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If you are a skilled worker, the world is your oyster. But how can companies and governments hoping to retain and attract increasingly mobile, qualified individuals improve their position in the global race for talent? By Sebastian Baldermann and Stefan Schmid.

In the knowledge economy, highly skilled people are a valuable resource. So valuable that the terms “race for talent” and even “war for talent” are commonly used in boardrooms and cabinets. Indeed, in a globalised world where individuals, especially skilled ones, are willing to seek professional success beyond the borders of their home countries, attracting and retaining talent is crucial. 

So, what strategies can firms and governments adopt to make a specific economy an attractive place to work? For companies, the obvious factors are compensation and career opportunities. Recent studies have also revealed the importance of “soft factors”, such as the internal promotion of diversity. At the country level, too, professionals of various origins, ethnicities and religions can be made to feel welcome through government policies, including candid immigration policies. 

However, in recent years, an increasing number of economies that were once passionate proponents of free trade have become more protectionist, limiting the free flow of goods and services into and from their markets through quotas or tariffs. Others close involuntarily because of war and conflict. What does this mean for the global race for talent? We explored this issue in an impact paper we wrote as part of ESCP Business School’s new “Geopolitics and Global Business Impact” series

Open economies: one step ahead 

In a world in which some economies are “closing”, the general implication is that qualified individuals from those nations are drawn to economies that are considered “open”. After all, foreign trade theory posits that openness stimulates productivity and growth. It’s no surprise, therefore, that more open economies would benefit from a so-called “brain drain” from protectionist or war-torn countries. 

Yet openness alone is not sufficient to convince workers from abroad to pack their suitcases and relocate. There must also be jobs available, and foreign workers must not be met with hostility from locals or unnecessary bureaucratic obstacles, for instance. In other words, an economy may be open enough not to be disadvantaged in the race for talent, but equally still not attractive enough. Germany is an example of an open economy that nonetheless suffers from a massive shortage of skilled labour (Fachkräftemangel in German).

Closed economies: losers in the long run 

The likely implications are different both in the short and long term for closed economies that have chosen to seclude their market from the rest of the world, or part of it. In the short term, economies with protectionist agendas may prevent a brain drain, for instance via government stimulus packages. If international competitors are forced out of the market, domestic firms might find themselves at an advantage in the race for domestic talent.

In the long run, however, protectionist economies will likely have trouble retaining home-grown talent, let alone attracting that which is grown abroad. In addition, companies living behind trade barriers (or even behind a physical one such as the former Berlin Wall) see their competitive position deteriorate, including in the talent race.

Global talent diagram ESCP

Post-Brexit exit of banking talent from the UK 

The UK banking industry serves as a good example to illustrate the implications of protectionism in the war for talent. In mid-2021, then-finance minister for France, Bruno Le Maire, announced expectations for Paris to gain 3000 additional jobs in finance due to Brexit until the end of that year alone – especially since US players in the industry did not want to lose touch with the European single market. Even though the exodus of banking talent from London was not as massive as some had estimated, still thousands of jobs were lost to Paris or other financial centres like Frankfurt or Dublin as a consequence of protectionism. 

The outlook in terms of retaining and attracting talent could be even worse for an economy that closes involuntarily as a result of armed conflict (Ukraine being the most prominent recent example). A significant part of the population, including skilled workers, will flee to safer shores. Whether they decide to return and rebuild the economy after the war ends depends on how long it lasts, the extent of the destruction of the country and whether the refugees were able to create new lives for themselves abroad. 

Open economies start in a better position than closed ones in the global race for talent, but to avoid falling behind, they must actually make sustained efforts to ensure the wellbeing of skilled workers, for example through mentoring and guidance programmes.

Sebastian Baldermann is a researcher and Stefan Schmid is professor of international management and strategic management at ESCP Business School.

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