Talent is scarce. Yet many countries spurn it

Mr Hernandez, who teaches at Wharton business school, tells this story to illustrate a point about immigration. His (now healthy) son owes a debt to Alessio Fasano, an Italian-born doctor who helped improve understanding of gluten intolerance in America. Dr Fasano migrated from a country where celiac disease is common (Italy) to one where it was thought to be rare (America). Having grown up surrounded by sufferers, he wondered if the condition was really so uncommon in his new homeland, or simply underdiagnosed. In a landmark study in 2003, he proved that celiac disease afflicts Americans just as much as Europeans. Diagnosis and treatment have now markedly improved.

Clever immigrants like Dr Fasano bring huge benefits to the countries where they relocate. Yet many governments make it hard for them to settle or turn them away outright. Even governments receptive to skilled immigrants often bungle the job of attracting them. Some, however, do it ruthlessly and reap big rewards.

Brain germane

When brainy immigrants arrive in a country, they do not just bring their brains. They bring fresh ways of looking at things. They know things that locals don’t, and can tap foreign-language sources that locals can’t. So in a variety of fields, from business to science, their skills are likely to be unusually beneficial. “Immigrants are different in useful ways," argues Mr Hernandez in “The Truth about Immigration", a new book.

A study by Shai Bernstein of Harvard University and others found an original way to measure this. They looked at what happens to scientists when a colleague with whom they have collaborated dies prematurely (before the age of 60). Naturally, any such tragedy makes the surviving scientists less productive. But intriguingly, the death of an immigrant colleague hurts more. The number of patents subsequently received by the surviving scientists falls by nearly twice as much (17% versus 9%).

“Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the… diffusion of ideas across borders," the authors conclude. Immigrants are 14% of the population in America, 16% of inventors and directly produce over 23% of innovation, measured by patents, patent citations and the economic value of those patents, the authors estimate. Taking into account how they make their native-born collaborators more productive, they are responsible for a staggering 36% of total innovation.

Given the advantages that highly skilled immigrants bring, you might think that countries would compete as vigorously to attract the best and brightest as companies do. Many governments say they want to lure the world’s top talent. China’s ruling party recently vowed to “improve the support mechanisms for recruiting talent from overseas", perhaps by allowing foreign scientists permanent residence. In America Joe Biden’s administration has promised to streamline the process for admitting talented foreigners, especially those with skills in AI. Donald Trump has said that anyone who graduates from an American college should “automatically" get a green card (ie, permanent residence).

The smartest people are highly mobile. Only 3.6% of the world’s population are migrants. But of the 1,000 people with the highest scores in the entrance exam for India’s elite institutes of technology, 36% migrate after graduation. Among the top 100, 62% do. Among the top 20% of AI researchers in the world, 42% work abroad, according to MacroPolo, a think-tank in Chicago.

Yet few governments think systematically about luring talent, as a corporate recruiter would. Many have schemes to attract people with specific skills, in medicine or AI, say, but these are often piecemeal and bureaucratic. China’s “Thousand Talents" programme, which involved big cash gifts to lure academics from abroad, enrolled only 8,000 scientists and engineers between 2008 and 2018, mostly of Chinese origin. In many countries, far more political energy is expended keeping out the huddled masses than enticing the excellent. Indeed, though some governments fight fiercely for footloose talent, others actively harm their own cause. Consider how America treated Deedy Das, a young AI whizz.

Mr Das, a Cornell graduate, has worked for Google (on search) and was part of the founding team at Glean, a startup that created an AI assistant and is now worth over $2bn. He is precisely the kind of immigrant that both Mr Biden and Mr Trump say they want.

Yet when he wanted permanent residence, he faced a snag. America mandates that no country may receive more than 7% of green cards in a given year. This is tricky for applicants from populous countries, such as the Indian-born Mr Das. A typical Indian applicant can expect to wait 134 years for approval, estimates the Cato Institute, a think-tank. That the system is still paper-based, when even much poorer countries such as Pakistan and Zambia have shifted to digital, does not help.

So Mr Das applied for what is colloquially known as the “genius visa". He had to send 926 pages detailing his technical and commercial accomplishments to bureaucrats who struggled to understand either. He was rejected on what he calls “nonsensical" grounds: for failing to provide evidence he had, in fact, provided. He appealed and was eventually granted a visa.

The process “stifles innovation", he says. Certainly, it repels talent. A hefty 73% of foreign graduates of American universities say they would stay in the country if a visa were readily available. But it often isn’t, so only 41% actually stay, according to the Economic Innovation Group, a think-tank. This may also be why, although American universities are widely considered the world’s best, America has been losing market share to Australia and Canada over the past two decades.

