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Friday, June 22, 2012

Immigrant Job Creators

There is a very good article over at the Migration Policy Institute (MPI) about how different countries all around the world are trying to attract those highly-skilled entrepreneurial immigrants with some cash on hand.

It's called Visas for Entrepreneurs: How Countries are Seeking Out Immigrant Job Creators by Madeleine Sumption.  Fascinating look at the different deals countries are willing to make to attract these people using visas that offer very favorable terms for entrepreneurs. This type of immigration tends to be less controversial than other kinds simply because it's pretty tough for even the most die-hard anti-immigrant citizen to complain about an immigrant investor willing to sink hundreds of thousands of Euros into a company that would create jobs for local workers.  There are always a few exceptions to this, of course.  Marine Le Pen of the Front National, for example, has come out in the past against "l'immigration choisie" (selective immigration) and even the Startup Act in the U.S. has its critics.

What is often lost in the national debates on this issue is the international nature of this competition.  This is a very competitive race to attract these potential migrants' attention and encourage them to choose one country over another.  Immigrants are rational actors and have every interest in shopping around to get the best deal.  This is a bitter pill to swallow for those countries who are used to thinking of themselves as choice destinations and are now having to adjust their own self-perceptions to accommodate the fact that they are now just one choice target country among many others.

How sweet are these deals?  Varies by country.  Ireland's Start-up Entrepreneur Programme can be had for as little as 70,000 Euros and does not require the entrepreneur to create any local jobs or even to turn a profit. After five years the investor qualifies for permanent residency in an EU member-state.  That is an incredible deal.   On the other end of the spectrum is Australia's Business Innovation Stream which has more complex requirements:  the migrant must be sponsored by a state/territory within Australia, be under 55 years old, have assets of at least $787,000 USD and create jobs within two years.  See Table 1  (Conditional Entrepreneur Visa Eligibility Criteria) in the MPI article for more information about other countries' programs (Singapore, U.S., U.K, New Zealand, Germany and Sweden).  Just a quick glance at this table makes it clear that comparison shopping and due diligence are absolutely essential.  If a migrant is going to invest that kind of money in a country, he or she needs to be relatively sure of getting a return on that investment and be happy with his choice.  This means 
that there are other criteria involved.

Attraction: Is this a country the investor wants to live in?  Is it a good place to raise a family?  What is the local infrastructure like?  Does the country have good health care?  Good schools?  Is it safe?  How much anti-immigrant sentiment is there among the local population?  All these things are subjective and based on perceptions.  A migrant investor may be quite to spend a little bit more money to get a good quality of life (and what this means greatly depends on the investor's personal circumstances).

Economy: Does the country have a stable economy with interesting opportunities? Is it easy or hard to start a business? What are the tax laws like? Will the investor be subject only to local taxes (true almost everywhere) or will he/she be taxed on worldwide income (US)?  Does having residency in one country open doors in others (US/Canada/Mexico under NAFTA or the EU)?

Family/Networks: Does the investor already have family or close friends in the destination country and are they happy and successful there?  Networks are very important - it is one of the few ways that migrants can evaluate their chances in the destination country - they listen to the experiences of trusted family members who have already done it.  Family can help with integration into the new culture and assist  the new migrant professionally by inserting him or her into existing business networks.  Also these days the migrant may be looking for good terms for his or her spouse.  Can the spouse work in 
the target country? What about adult children?

Exit Options: Not every migration story ends well. What would happen if the investor migrant decided that he/she didn't like the country for a hundred different possible reasons?   Let's say that after a few years he wanted to leave to either go home or to another country.  Can he fire the local staff, liquidate the business and take his money elsewhere or are there barriers to this?  This is important - a smart investor does not pour a million U.S. dollars into  something without assurances that he/she will 
not become a permanent "captive" of the receiving state.

The last, I think, is something to consider very carefully. Are the countries with these kinds of programs really seeking people or are they primarily interested in capital?  In an ideal world I think they want both but, at the end of the day, they just might settle for the money and let the talent go where it will.  I realize that that is a very cynical statement but when I listen to the debate over Eduardo Saverin it does seem to focus primarily on the money (lost revenue) when an equally important issue (in my humble opinion) is that this very talented individual has packed up and taken his brains, degrees and business 
experience elsewhere.

Last comment and I'll let you get to the article. The major flaw in some of these programs is in assuming that money equals entrepreneurial talent. There may be just as many idiots among the rich as among the poor and cash is not necessarily an indication that a person is business savvy.  Some of these programs require a business plan but I'd just point out that someone of means can perfectly well hire an MBA student to write one.  As for the requirement that the potential migrant show successful business experience,  how does one define "successful" and who is is responsible for evaluating past success and future potential?  Ms. Sumption makes a very good point when she says,  "A criticism of this approach is that it puts government officials in the complicated business of identifying entrepreneurial talent — something they may not be qualified to do."  Indeed.  Some countries rely on third parties to evaluate the business plans but they could be wrong too. Startups simply have a very high rate of failure.

This selective approach also does not take into account the inherent potential in all migrants. When Sergey Mikhaylovich Brin came to the U.S. at the age of six could anyone have predicted that years later he would co-found Google and have a net worth of 18 billion dollars today?   I contend that every migrant has the potential to do great things in, and be an asset to, his or her host country.  Personally, I think France could use a few more great plumbers (or at least ones that aren't booked solid for the next three months and can't fit you in when you have an emergency).  Migrant success stories (however you choose to define "success") are not unusual and yet we continue to have the arrogance to assume that we can predict the future life trajectory of someone based on where they are and what they have today before they ever land on our shores.

Potential untapped talent, I admit, cannot be easily measured but it is there in people from all places. They may simply need to be here rather than there in order to realize it.  So chase the high rollers if you will but let's have a little humility and take a chance on the others too.

2 comments:

the fly in the web said...

Governments think in terms of high rollers...being staffed by high rollers themselves or worshiping the idea of same.

I welcome immigration, but on the basis that the potential immigrant has something to offer....contact with Turkish immigrants to France showed me that the men came to work in low wage industries - but a number of them set up their own firms - seeing a need and filling the slot in the market.
Then there the second wave... the push to get visas for the cousins, etc. by marriage to a Turkish girl living in France and out came the useless...

Victoria FERAUGE said...

@Fly. I had to laugh at your first sentence. Indeed, governments do worship at the altar of the high rollors. I think they may hope that some of it rubs off on them - a little glory by proximity?

"Something to offer" is a tough one. France, for example, is hurting for nurses but naturally the medical profession doesn't see it that way. Same for IT workers in the US and H1-B visas. Maybe money is used here because it is easy to quantify - who can argue with 1 million U.S. dollars? But then in a weird way that becomes the market value of citizenship - if you have the cash you can buy citizenship almost anywhere in the world: US, UK New Zealand and so on.
A 'cat among the pigeons" question. What if we turned this around and said that citizens, in order to prove that they have something to offer, had to pony up some cash (or come up with a business/career plan) to retain their citizenship. What if failure to do so would result in a strong encouragement to find another home? This has actually been tried. In earlier times this is what the UK did with its "useless" - they sent them to the US and Canada :-)