India and the coming global talent race

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This global talent race has the potential to make today’s laggards to become tomorrow’s leaders.

By Ejaz Ghani

More than 3% of all people live outside their country of their birth. The share of high-skilled migrants relative to low-skilled migrants has grown dramatically, owing to the globalisation of demand for talent. And this development has a clear geographic dimension. Over 70% of software engineers in Silicon Valley in the US are foreign-born, and nearly 75% of all high-skilled migrants reside in the US, the UK, Canada, and Australia.

The top three applicants for H-1B visas in the US are Indian outsourcing firms, with Infosys applying for three times more visas than Microsoft. In Silicon Valley, immigrants lead half of engineering and technology start-ups. Ethnic inventors, who are not of Anglo-Saxon or European origin, account for more than 40% of patents from Google, Intel, and Oracle, compared with less than 20% from 3M, Boeing, and Procter & Gamble. Most large companies fall in between these extremes.

The early literature on global migration focused on the “brain drain” hypothesis, with the migration of talented individuals to developed countries draining the developing countries. However, the role of diaspora has changed, with globally-connected migrants promoting economic exchanges that promote trade, foreign direct investment, technology and knowledge diffusion with the developing countries. This has shifted the literature on global migration from “brain drain” to “brain gain”. This global talent race has the potential to make today’s laggards to become tomorrow’s leaders.

Empirical estimates suggest that the knowledge diffusion from the Indian diaspora in the US has helped development of major advances in India more than domestic inventors there. High-skilled Indian migrants have enabled their US employers to conduct R&D-based work abroad. High-skilled Indian migrants have also played a key role in the growth of India’s outsourcing industry, by providing information about economic opportunities to their home countries, and serving as reputational intermediaries. For our detailed empirical examination of online labor-sourcing platforms found evidence of U.S.-based ethnic Indians being more likely to send work to India when outsourcing tasks (bit.ly/3v4Usb9).

What is driving the global talent race, and the shift in the composition of global migration flows? A key driver in this global talent race is the Fourth Industrial Revolution, along with declining transportation and communication costs (high-skilled migrants tend to travel farther to their destination countries than do less-skilled migrants). Limited educational opportunities in source countries have also promoted talents to seek education abroad.

The main cause behind the “war for talent” is the growing recognition that human capital plays a key role in today’s knowledge economy. Enterprises that manage their global talent pool well are marching ahead. Most multinational corporations now insist that high-potential executives gain global experience by working in other countries, and they have made international mobility a prerequisite for senior leadership positions. Some of the global economy’s most familiar players—including Google, Microsoft, Alcoa, Clorox, Coca-Cola, McDonald’s, Pepsi, and Pfizer—have immigrant CEOs.

Changes in global demographics will continue to accelerate the global migration flows during the coming decade. Whereas most of the developed world is aging, developing countries have a growing share of young people. India will continue to benefit from its demographic dividend in the global talent race. In India, there are four 20-year-olds for every 65-year-old; in Western Europe, that ratio is one to one. At the same time, average earnings in developed countries are 70 time higher than in India. Combined, these demographic and wage differentials have become a strong impetus for global migration.

Since the end of World War II, trade and capital flows have been liberalised more than at any other point in history, but the global mobility of labour remains heavily restricted. This will not work in a global knowledge economy and changes in global demographics. Global migration will continue to play a key role in the growth agenda in the face of upcoming demographic changes that will result in an aging population and fewer workers in developed economies. As developed economies debate the right level of global integration, it is crucial to design the policies to spread benefits out more broadly and thereby generate the necessary political support. Countries that do not join the global talent race will fall behind. Talent has become the most valuable resource in a knowledge-intensive economy, and the global distribution of talent will shape economic growth and jobs in the future.

Policymakers have many tools to improve the global talent race. Multilateral global institutions including World Bank, World Trade Organization, and International Labor Office need to join hands to do a comprehensive immigration reform agenda to change the size, composition, and efficiency of global mobility. This has the potential to alter the total number of immigration flow each year, providing permanent status to undocumented immigrants, and promoting immigrant entrepreneurs for start-ups. Many countries have introduced targeted entrepreneur visas in the last decade.

Policy makers in high-income countries may need to remove country-level caps to employment-based permanent residency to decrease migrant uncertainty, increase worker mobility to help facilitate better employer-employee matches, and allow entrepreneurs to gain permanent residency faster and launch their ventures. Policy makers can also expand work visas, (increase the number of H-1B visas), and link future caps to economic conditions to reduce the need for multi-year debates about nominal changes in the cap level. Developed countries should also consider reforms that provide more guaranteed work time to international students after graduation, to promote size and composition of the inflow of talented students.

The multifaceted nature of the global migration agenda calls for increased partnerships between the public and private sector. Firms and universities are the frontline participants in this global talent race. Universities in developed countries can implement a reform agenda to change the size of immigration pool through their selection of international students who receive visas, and reverse the recent trends in US policy uncertainty, which has reduced foreign student interest in the US. Although American enterprises utilise an employer-driven system for the selection of migrants for work-based purposes, with the hiring firm filing the application, the mobility of migrant worker is restrained. A knowledge economy needs great talent mobility.

Global-governance organisations, multilateral development banks, and civil-society groups also have key roles to play. Technology, which now allows for virtual global talent mobility through video conferencing, digital platforms, online labor exchanges, and other applications will further accelerate the march for the global talent race, accelerate knowledge diffusion and “brain gain” for India.

Author has worked for World Bank, WTO, and ILO, and taught economics at Oxford University

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