'Why we're losing our minds'

New report says brain drain is no myth

We're losing our best minds to lower taxes, higher incomes and better job opportunities south of the border, says the Conference Board of Canada, which warns the increasing brain drain threatens to deplete Canada's pool of skilled workers.

In a study released yesterday titled Are We Losing Our Minds? the major economic research firm challenged Prime Minister Jean Chretien's claim that the brain drain is a "myth" created by business to pressure government into cutting taxes.

And it ridiculed studies by Statistics Canada and some private researchers that have concluded there is no brain drain but a brain gain, as flawed and incomplete.

Mr. Chretien, however, immediately scoffed at the board's findings.

"Everybody has his own statistics on that," Mr. Chretien said as he arrived at a meeting of the Liberal caucus in Halifax, where tax cuts are expected to be a dominant and possibly divisive issue. "We're importing a lot of brains.

"The quality of life of Canada is very good," he continued. "The people love to be in Canada and a lot are coming to Canada to live here."

Alberta Reform MP Rahim Jaffer, however, said the board's findings are "not surprising" and support the official Opposition's call for tax relief.

Walter Robinson, federal director of the Canadian Federation of Taxpayers, said the "evidence seems to be starting to weigh much more in favour of the real existence of a brain drain." But he admitted "the debate will rage on."

The report blasted government for its slowness in reducing Canada's heavier tax burden, which is "especially" to blame for the unprecedented loss to the United States of Canada's best and brightest.

"Professionals like physicians, nurses and engineers are leaving the country at a rate higher than their rate of entry into the Canadian labour force, which could jeopardize the country's pool of highly skilled professionals in the long term," said Charles Barrett, the board's vice-president of business research.

"Policymakers need to pay attention. If the present trend continues, our labour pool may be gradually depleted, with significant negative repercussions for our quality of life."

And the report said it is "troubling" that Finance Minister Paul Martin has indicated that "the reduction of the tax burden should be gradual and incremental, lasting at least 20 years."

"According to this view, the world must stand still until the year 2020 so that Canada can play catchup," it said.

The study found that the number of permanent and non-permanent Canadian emigrants to the United States, which was relatively stable at 17,000 a year until 1989, had reached 98,000 by 1997, most of which was due to a six-fold increase since free trade in the number working in the U.S. on temporary visas.

Statistics Canada, which didn't count temporary workers, found no significant brain drain and in fact a brain gain, when the flow of skilled workers into Canada from other countries was included.

But the board argued those working in the U.S. on temporary visas must be counted because they are not available for employment here, and that "unofficial" estimates by U.S. authorities suggest 60 per cent eventually apply for permanent work visas.

Statistics Canada researcher Scott Murray responded that the the board is vastly overstating the actual number of Canadians working in the United States on temporary visas.

Further, the federal agency will soon release new findings showing that less than two per cent of Canadian university graduates are going south for jobs.

The conference board said that from the mid-1980s to the mid-90s, the proportion of new graduates working in the U.S. rose to 69 per cent from 27 per cent in computer sciences, to 56 from 30 per cent in nursing, to 52 from 23 per cent in engineering, to 44 from 36 per cent among doctors, and to 23 from seven per cent in natural sciences.

The board put much of the blame for those and the losses of other skilled workers on Canada's higher tax burden.

"It is clear that taxes are higher in Canada," it said. "For example, a person who earns $50,000 pays 36.8 per cent of gross income in various taxes in Canada compared to 31.7 per cent in the United States."

"This means that even lower income earners can realize the benefit of moving to the United States."

Further, as income rises the gap widens, it added.

"At the $250,000 level, total tax payment rises to 41.2 per cent of gross income in Canada but amounts to only 29.7 per cent in the United States.

Although the federal government is often criticized for the extra tax burden Canadians bear, the board said the gap with the U.S. is largely due to high rates of provincial income tax and surtax.

But it's not just lower U.S. taxes that are luring Canadians, it said.

"The decision by highly skilled Canadians to emigrate to the United States is also strongly influenced by factors like higher earnings and better job opportunities."

Both the earnings and unemployment gap between Canada and the U.S. have been widening, it said, adding that "all economic factors that influence the decision to move are in favour of the United States."

"Quality of life and health care are a lower priority," it said, noting that those leaving are often young and provided with health care coverage by their American employers.