly a third of workers in London had a degree or equivalent in 2002/03 while in the North East the figure was 19 per cent.

The situation is slightly more complicated in the devolved territories. Scotland has a relatively high proportion of graduates in its working age population, though it also has greater numbers of unqualified people than England. Wales and Northern Ireland are similar to the less advantaged English regions in terms of the proportions with higher education qualifications (level 4 and above), but Northern Ireland has a bigger proportion of the working age population lacking any qualifications - about one quarter in 2002.

Universities in the North produce a steady supply of graduates, and northern regions are attractive to 18 year olds deciding where to study - for example, the North East is a net importer of students, and one recent study concluded that the students that migrate to study in the North East are actually more likely to be drawn from more affluent postcode areas than those migrating to study in other UK regions. However, there is a continuing shortage of graduate jobs in the North, and the regional economies in the north simply do not provide sufficient jobs to keep these highly qualified people in the region. The better qualified are one of the most geographically mobile sections of the population and they will look elsewhere for employment, particularly the greater south east where a higher proportion of better jobs is on offer. This is the infamous ‘brain drain’ in operation.

This study also stressed that the highly qualified people who leave the northern regions are acting quite rationally. The evidence shows that it is those graduates from north-east universities who leave the region after graduation who are more likely to do well in the job market. By contrast, those graduates who remain in the north-east tend to do worse in employment terms than graduates from most other UK regions. Public agencies in regions such as the north-east give great attention to graduate retention programmes, but in the absence of a sufficient supply of 'good' jobs to retain the highly qualified, such programmes face an uphill struggle.

Decision-makers in the north face a vicious circle. Lagging regions find it difficult to retain highly skilled workers in the absence of good employment opportunities. However, high value added economic activity is more likely to be attracted to regions with a well-qualified workforce, and the availability of skilled labour will probably help foster innovation and facilitate investment. Furthermore, the presence of well-paid jobs demanding significant skills and qualifications will attract highly skilled migrants from other regions, where such jobs are in short supply.

There is also the potential of a further vicious circle here. A range of background factors - social class, parental education and experience of child poverty - are major determinants of educational attainment. Therefore, because in poorer regions fewer parents have experience of higher education and more children live in poverty, the region will have lower levels of educational attainment. Those young people who do attain good qualifications may well migrate out of the region in the absence of enough good jobs locally.

So what are the implications for public policy? First, it should be noted that the ‘brain drain’ issue does not mean that other equally important regional education and training issues should not be addressed with equal urgency, particularly as these issues actually affect a wider number of people. Decision-makers in the North also need to focus on the objective of continuing to encourage better attainment at sixteen, to improve staying-on rates and attainment post-16. In part this relies on the education system being able to compensate for some of the adverse social and economic background factors that help to explain poor attainment.

Regional and local agencies operate numerous graduate retention schemes – one recent mapping exercise identified 23 in the north-east alone. Some of these schemes aim to increase the number of graduates starting their own businesses (although studies show that the more successful entrepreneurs are individuals in their 30s and 40s who already have experience of working in a particular sector). Other schemes aim to secure employment for recent graduates, and are usually supply-side in nature. Demand-side schemes aimed at developing the interest of employers in recruiting graduates are present but less pronounced.

If policy-makers aim only to improve the supply of qualified labour in the north, there is no guarantee that this would not simply translate into a higher rate of selective out-migration of the well qualified to more prosperous regions in the absence of policies that bring more highly skilled jobs to the north. The key to tackling the ‘brain drain’ issue is promote a stronger regional economic policy across a number of policy fronts – skills, enterprise, innovation, public investment, the housing market and labour market reforms. Only then can we create more good quality jobs in lagging regions.