Science minister Lord Sainsbury told a meeting of university, government and industry representatives that academic salaries would play a major part in this autumn's higher education policy paper.
"We can't go on with a system which pays so badly," he told the annual conference of the Association for University Research and Industry Links at Imperial College, London, this week. "We're competing in a global market."
He told the conference that the UK was statistically the most efficient place in the world for research, but said that the underfunding of research highlighted in the transparency review, coupled with low salaries, could be the reason.
He said that neither the Treasury nor universities had previously understood the true cost of research and that there was much to do to reverse brain drain.
The conference discussed what universities, industry and the government expected from each other. Leaders of industry and academia told Lord Sainsbury that a clear and well-paid career structure to attract more people into science was vital to the country's economic future.
Delegates also expressed concern at the amount of government funding available for technology transfer and the expectations of the Treasury in return for increased science funding in the spending review.