Brain retain

Contrast this with how Dubai welcomed Simon Williams, a British banker with HSBC. It took him a week and minimal hassle to get a residency visa. The United Arab Emirates (of which Dubai is part) almost never allows foreigners to become citizens, but work permits for well-paid professionals are straightforward. Anyone who earns more than 50,000 dirhams ($13,600) a month is eligible for a “golden visa", valid for up to ten years, as are scientists, inventors and even some artists.

Settling in is simple, too. Mr Williams says it took him only a week to obtain a local ID, driving licence, phone number, bank account, credit card and a licence to buy alcohol, which devout locals shun. A “super-efficient" airport helps. Mr Williams contrasts “the dreaded 90-minute queue at a US airport to deal with an immigration officer who rarely seems pleased you’ve come to visit" with the UAE’s high-tech system. Arriving in Dubai, “My passport stays in my pocket, the camera recognises me, the screen says, ‘Hello Simon J. Williams’ and the gate opens." He feels both more welcome and more secure.

To estimate how much footloose talent countries might gain if they were more open to it, The Economist analysed data from the Gallup World Poll. This is an annual survey of nearly 200,000 people from more than 150 countries and territories. Among other things, it asks people whether they would like to move abroad permanently if they had the chance and if so, where? As a proxy for talent, we considered only respondents who said they had completed an undergraduate degree. Using data from 2010-23 (excluding 2019 and 2020, when few surveys were conducted), we estimated how many graduates each country could expect to gain and lose if moving were easy.

Three big, rich, English-speaking countries are the most powerful magnets (see chart above). If there were no barriers to entry, 23m graduates would move to America, 17m to Canada and 9m to Australia, we estimate. Taking account of the number who would consider leaving these countries, global free movement for graduates would raise the number of them in the US by 7% (see chart below). Canada, Australia and Switzerland would see their graduate populations rise by a factor of around 2.5; New Zealand by over fourfold.

At the other end of the scale, China and India would lose the largest number of graduates in absolute terms (14m and 12m respectively). In relative terms, however, places like Iran, Ecuador and the Democratic Republic of Congo would see the biggest net outflows. The UAE would see only a modest inflow. A port in the desert is not inherently attractive—it is policy that makes it so.

Many things that make a country attractive are beyond a government’s control. Belgium cannot aspire to New Zealand’s scenic beauty, nor New Zealand to Belgium’s location. The most important pull factor—the quality of job opportunities—is hard to change in the short run.

Places where talent clusters have an enormous advantage, since high-flyers like to work with other high-flyers in the same field. This is why, for example, 57% of the top 20% of AI researchers worked in America in 2022. China is catching up fast, largely because it trains a huge number of AI experts at home. But more than half of elite Chinese AI researchers work outside China, whereas America hosts nearly twice as many elite AI researchers as it trains.

Still, whatever their starting-point, there are plenty of things governments can do to make their countries more appealing to foreign talent. They can simplify the processes by which highly skilled workers enter the country, and foreign graduates of local universities enter the workplace. They can treat foreigners with respect. They can adapt to changes in global labour markets, such as the rise of digital nomads. And they can make it easier to build infrastructure to accommodate newcomers.

Portugal is something of a model in this respect. Only a decade and a half ago, it was considered a backwater. By The Economist’s calculations, using survey data from 2010-12, if all graduates who had wanted to move there had done so, its graduate population would have increased by just 1%. But repeating the calculation using survey data from 2021-23, its graduate population swells by 140%.

In some ways, the global financial crisis helped. The country was so broke it needed a bail-out. The government had to sell the national airline, and the new private owners initiated many more flights to the United States, putting Portugal on the map for many Americans. More broadly, the Portuguese government had to think harder about how to foster growth, and opted to open up to talented and rich immigrants. “It has made a real effort to make it easier to get visas [for skilled workers]," says André Filipe of Critical TechWorks, a Portuguese firm that designs software for BMW. “There’s much less red tape."

Portugal is also adept at integrating skilled newcomers into the labour force. A study by Lighthouse Reports found that college-educated migrants in Portugal were more likely than those in other EU countries to be doing jobs that matched their skills. Many governments do not recognise qualifications earned abroad, or make the process difficult. As covid-19 was spreading, Jeanne Balatova and Michael Fix of the Migration Policy Institute estimated that there were 165,000 foreign-trained nurses and doctors in America whose skills were being wasted.

