Iwona Tokc-Wilde 8 May 2017 11:40am

How the private sector is influencing the migration debate

Private sector companies can benefit from migration, but they need to engage in the immigration debate more, says Iwona Tokc-Wilde

Caption: Migration has taken centre stage in Europe and the US as tensions mount over immigration from central and eastern Europe.

Migration has taken centre stage in Europe and the US as tensions mount over immigration from central and eastern Europe, and the growing number of refugees from the Middle East and Africa. Anti- immigration sentiments were revealed in the EU referendum and Donald Trump’s successful presidential campaign, and are fuelling populist movements in France, Holland and Germany.

While 2016 global statistics have not yet been compiled, 247 million people had lived outside their country of birth as of 2015, a number that has almost tripled in the last 50 years. According to a recent report from McKinsey Global Institute, more than 90% are voluntary or economic migrants; the remaining 10% are refugees and asylum seekers.

Involuntary migration (the International Organisation for Migration defines it as migration to escape persecution, conflict, repression, natural and human-made disasters, ecological degradation, or other situations that endanger the migrants’ lives, freedom or livelihood) is expected to rise over the next 10 years. In fact, large-scale involuntary migration is perceived as a major risk to global development in the World Economic Forum’s Global Risks Report 2017.

“Economic or not, migration has become a highly-charged topic, but all too often the facts are mixed with misinformation and distortion masquerading as truth,” says Richard Spencer, ICAEW’s head of sustainability. He adds: “While migration is usually discussed in terms of crisis, there’s also a strong positive aspect: migrants can be good for the economy and for business. And I don’t mean just as cheap labour. Migrants bring much-needed skills and experience at all levels and add to our cultural diversity.”

McKinsey’s research shows that from 2000 to 2014, immigrants contributed 40-80% of the labour force growth in the top migrant destinations (the US, Germany, Saudi Arabia, the UK, Canada, France and Australia), boosting the working-age population. The research also shows that migrants contributed 9.4% of global GDP, or roughly $6.7trn (£5.3trn), in 2015. North America captured up to $2.5trn of this output, while up to $2.3trn went to western Europe.

Michael Clemens is a senior fellow at the Center for Global Development in Washington DC. He explains the effect of immigration on rising GDP: “It stimulates investment by raising the return on capital. It builds international trade and increases entrepreneurship. It tends to raise the productivity of native workers because immigrants often specialise in different tasks than natives.”

Research also suggests that immigrants do not harm the long-term employment prospects or wages of native workers. “Immigrant workers in some countries do compete to a limited extent with the lowest-skilled native workers, but when natives are displaced to other jobs or sectors of the economy they typically earn more, not less,” argues Clemens. On the whole, migrant wages remain some 20-30% below those of comparable native-born workers, according to McKinsey.

“Not only do immigrants not take jobs away from native workers, they often create them – either through their entrepreneurial efforts, or by simply spending their wages in the new economy they contribute to, creating the demand and need for more jobs,” says Kate Andrews, news editor at the Institute of Economic Affairs. In the UK, 15.4% of immigrants launched their own businesses compared to just 5.3% of lifelong UK residents, according to the 2015 Global Entrepreneurship Monitor.


Marta Krupinska, a migrant entrepreneur from Poland, co-founded London-based money transfer service Azimo in 2012. Azimo employs 10 Brits, but Krupinska admits around 77% of the company’s workforce are migrants. “Without migrants we wouldn’t be the thriving business we are now,” she says.

While companies in many industries traditionally look to low-skilled immigrants to handle labour-intensive jobs, fintechs like Azimo are increasingly tapping into a pool of migrant employees with specialised digital and technology skills.

Krupinska says: “Migration is the key to innovation in the technology sector. We’ve been able to attract the very best talent from all over the world.”

Berlin-based language exchange tuition app Tandem sourced its development team from Colombia, the UK, Belarus, Mauritius, Georgia and Vietnam. Arnd Aschentrup, chief executive and co-founder of Tandem, says: “Of course it’s possible to find great employees in Berlin and we do have several very talented German members on the team. However, most start-ups struggle with sourcing the right kind of talent to fit their particular needs. For us, accessing what we call ‘dark talent’ where you might not expect it was the key. It’s ‘dark talent’ because it’s almost as hard to detect as dark matter!”

In the UK, finding British-born employees with skills fit for the digital age may soon become difficult. Last year, a parliamentary report revealed that 12.6 million adults lack even basic digital skills, while about 766,000 new jobs requiring digital skills are projected across the country by 2020, 47% of them in London.

