Mobilizing Talent for Global Development

1. Mobilizing Talent for Global Development Andrés Solimano Regional Advisor ECLAC, United Nations Red de Ciencia, Tecnología e Innovación Reunión Subregional del Cono Sur Santiago-Chile – November 16th, 2007

2. Contents • The International Mobility of Talent: Main Issues • Classification of Talent. • The International Market for Talent • Two Topics in Talent Economics • Development Impact of Talent Mobility • Empirical Evidence • Policy Issues

3. 1.- International Talent Mobility: Main Issues Talent is a key economic resource that creates new goods, knowledge, technologies, ideas and wealth. The international mobility of talent has increased with globalization and has an impact on growth and inequality. International markets for talent are more integrated than markets for unskilled labor. In the ’60s and ’70s a main concern was on “brain drain”. In the early 21st Century we talk also about “Talent circulation” with potential win-win impact for origin and destination countries.

4. 2.- Classification of Talent • Directly productive talent, related to business sector: • Entrepreneurial • Managerial • Technical • Scientific talent • Academics • Scientists • International students • Talent related to health and cultural sectors • Medical doctors, nurses, etc. • Artists, musicians, writers • Media-related people

5. 3.- The International Market for Talent Supply of talent (Ph.D’s, engineers, IT experts, medical doctors, students, etc.). Talent comes from developing countries (Asia, Eastern Europe, Latin America, Africa) and developed countries. Demand for talent, from developed and developing countries (business, academic sector, government, others). Where do supply and demand meet?

6. 3.- The International Market for Talent (cont.) 3.a.- Pulling Factors in the “North” (Demand for talent) Shortage of skilled professionals in IT, health and other sectors in industrialized countries. Higher wages and attractive employment conditions. Favorable immigration policies for talent. Better possibilities of interaction with peers (scientists, artists, etc.)

7. 3.- The International Market for Talent (cont.) 3.b.- Pushing Factors in the “South” (Supply of talent) Lower relative income and real wages. Lack of resources in universities and research centers (for academic talent). Lack of meritocratic careers in the public sector. Higher costs of doing business and barriers to entrepreneurship (for directly productive talent) Higher frequency of economic and financial crises, unstable political regimes.

8. 3.- The International Market for Talent (cont.) 3.c.- Talent chasing Capital, or Capital chasing Talent? • South – North movements of Talent • Talent from the south in search of employment and capital in the north • North – South movements of Capital • Capital from the north in search for lower cost talent in the south (movement of multinational firms) • Examples: • Bangalore (South) • Silicon Valley (North)

9. 4.- Two Topics in Talent Economics Rewards Structures for Talent: Problems Education and Talent

10. 4.a. Rewards Structures for Talent: Problems for rewarding Talent • Failures of Markets • Complexity to identify talent • Matching failures between Capital/Jobs and Talent availability • Failures of Institutions • Weak property rights • Patent system • Failures of the State • The Clientelistic and Paternalistic dominated Organization versus the Meritocratic Organization

11. 4.b. Rewards Structures for Talent (cont.) • The existence of increasing returns to ability (winners-take-all). • Examples: sports, artists and famous writers (i.e. Roger Federer in tennis, J.K. Rowling with Harry Potter). • Distortions: Incentives for rent-seeking, penalize innovation and entrepreneurship.

12. 4.c. Education and Talent Allocation A complex relationship… • Human Capital Theory. Talent goes to careers with high rate of return. • Education, as a signal of capacity and talent. • Is it tertiary education always profitable? • High opportunity costs of education for the highly gifted, entrepreneurially-oriented talent (Bill Gates left Harvard University to create Microsoft). • Larry Page and Sergey Brin left Stanford University to create Google.

13. 5.- Development Impact of Talent Mobility Impact on Economic Growth and Welfare Impact on Inequality and Income Distribution

14. 5.- Development Impact of Talent Mobility (cont.) 5.a.- Talent, Economic Growth and Welfare. InnovationProductivityInvestment Economic Growth Talents Social Services (Health)CultureIdeas Talents Welfare

15. 5.- Development Impact of Talent Mobility (cont.) 5.b.- Talent, Inequality and Income Distribution High rewards to Talent “Winners-take-all” Markets Top Incomes Obstacles to develop Talent for low-income individuals Modest Rewards Inequality

16. 6. Empirical Evidence

17. Table 1. New Knowledge is Concentrated in the “North” Source: Own elaboration based on data from The World Bank’s WDI (2007).

18. Table 2. Prizes to Talent: Nobel Laureates in Science and Economics are Very Concentrated in High-Income Economies (1980 – 2007)

19. Table 3. Prizes to Talent: Nobel Prizes in Literature is more uniformly distributed across nations (1980 – 2007)

20. Table 4. Technical Talent: Patent Applications (by Country and Regions, year 2002)

21. Table 5. Where is the Talent? (I) The Global Talent Index (GTI) 2007

22. Table 6. Where is the Talent? (II) Global Creativity Index, year 2005

23. Table 7. Migration of Qualified Human Resources* fromthe Americas to OECD Countries (2000) Region Share in the OECD stock (%) Average Rate of Emigration (as a % of the labor force**) Share of Skilled Workers (%) Total Skilled Total Skilled Among Among Residents Emigrants Americas 26.3 22.6 3.3 3.3 29.6 29.7 North America 2.8 4.6 0.8 0.9 51.3 57.9 Caribbean 5. 1 5.7 15.3 42.8 9.3 38.6 Central America 13.7 6.6 11.9 16.9 11.1 16.6 South America 4.7 5.6 1.6 5.1 12.3 41.2 * People with 13 years or more of education (tertiary education)** People equal or greater than 25 years old. Source: F. Docquier y A. Marfouk, “International Migration by Educational Attainment, 1990-2000”, International Migration, Remittances and Brain Drain, C. Ozden y M. Schiff (eds.), Washington, D.C., World Bank, Palgrave Mc Millan, 2006

24. Table 8. H-1B Visas to High Skills Immigrants Granted by the United States by Region(2002) Visas related to areas of information technologyand computer science Visas H-1B Granted Origin region Total Percentage Total Percentage of Percentage intothe informationtechnology sector Total Visas H - 1B South America 12 732 6.4 1 500 11.8 2.0 Asia 127 625 64.6 62 121 48.7 82.7 Africa 5 994 3.0 1 308 21.8 1.7 Europe 30 84 0 15.6 5 901 19.1 7.9 Others 20 346 10.3 4 284 21.1 5.7 All countries 197 537 100.0 75 114 100.0 Source: R. Barrere, L. Luchilo y J. Raffo, “Highly skilled labour and international mobility in South America”, STI Working Paper, N° 2004/10, París, OCDE, Decembre, 2004

25. Figure 1. Estimated value of offshore services offers in the World(billions of dollars, 2003) Source: McKinsey&Company (2005), The Emerging Global Labor Market: Part III – How Supply and Demand for Offshore Talent Meet, June.

26. 7.- Policy Issues How to promote circulation of talent toward developing countries and transition economies to counteract “brain drain”. Review rewards structure in the public and private sectors and identify obstacles to retaining and developing talent in developing countries and transition economies. Policies oriented to increase connectiveness, compensation, retention. Critical areas: the Health sector and Science and Technology. Mobilization of Diaspora for national development.