The global war for talent is expanding
The tech war between nations is well-established – the US and China being the least coy about this battle. There is another (more subtle) war happening: the battle for talent is quietly turning into a more global competition.
Politicians in Washington (with cameras off) note that the US requires more high-skilled immigration to support its fiscal investment in the tech and industrial sectors. Members of Parliament in the UK face a similar dilemma due to Brexit and a loss of easy access to talent from the EU.
Yet, legal immigration policies in both countries remain entangled with the politics of poor security at land borders. Highly-skilled immigrants aspiring to legally move to the US often note that the legal immigration system (with its caps on visas and high backlog) lacks the porous characteristics of the southern border with Mexico.
As the immigration policies have changed in these two countries, workers have normally considered countries, such as Canada, Singapore, and Australia, as alternative options. However, economic growth and the accompanying talent requirements for workforces are universal constructs with other countries, such as Saudi Arabia and the UAE, prepared to compete for this global talent.
Global market for workers: Not simply between London and New York
Saudi Arabia's Vision 2030 is the perfect example of a country with a robust development strategy and sound implementation. Between 2016 and 2020, the initiative created more than 550,000 jobs with at least two million more expected to be created by 2030. The kingdom has employed aggressive education and up-skilling programs to develop the local talent to support this growth.
However, the job creation rate is currently outpacing the nation's ability to close the skills gap for Vision 2030. Accordingly, Saudi companies are reportedly showing the cash to potential employees to come to the kingdom and fill open roles. For example, the state-owned Public Investment Fund (PIF) with more than $600 billion of assets has employed several foreign recruiting firms to staff the organisation across multiple verticals and is reportedly offering 30 percent pay bumps to bankers and consultants. Construction companies and other key local companies have reportedly surpassed that figure.
In the Middle East, the first place for attracting potential talent is usually Dubai. The city has long been home to bankers and consultants who shuttle between Dubai and Riyadh (or Jeddah) on Sunday morning with a return flight on Thursday evening. In 2021, the kingdom announced a directive that required foreign firms to set up regional headquarters in the country by the end of 2023 or risk losing out on government contracts. Many companies have opened offices in the UAE and shifted some of the workforce there, but Saudi officials would like to see more talent shift to their country.
This type of competition is not restricted to any one region. Singapore has increased efforts for global talent with the Overseas Network and Expertise pass, which permits high-skilled individuals to live in the city without possessing a job in the first place. Hong Kong similarly would like to attract talent back to the city after residents left the city in droves in 2022 after becoming frustrated by stringent Covid-19 restrictions and Beijing's rules and enforcement surrounding freedom of expression.
Bringing women (back) into the workforce
The US manifests the challenges that global economies face with both attracting and keeping women in the workforce. The number of women in the US workforce finally passed pre-pandemic levels in February this year. On one hand, the return of women to the workforce in the US is faster than imagined a few years ago. On the other hand, the number today also represents how inflation has hit many households and forced many individuals back into the workforce in addition to parents no longer having to watch their kids round-the-clock (with women generally bearing a greater portion of that burden). Remote and hybrid work have helped in-part in the US, but it is both lacking in many countries and cannot solve every issue in other countries.
For example, in India, the labor force participation rate of women hovers between 15 and 25 percent. There are varying reasons related to level of education, child and related home care, and the informal nature of a significant portion of jobs performed by women. Remote and hybrid work, which could help solve for child and related home care, is not as readily available.
In the UK, British companies are offering fertility benefits, such as egg freezing and IVF treatment, alongside increased leave benefits to attract women back to the workforce. The UK (and the US) has encountered a surprising increase of men leaving the workforce with women returning at a higher rate (than projected), which suggests a change in focus for business owners when recruiting back talent. Though critics have argued the dynamics of childcare and fertility benefits can both help bring women back into the workforce as well as solidify stereotypical norms surrounding the participation of men in the household.
Lifestyle benefits play an important role
The development of new financial hubs across the globe adds a new dynamic to the discussion. Global talent is considering both career opportunities and lifestyle opportunities. Let's not forget that Miami became a financial hub during Covid-19. New York residents sought the sun and beaches while still working remotely from home. The return to office mandates have clearly benefited New York City (NYC), but some people (and firms) have chosen to stay in Miami, noting NYC housing costs and increased crime as reasons.
Global talent understands currency can be traded daily (thus earning in pounds and dirhams is not necessarily an issue) and that engagement with markets can happen easily from a computer (or is simply a fight or two flights away). It is this mentality that has strengthened the positioning of cities, such as Dubai and Singapore, against cities, such as London and New York.
Global funds from both New York and London, such as Millennium Management and BlueCrest Capital Management, have opened offices in Dubai as the city continues to position itself as a respite from cramped inner-city housing, crime, and cold winters (brutal summers of 40-plus degrees Celsius are not great either, but many residents choose to travel significantly during the summer to escape Dubai).
It should come as no surprise that some companies in Saudi Arabia have elected to include villa housing accommodations (or allowances) as part of a pay package to entice talent to the kingdom. Domestic help and childcare also vary significantly across the globe with the cost more affordable in the Middle East and Asia compared to New York and London. In the mind of many business leaders, if the pay package and career prospects are the same but they (or the city) can offer a better lifestyle, then they can compete for the talent.
Immigration policies will have to adapt
Immigration policies will have to change to match the changing dynamics of this global battle for talent. Many Western economies are saddled with policies anchored in the 1990s. The US immigration system has never been easy to navigate for high-skilled talent with tech companies having to generally rely on H-1B visas, which are capped at 85,000 each year.
The UK implemented a "points based" system for work visas following Brexit and had a greater influx of resident visa applications from non-EU nationals (up almost 80 percent according to some estimates). The number suggests that the UK may be filling its workforce with a more global version of high-skilled workers, which says a lot for an already diverse city.
The Middle East and Asia may be a big beneficiary of these demographic trends with an increase of EU nationals relocating to these regions. Dubai is a sunny tax haven for EU nationals wanting to escape 40 percent to 50 percent tax levels and provide all the security and lifestyle amenities (including beaches) not readily available in European financial hubs with a straightforward process for obtaining a residence visa. The Saudi process is relatively similar, though Riyadh still does not match Dubai on lifestyle benefits.
Hong Kong and Singapore both have relatively simple processes for onboarding talent for companies and are considering other offerings to retain current talent as well as compete against emerging Middle East hubs.
Mainland China could use more immigrants as the one-child policy has left the country with a shortage of skilled labor. Yet the country is not exactly the usual destination for foreign workers. North Korea currently has a higher percent of immigrant population. A mix of culture, history, and language generally explains why countries like China among others do not (or cannot) join this talent war.
Countries, such as the US and UK, have long possessed a culture of openness and a history of accepting immigrants, but politics are more polarised today, especially in the US, where immigration can be a political football. Other countries, such as Saudi Arabia and the UAE, have significantly changed culturally over the years and adopted a balanced mix of English and local language in business. Immigration policies there, are directives from leadership and avoidant of theatrics and the internal wrangling of congresses or parliaments.
Cities do not have to be Dubai (where foreign expats account for approximately 90 percent of the workforce) or Beijing (where that figure is less than 1 percent) but rather find a balance in-between, which suggests a varying mix of options for global talent (and consequently a more intense battle for talent).
Kurt Davis Jr. is an investment banker focused on developed and emerging markets. He is a member of the Council on Foreign Relations. He earned a M.B.A. in finance, entrepreneurship, and operations from the University of Chicago Booth School of Business and a J.D. in tax law and commercial law from the University of Virginia School of Law. He can be reached at [email protected]