Thomas White Global Investing
Italy
Italy Stamp
May 21, 2010
A Postcard from Europe
Italy: Brain Drain Rises as Economy Struggles

Borsa stock exchange in Milan

Italy, the Euro region’s third-largest economy, slipped into recession again in the fourth quarter last year.

It’s been the subject of books. The subject of many an article. And the subject of many a fiery politician’s rant. Italy’s ‘brain drain’ is not a new phenomenon. But it is only now that the loss of intellectual capital from the country is reaching alarming proportions, as Italy struggles to emerge from the mire of a debilitating recession.

Depressed by the prevailing economic climate, young Italian graduates are finding it easier to obtain and retain jobs overseas. Not only do they receive more competitive salaries, these ambitious Italians find that the country’s old ways of running its system are bureaucratic stumbling blocks too big to overcome. It is not the education received in Italy that is the problem. On the contrary, Italians have admitted that their education is of the highest quality. But graduates find that the jobs they obtain don’t match the skills they have amassed during their study years. And so Italians move – to the U.S., U.K, and even other neighboring countries in Europe.

Just how depressing is the situation at home? The International Monetary Fund (IMF) expects the Italian economy to grow just 0.8% this year and improve to 1.2% in 2011. And the news is worse on the unemployment front. The country’s unemployment rate is poised to reach 8.7% this year, and even 2011 will see just a marginal drop to 8.6%, according to the IMF. So far, the IMF’s projections seem to be on the mark. February unemployment stood at 8.5% compared to the previous year figure of 7.3%. There are no precise statistics, however, on emigration from Italy, but various papers over the years have pointed out that the problem has worsened since the 1990s.

Corruption and bureaucracy also plague the system, creating an environment that drives Italians away to countries that offer them the scope to exercise their creativity and skill in a more nurturing atmosphere. Researchers, for instance, find Italy’s academic environment too stifling and restrictive – academic positions are hard to find and often enthusiastic researchers are daunted by low salaries, bureaucracy and the absence of a real meritocracy. As well, the Italian labor market has been criticized for being too rigid and protectionist towards those already in a job. The result? Escape from Italy!

The government is all too aware of the seriousness of the problem. Since 2001, it has been trying to reverse the trend into a ‘brain gain’. By launching a program called ‘brain buster”, officials hope to encourage researchers settled abroad to return to Italy, promising advancements in their academic career. But that program has not been a rousing success. The government will also need to be careful to control its debt, to avoid the replaying of its neighbor’s Greek tragedy. As Sergio Nava, the owner of a blog called La Fuga dei Talenti (The Flight of Talent) commented to Deutsche Welle ‘…in an era of globalization’ Italy can no longer afford to push away its best brains. Somehow, this flight of talent must book a return trip.

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