Portugal has made shrewd use of other advantages, too, such as a mild climate and tasty but healthy cuisine. For example, NOVA, a business school, relocated from the centre of Lisbon to a new campus by the beach in 2018. It entices foreign students not only with instruction in English and a rigorous curriculum, but also because “It’s nice to live here," as Pedro Oliveira, the dean, puts it. Overlooking the main concourse is a jaunty, turquoise statue of an executive in a business suit, barefoot and carrying a surfboard. A walkway leads to the sea. Half the staff and 70% of master’s students are foreign, with Germans and Italians forming the largest contingents. The diversity of perspectives in the classroom enriches debate, says Mr Oliveira.

Portugal’s population of legal immigrants has shot up, from fewer than 400,000 in 2015 to more than 1m today. On June 3rd the new prime minister, Luis Montenegro, came to NOVA to unveil a new immigration policy that aims to make Portugal even more alluring to young, highly skilled migrants.

Brain campaign

Lowering barriers is more effective than offering carrots. Raj Choudhury of Harvard Business School and others used a data set of work-related migration reforms in 15 countries over 26 years and found that policies discouraging inventors from moving had a large negative effect on patenting by multinational firms. Policies designed to encourage such mobility had a positive but much smaller effect.

In some countries, such as Canada, Sweden and the UAE, getting a work visa is relatively easy for the highly skilled. Some places make it easy for foreign students to enter the workplace, too: graduates of Danish universities automatically get a three-year work permit, for instance. Simple, objective rules speed things up: allowing in anyone who earns more than a certain sum, for example, or giving applicants points for such things as youth, qualifications or linguistic proficiency.

Giving bureaucrats too much discretion tends to have the opposite effect. Whereas Finland uses AI to issue residence permits to students who meet certain criteria, reserving human immigration officials only for difficult cases, Italy has a government commission to decide which startups are innovative enough to merit an investor visa. “It’s insane," says Chris Kaelin of Henley and Partners, a consultancy. “Governments are no good at judging business plans. It would be much better to say, ‘Invest 500,000 euros and you’re in.’"

Fragomen, a law firm, compiles indices on more than 100 countries’ immigration systems. On its index of “restrictive practices", America is rated second-worst, after Iraq. Another measure looks at how long it takes, on average, to obtain a visa for a foreign employee. The range in rich countries is astonishingly wide, from 34 days in Israel to 232 in Italy.

Delays deter not only jobseekers but also potential employers, notes Mr Hernandez. Suppose a firm in America has a crucial vacancy that needs filling right now, and has found the perfect candidate. Alas, she is foreign, so she needs an H-1B visa (for highly skilled workers). If the firm already has more than a certain number of H1-B-holding staff, it must apply to the Department of Labour, showing it has tried to find an American citizen and will not undercut local wages. If the Labour Department approves, the firm must then apply to the immigration authorities, which will sit on the application until the following April, when they hold a lottery. At this stage three-quarters of applications—all for professionals with firm job offers, on average pay of $130,000 a year—are rejected. If the firm is unlucky, which it will not know until May, it has paid an immigration lawyer serious cash for no result.

If the company wins the lottery, it must wait until the following October to fill the post. Even then, the visa is valid for only three years, and renewing it is complicated. “[G]iven the choice between a prostate exam and sponsoring a work visa, hiring managers will probably choose the former," suggests Mr Hernandez. An analysis by the Washington Post found that it would be easier for a skilled worker to get a work permit by crossing the border illegally and claiming asylum.

The randomness of the lottery does at least make it easier to study its baleful effects. Jun Chen of Renmin University and others looked at 17,000 startups based in America and backed by venture capital between 2003 and 2016. Over a third petitioned for at least one H-1B visa, but on average they were granted barely half the visas they wanted. By comparing firms that won the lottery with those that didn’t, Mr Chen and his co-authors found that getting more visas improved a firm’s “financial performance, likelihood of going public, and quantity and quality of innovation".

Many high-flyers do not fly alone. To woo them, countries need to consider their families, too. In Dubai holders of a golden visa can sponsor their spouses for a work visa, as well as an “unlimited" number of domestic staff. “It was only two hours’ work to get our nanny a visa," gushes one expat. Add cheaper property and zero income tax and his family is much more comfortable in the UAE than they were in London, he says.

Brain disdain

In America, in contrast, skilled migrants may find that their children are deported when they reach adulthood and are no longer deemed dependants. Fedora Castelino, for instance, moved to the US at the age of six. In 2015 her father, who works for a life-sciences firm, applied for a green card, which would grant permanent residence to him and his dependants. But like Mr Das, he is an Indian citizen, so the wait could be excruciating. In November, when Ms Castelino turns 21, she may have to leave the country she calls home and pursue her career—she hopes to be a doctor—elsewhere. She is considering Canada.