Casting the net a little wider is, therefore, a no-brainer. “The cost of employing someone with digital skills in programming, coding and the creation of systems interfaces has been exploding due to its relative scarcity in the UK,” says Chris Simpson, SME consultant with national network Business Doctors. In the last 10 years, Simpson has both run and worked with businesses employing significant numbers of Poles, Hungarians, Bulgarians and Lithuanians. He says: “They are perhaps as skilled as their British counterparts but their motivation and drive are higher. Over time, this positive mindset offers an even more significant contribution to businesses than their technical skills.”

But what of our moral responsibility for the potential “brain drain” in the origin countries? “In the short to medium term, the skills-stripped countries definitely lose out,” Simpson admits. But he also adds: “The reverse diaspora that often takes place in the decades to come is of inestimable value to these economies. Some of the talented eastern Europeans I brought into a London digital agency eight years ago have since returned home and set up businesses of their own. Ireland is another example of where the impact of returning talent is huge.”

Talent exodus

In preparation for Brexit, however, the British government insists that businesses must “grow their own” skilled employees. “It’s implementing measures designed to make it more expensive to recruit skills that should be available in the UK,” says Punam Birly, employment and immigration partner at KPMG UK. The apprenticeship levy and the new skilled migrant charge both came into force on 6 April 2017. Employers of skilled workers from outside the EEA, namely those hiring under the Tier 2 route, will now have to pay a levy of up to £1,000 per year for each sponsored worker.

Birly adds: “The new US administration appears to share this view – use US workers and invest in their long-term skills.” On top of his push to ban immigration from several majority-Muslim countries, President Trump has recently flagged introducing an Australian-style merit-based immigration system for skilled foreigners wanting to migrate to America.

Mariano Mamertino, economist for EMEA at global job site Indeed, says: “Any policies aimed at making it more difficult for foreign workers to take up a job in a country have the potential to reduce the pool of available qualified candidates for firms located in that country.”

Such policies are also damaging to a country’s appeal as a destination for migrant workers. “In the UK, foreign talent is becoming more choosy about choice of country, understandably wanting to live somewhere that welcomes them,” says Birly. More than a quarter (27%) of employers believe their EU staff are considering leaving their jobs and/or the UK this year, according to
a survey by the Chartered Institute of Personnel and Development. The talent exodus is expected to hit the education, healthcare, retail and wholesale, manufacturing, accommodation and food services sectors particularly.

“This means businesses must now consider whether to engage in the wider debate on who we let in, for how long, and for what purpose,” says Birly. She adds: “Deploying the analytical and factual approach used by businesses will not only help governments tackle the interdependent issues of migration, birth rate and talent shortages but also enhance their standing among key stakeholders as well as young talent for whom social justice is as important as personal success.”

Profit and social impact

Aside from fulfilling local hiring needs, the migrant population is also a potentially valuable market segment. Here the private sector can profit while aiming to achieve social impact.
Azimo’s platform helps migrants send money to family members back home. Krupinska says: “We understand the importance of a reliable, low-cost money transfer service. If you’ve been in the situation where your hard-earned cash is being swallowed up by unfair transfer fees, it really spurs you on to make a change.”

The Tandem app is used by migrants who want to better function in a society where they have chosen to live and work. “Our users come from all walks of life and include migrants who have an urgent need to improve their language skills,” says Aschentrup.

Businesses can also achieve social impact by helping migrants integrate in their destination country. Aschentrup says: “We fully support our international staff before and when they first arrive in Berlin. This is really important in Germany as our bureaucracy is pretty complex. Visas, renting flats, getting kids into kindergarten or school and opening a bank account are just a few of the things we assist with. We also offer German lessons through the Tandem app. All these things help our team to settle in quickly.”

Integrating refugees is a bigger challenge. They do not arrive spurred on by better job or career opportunities but to escape war and religious persecution. Because of their cultural and racial backgrounds, they do not often immediately blend well with the receiving society.

But large economic gains could be realised from this new wave of migrants once they are allowed to join the receiving country’s workforce. “Economic research shows that after they get on their feet, refugee workers are more economically productive than non-refugee immigrants,” says Clemens.

Governments, the public and the private sector must, however, collaborate to help create a holistic economic and social integration policy. McKinsey’s research shows that successful holistic integration could increase the global economic contribution of all migrants by up to $1trn annually.

The most socially responsible companies today are also trying to counter-act the “brain-drain” effect in the sending countries. “They are exploring ways to train migrants in their country of origin, thus turning migration into an engine of skill creation rather than the brain-drain,” says Clemens. As an example he cites Singapore-based Virsagi Management, which trains skilled construction workers in Bangladesh in preparation for work in Singapore. “And it’s far more economical to train in Bangladesh than in Singapore,” he adds.