Highly skilled global talent follows economic opportunities. What policies should Australia adopt to attract these foreign workers?
Attracting global talent is not as easy as hanging a shingle on the immigration door and hoping skilled workers from other countries will simply respond.
Enticing foreign-born workers whose skills are in high demand is a globally competitive playing field.
Australia is competing with many other countries vying for highly prized ICT skills, (IT and computer skills) which many believe will form the basis of the fourth industrial revolution and future labour markets.
It’s important that as a country, we get it right.
What skilled immigrants want
Migrants have many choices, so what policies are more likely to lure them to our shores?
A new study from Monash Business School and the ETH Zurich looks at what entices skilled workers when choosing where to locate.
In short, letting firms and workers choose as freely as possible is the answer, at least in a stable, competitive economy that adopts new technology quickly.
This is key not only for local employees but also for migration decisions.
Research fellow at Monash’s Centre for Health Economics, Dr Johannes Kunz explains why they set out to determine which levers work to attract global talent.
“In the last decades, most developed countries experienced rapid growth in the demand for skills and an increase in wage inequality as a consequence of the widespread adoption of information and communication technology,” Dr Kunz says.
“When attracting global talent, it is important to consider these changes in the labour market as a result of the increased globalisation and digitalisation of the world.”
Do we need to attract talent? Can’t we just train people?
Dr Kunz explains it can take many years to train people with the skills required in the industry.
“Instead, immigration can be used as a rapid lever to plug the holes that companies are demanding when there is a shortfall in the local talent pool,” he says.
Skilled immigrants look for economic opportunities
The paper finds that newly entering immigrants are a selected group of individuals who strongly react to a change of economic opportunities in national labour markets.
In other words, people with these skills are looking to exploit them to their best advantage; but it’s not always just about money.
Structural changes such as the adoption of ICT (Information and Communications Technology) by firms lead to changes in economic opportunities that strongly affected the choices and ultimately the decisions of migrants.
This leads to a pronounced upgrade in the skill mix of immigrants and particularly affected the service sector.
“Previous research has focused on documenting the effects of ICT on skill-specific employment within the US and, separately, on how higher levels of inequality are correlated with the distribution of college-educated immigrants across countries,” Dr Kunz says
“Yet, there was no evidence informing policymakers of whether and how newly entering immigrants respond to these structural trends in the labour market and how immigration policies might affect this response.”
How immigrants respond to policy
In this study, the researchers were able to look at data for different local labour markets in Switzerland, where new immigrants settled.
They found that highly skilled new immigrants choose predominantly regions that experienced stronger ICT adoption which increased the economic returns for highly skilled labour in terms of income and employment opportunities.
“We found that the skill mixes of newly settling immigrants strongly responded to these changes in local economic opportunities,” Dr Kunz says.
“The regions with a higher initial routine specialisation, and a larger potential for ICT-adoption, attract stronger inflows of immigrants with a college education while the inflow of immigrants with an intermediate, secondary education was much weaker between 1990 and 2010.”
Open borders did not lead to an influx of low skilled immigrants
Switzerland experienced a boom in highly-skilled immigration between 1990 and 2010.
A gradual abolishment of all migration restrictions in Switzerland, starting with the Free Movement of People treaty with the EU around the 2000s, had no adverse influence on the skill mix of immigrants and fears of a massive influx of lower-educated immigrants after the policy change did not materialise.
In contrast, and also consistent with the insignificant change in relative economic opportunities at the bottom of the wage distribution.
There was no obvious inflow of middle relative to low educated foreign-born. In other words, highly skilled workers were attracted to the economic opportunities provided: middle to low-skilled foreign workers were not.
“These findings are robust, even when we looked at a range of alternative explanations. What we found was that these effects are considerably more pronounced in the service sector, compared to the manufacturing sector,” Dr Kunz says.
“And it is strongly consistent with the hypothesis that newly entering immigrants are a selected group of individuals in strong pursuit of economic opportunities.”
Australia’s current policy may not be enough
While the policy increased the total inflow of immigrants from EU countries (relative to those from other countries) it did not affect the relative size of different education groups at the national level.
“Contrary to fears expressed in the public debate, the opening of borders did not lead to a massive influx of lower-educated immigrants nor did it lower the response of immigrants to skill-demand,” Dr Kunz says
“If anything, it allowed regions with strong ICT-induced demand for skills to attract even larger numbers of highly educated foreign workers.”
In light of these findings, recent attempts of the Australian government to encourage people to move to rural or declining areas through the use of visas linked to the location might not be enough to encourage highly skilled migrants.
“Policies that improve local business conditions that create or improve economic opportunities are better suited to fill local skill demand,” Dr Kunz says.