Unrealized potential: The challenge of ‘brain waste’ among Europe&#03

Most European countries are currently facing a major skill shortage amid an ageing work force and declining birth rates.

Some countries like Germany have enacted significant changes to their immigration system in an attempt to attract more skilled workers into their midst to close these gaps. Other countries have entered into direct agreements with foreign governments to bring skilled workers in.

However, recent studies reveal that highly educated immigrants who already are in Europe are often ‘underutilized,’ resulting in what is known as “brain waste,” with many skilled migrants missing out on career opportunities and working in jobs which do not reflect their skillset.

Recent academic research conducted by Angela Dalmonte and Tommaso Frattini has shed some new light on such integration challenges faced by highly educated immigrants in Europe.

Despite a similar proportion of university graduates among immigrants and the native population of Europe (32% versus 34%), immigrants with foreign degrees face lower employment probabilities and are more likely to be overqualified for the jobs they are in.

Also read: Italy needs 2.3 million domestic staff, 2/3 from abroad

Understanding brain waste – and its causes

The European Commission defines “brain waste” as the failure to recognize and utilize the skills and qualifications that migrants bring from their countries of origin.

This issue can manifest in several ways, including being overqualified and underpaid, or experiencing higher unemployment rates compared to similarly educated nationals of host countries. In other instances, immigrants may work fewer hours than they wish or are qualified for, compared to their native counterparts.

Dalmonte and Frattini found that in most European countries, tertiary-educated migrants come from countries with an overall “lower educational quality than in their destination”.

That differential is strongest in Denmark, Germany, Italy, and the Netherlands, whereas it is smaller — or even positive — in countries like Latvia and Norway.

But the persistently high levels of over-education among immigrants with foreign degrees might not only reflect educational quality differences but also potential mismeasurement of skills.

Immigrants with foreign degrees face a 15.6 percentage point lower employment probability than natives with similar qualifications. Additionally, they are 22 percentage points more likely to be over-educated compared to their native counterparts.

Also read: Germany: ‘Opportunity Card’ launches for skilled migrants to seek employment

What is behind brain waste?

Several factors contribute to the underutilization of highly educated immigrants, including language barriers, differences in educational standards or skillsets, and discriminatory policies that limit access to career opportunities from immigrant compared to their local counterparts.

A collaborative investigative series by Lighthouse Reports, The Financial Times, El Pais, and Unbias the News uncovered significant misalignment between migrants’ actual jobs in Europe and their academic qualifications.

Analyzing data from Eurostat’s Labor Force Survey (2017 – 2022) across all EU countries as well as Norway, Switzerland, Iceland, and the UK (until 2019), the report revealed that nearly half of college-educated migrants in Europe are overqualified for their jobs, and are almost twice as likely to be unemployed as native workers.

This disparity exists even despite similar education levels between locals and immigrants. Educated migrant women meanwhile face even higher unemployment rates, while asylum seekers, who usually are among the most vulnerable immigrants, experience the poorest employment outcomes and highest levels of brain waste among all migrant groups.

Dalmonte and Frattini attribute part of the over-education gap to the aforementioned differences in educational standards between immigrants’ countries of origin and their host countries, as many immigrants often come from countries with lower educational quality, according to data from Harmonized Learning Outcomes.

However, Dalmonte and Frattini’s research also indicates that this mismatch persists even after accounting and adjusting for educational quality and language barriers: Factors such as discrimination in hiring, inadequate recognition of foreign qualifications, and ineffective integration policies further exacerbate brain waste among highly educated immigrants.

Also read: Skilled professionals leaving Germany for other English speaking countries

Economic Implications

In their research Dalmonte and Frattini found evidence of a “significant waste of skills” that could otherwise benefit the European labor market. They warn that this mismatch has “substantial implications not only for immigrants but also for host countries, given the importance of human capital for economic growth.”

The economic cost of brain waste meanwhile is also a substantial factor, according to research: If highly educated migrants were employed in roles matching their qualifications and earned wages comparable to natives, the European economy could potentially see an increase of €33.8 billion annually.

Currently, the wage gap between migrant graduates and their local counterparts amounts to about €10.7 billion in losses annually, representing 0.12% of the combined GDP of affected countries.

The extent of brain waste, however, varies significantly across Europe: Countries such as Italy, Greece, Spain, and Sweden exhibit high levels of brain waste, while Portugal has been successful in integrating highly educated migrants.

Portugal’s approach includes supportive policies like free language training, mentoring programs, and effective job matching strategies. Furthermore, Portugal is trying to counter its own “brain drain” (native populations moving abroad for better job opportunities) by managing immigrant talent skilfully.

Also read: Brain waste: Immigrants overqualified but underemployed and underpaid

Selective immigration

Many European countries are increasingly adopting ‘selective immigration’ policies to address their labor shortages amid rising rates of irregular migration and a growth in asylum applications.

Despite restrictive measures and the increasing trend to outsource asylum systems (by countries such as Italy and Hungary), Europe’s aging population and labor market needs are driving governments to amend their immigration laws.

By late 2023, many European SMEs (small and midsize enterprises) were reported as struggling to fill vacancies, as the EU projected a need for millions of new workers in the coming years. Certain sectors, including nursing and renewable energies, are operating at a net loss of workers, meaning that more employees are leaving the sector or retiring than people entering.

Selective immigration programs could help solve parts of these issues by creating legal pathways to attract such talent.

Legal immigration, however, still remains insufficient as a response to the changing needs of the labor market, with only a fraction of new arrivals to Europe having such work visas. EU officials advocate for safer, legal immigration pathways to address these gaps and to also regularize and gain control over their immigration.

But there are some success stories, too: Spain’s economic growth in 2023, which surpassed the Eurozone average, has been significantly supported by the influx of immigrant labor. Immigrants, coming predominantly from Latin America, accounted for 64% of new hires and contributed to half of the country’s economic expansion.

While traditionally, immigrants in Spain tend to fill low-wage positions, their involvement has been growing in technology and hospitality sectors.

Spain’s recognition of Latin American qualifications and shared language also helps facilitate better integration in the labor market compared to other European countries.

Also read: Spain: Immigrant labor bridging job market gaps

Policy shift needed

To create similar success stories across Europe, Dalmonte and Frattini meanwhile also highlight in particular the need for sufficient language training, professional mentoring, and job placement services to facilitate the better integration of highly educated immigrants into the labor market.

The authors also suggest streamlining processes for recognizing foreign qualifications to ensure that immigrants’ education is accurately valued, in addition to implementing further policies to reduce discrimination in hiring practices.

In their research, Dalmonte and Frattini stress that in order to “fully harness” the potential of Europe’s diverse workforce, it is crucial to address brain waste and ensure that highly educated immigrants are “effectively integrated into the labor market.”

“Europe can not only enhance its economic growth but also make the most of the valuable human capital that immigrants bring to the continent,” the study concludes.

Also read: Germany: Study highlights untapped potential of migrants for labor market