Treating foreigners with respect ought to be easy. But many governments are so obsessed with security that they fail. China under Xi Jinping has become far more prickly. Expats have to register with the police every time they leave and come back. Hotels must alert the authorities when a foreigner checks in; many small ones simply turn foreigners away to avoid the hassle, as your correspondent discovered when half a dozen refused him a bed on a snowy night in Hebei province. Official campaigns warn Chinese women that their foreign boyfriends could be spies.

China’s reputation as a land of opportunity for expats is “long gone", says Jens Eskelund of the European Union Chamber of Commerce in China. “Ten years ago, you needed to have China on your CV. [Now] people will ask, ‘Why are you in China, couldn’t you find anything better?’ [There’s a] perception that it’s difficult to live [here], and that is exacerbated when you arrive at the airport and you cannot pay for anything unless you have a Chinese app…You cannot even buy a cup of coffee."

There is little public appetite for immigration. In 2020 a proposal to ease the path to residency for rich or skilled foreigners faced a populist backlash, with men promising to protect Chinese women from immigrants. The head of a think-tank which promoted the scheme was vilified online as a traitor. Small wonder that, as a study by MERICS, a think-tank, concluded, China “has not been very successful" in attracting talent that does not already have strong ties to the country.

Even Hong Kong, the most open part of China, has lost much of its appeal for expats. A banker who was in Hong Kong during the pandemic recalls the misery of ultra-strict lockdowns, homeschooling three children in his flat and being forced to wear a mask indoors or risk being reported by his neighbours. He contrasts Hong Kong’s “atmosphere of mistrust" with Dubai, where he now lives. “You talk to any Emirati and they say ‘Do you like it here? What can we do make you like it better?’"

Helal al-Marri, the director-general of Dubai’s Department of Economy and Tourism, offers a trivial but revealing example. Some expats complained that a local rule barred them from walking their dogs on beaches. Emirati officials had thought the rule uncontroversial (and many Muslims consider dogs unclean). But on realising that it bothered foreigners, they reached a compromise. Some beaches are now dedicated to dog-walkers.

Since covid-19 revealed that many white-collar jobs could be done remotely, many countries have tried to attract digital nomads. Dozens offer remote-worker visas. Growth in the number of American digital nomads has slowed since the height of the pandemic, according to MBO Partners, a consultancy, but a hefty 11% of American workers describe themselves as such. They tend to be younger than average, and happier with their work.

The places that lure them best often have low taxes or a pleasant lifestyle and relatively easy entry requirements. Vivek Shankar, a content marketing strategist for financial firms, has been a digital nomad since 2019. He tried living in Dubai but found it “very consumerist". “The minute you land you are bombarded with messages saying you need to buy this or that, and …need to have a certain income or you’re not worth much." So he moved to Portugal, which is “more normal". There are places to hang out and meet people without spending money, he says. And he can surf in his spare time.

Places that compete for digital nomads typically hope to persuade them to stick around. This can be hard. A study of nomads in America found that they stay on average only 71 days in a city. However, a study of a scheme to attract such people to Tulsa, Oklahoma found that it helps to make them feel part of a community, for example by helping them with office space and encouraging them to join school boards. Three-quarters of the participants stayed at least two years.

One problem with migrants is that they need somewhere to live. If lots of well-heeled ones arrive in a place where housing supply is limited, they can drive up prices, infuriating locals and creating a backlash. This has happened in many places, from Sydney to Singapore. It is especially likely if governments offer visas to those who simply buy a property, as happens in Greece, Hungary and Malta. Such schemes have recently been scrapped in Ireland, Spain and Portugal.

House-price inflation is one reason why Australia and Canada, previously welcoming places, have recently sought to curb the inflow of immigrants. However, house prices can be kept in check by allowing more construction. Dubai has far less land than Australia or Canada, but its government is confident that it can cope with the population more than doubling by 2040.

This year is the biggest election year in history, with countries that are home to 4.2bn people holding ballots. That bodes ill for talent mobility, says Julia Onslow-Cole of Fragomen. Candidates for office often promise to tighten immigration policies, sometimes using rhetoric that puts off top talent from abroad. The first promise of Mr Trump’s manifesto is to “SEAL THE BORDER". “We’re gaming what a second Trump administration might look like and it’s bleak on legal immigration," says Ms Onslow-Cole.

Which hardly sounds like a recipe for making America great again. To adapt Damon Runyan, the race is not always to the swift nor the greatest success to the country that attracts the most human capital—but that’s how the smart money bets.

© 2024, The Economist Newspaper Ltd. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com