The coming war over talent, the world's most valuable currency
Andrew Sheng says ageing advanced economies need to act now as their labour force shrinks
Forget about currency wars. The dollar may rise, the yen may fall and the renminbi could be the next big currency. But what determines the value of the currency will be the quality of talent. Real value is not gold or GDP, but sheer human power.
I was recently invited to Kiel, just outside Hamburg, to attend the 2013 Global Economic Symposium, organised by the think tank Kiel Institute for the World Economy. The symposium got together a diverse group of people to immerse themselves in lively debate about everything.
Many conferences I go to are based on a theme, populated by specialists who you know will talk about their pet themes. You could not imagine a closing plenary on the subject of success, comprising a Nigerian unionist, an Egyptian banker, a Hong Kong fund manager, an American feminist, a Polish-American economics professor and a US writer on China.
On the question of whether money is a good indicator of success, the economics professor had the last word: "Money is necessary, but far from sufficient."
The Hong Kong fund manager shared the most practical and wise insight. He had to go into socially responsible impact investing, because if he didn't, his next generation might give all the money away. The next generation cares about more than just making money.
Those countries that do not retain their best talent will be stuck in the middle-income trap
The best thing about such conferences is not just the people you meet, but the material you get to read. I found a bland-looking study funded by the Bertelsmann Foundation called "Competing for talent: The global struggle for the world's most valuable resource". But inside were four papers with stunning data on what is happening in the war for talent.
Here's a big-picture number: in order to sustain growth to 2030, an ageing US will need 25 million workers and Europe will need 45 million, equivalent to recruiting the entire labour force of the Philippines or Vietnam.
With a shrinking labour force, both the US and Europe need to up the ante through migration and training. In the past decade, new immigration accounted for 70 per cent of labour force growth in Europe and 47 per cent in the US.
Immigration is on the rise. In 1990, there were only 156 million migrants, but by 2010, there were 214 million. According to recent UN figures, the US, Russia and Germany attracted the most migrants. Migration is big money. The total estimated migrant remittance was US$479 billion in 2011. In other words, it's not just cheap labour that the importing countries will be going for, but the best talent. It is estimated that skills-based immigration to the US could triple, to over half a million annually by 2018, to make up 35-41 per cent of total migration. So, a number of countries will be training people for the US if they don't appreciate their home-grown talent better.
By 2021, China will be home to 28 per cent of the world's graduates, followed by the US (25 per cent), India (13 per cent), Russia (11 per cent) and Japan (7 per cent). However, quality concerns mean that not all the graduates can move abroad. The study suggested that only 25 per cent of Indian and 20 per cent of Russian professionals could be employable by multinationals.
Talent, like beauty, is in the eyes of the beholder. If you think your graduates are inferior, they will be of no use to you. Many talented individuals migrate because they think they are not appreciated by their own country. Some go because there is less pollution, corruption or just because they are offered better terms and opportunities.
Talent is also self-driven. Migrants are self-selected. They move because they have the most initiative, the willingness to take risks, and are probably the most creative.
Why is the talent war so critical? Because it takes more than 10 years to train decent talent in any profession. The best brain surgeon is useless without the best surgical nursing team. Lose enough nurses and you will lose the surgeon. It's not just about talented individuals, but talented clusters.
The problem is not just supply push, but also demand pull. Countries like Canada are actively going out to attract talent. There are also innovative skill transfer schemes, such as the German "Senior Expert Service", which has 10,000 retired experts who can go out on short-term consulting to train people around the world.
The pull factor from the advanced economies can only get stronger. The best people will get the highest pay. Those countries that do not retain and nurture their best talent will be stuck in the middle-income trap.
I am delighted that next year's symposium will be held in Kuala Lumpur. This means the Germans are thinking globally and acting locally. Asians have much to learn from the way the German , or small and medium-sized enterprises, have been able to train workers on a lifelong learning cycle, which grooms them to be resilient in downturns.
Talent will flow both ways, for the good of all.
