From German Labour Minister to President of the European Commission: A new Stand for Ursula von der Leyen on the Global Race for Talent?

Written by Oscar Brunzell

On November 1, 2019 Ursula von der Leyen became the 13th President of the European Commission. Her new position will come with difficult and complex questions to solve. As a leading German politician, Ursula von der Leyen gained both local experience as German minister of Family affairs, senior citizens, women and youth between 2005 and 2009; and Minister of Labour and Social Affairs between 2009 to 2013; and global political experience as Minister of Defence between 2013 and 2019. While serving in the German ministry, she was expected to look after what was best for Germany. However, her new position as the EC President will require her to put the priorities of the European Union above those of Germany. One issue that will require a less parochial perspective is the fight to attract skilled workers, such as doctors and engineers, to each countries’ respective labour pool. This fight is often referred to as the ‘global race for talent.’ Historically, Germany has been one of the most proactive countries in the EU, introducing laws to promote the immigration of skilled workers. For example, the German skilled labour immigration law (Fachkräftezuwanderungsgesetz) makes it easier for German employers to find skilled workers from outside the EU. Similarly, the Integration Act (Integrationsgesetz) promotes rapid integration in the labour market. As the German minister of Labour and Social Affairs, Ms. von der Leyen was directly responsible for the German policy of capturing talent from the rest of Europe (see interview BBC, 2013). As President of the European Commission, the policies von der Leyen proposes regarding the global race for talent will have to be in the best interest of all European Union member states.

The “global race for talent” is a two-sided issue for the EU. On the one hand, the EU should implement a strategy to attract talented workers from a global employment pool; on the other hand, the race for talent is an internal EU affair as it has to promote its communitary workforce. In this sense, EU countries are not enthusiastic about the prospects of having their best and brightest drained into the EU workforce and away from their own labour force. This said, Ms. von der Leyen is faced with the choice of a common EU policy for the global race for talent that is in the best interest of all EU member states. 

My suggestion is that Ursula von der Leyen, in promoting what is best for the EU, should allow all Europeans to make their own decisions about where to work. Free choice allows the companies and societies that create the most prosperity, and by extension, the best opportunities for workers, to be supplied with the best employees, which will maximize the EU’s prosperity. I further suggest that the EU take a leading role in the race for global talent. For this, I propose an action plan based on three points: 

1. Do whatever is needed to win the global race for talent, 
2. Promote the intra-EU work mobility, and 
3. Support source countries by providing them with educational support, both technical and financial. 

If the EU allows the capture of skilled workers exclusively from societies such as Romania and Bulgaria, the ruling parties in these countries will have to apply measures to modernize their countries faster. However, formulating the strategy will be a tricky task for our new President in that she will be accused of supporting Germany, which is in need of skilled workers, instead of prioritizing what is best for the EU. Therefore, she will have to walk a fine line between patriotism and politics as she attempts to redirect talent to a new finish line.

The Regulations and Data on Labour Mobility to, from, and within the European Union

Free movement of people, workers among them, is a fundamental right of EU citizens and one of the four pillars of the EU’s internal market. Free movement for workers means nationals of any EU member state can be employed in any EU member state on the same conditions as the nationals of that particular member state. During 2019, the European Labour Authority (ELA) was established with the purpose to facilitate the free movement of workers to promote labour mobility. An update on the job-matching web platform EURES (European Employment Services) intends to assist employers seeking workers from other member states. The job classification relevant for the EU labour and education market is made by the EU organization European Skills, Competence Qualifications and Occupations (ESCO).

The EU has actively attempted to attract skilled workers from the global employment pool. In 2009, the EU adopted the so-called “Blue Card Directive” (Council Directive 2009/50/EC) with the aim to attract high-skilled non-EU workers to the EU labour market. When the Directive came into force on August 1, 2012 most EU countries embraced it. However, the initial expectations of the initiative have not been fulfilled, and the Blue Card has been underused as a result. Much of the blame comes from the fact that what the Card offers is insufficiently attractive. To address this failure, in 2014 the EU Commission proposed changes to the Blue Card Directive. In December 2018, the European Commission reaffirmed the importance of the review of the Blue Card Directive and urged the European Council to agree on how to improve the Card.

Below, I will present data and analysis on global mobility, with a focus on mobility to and from the EU. The data on global movements I have collected comes from two reports: the International Migration Outlook 2017 (OECD) and the World Migration Report 2018 (IOM). I collected the intra-EU data from the 2018 Annual Report on intra EU Labour Mobility. Table 1 on intra-EU mobility is constructed based on data published by EUROSTAT.

The OECD report states that in 2017 more than 4.9 million labour migrants entered OECD member countries through temporary labour migration programs, an eleven percent increase compared to 2016. Of the labour migrants, the largest group – 2.7 million migrant workers – were Intra-EU/European Free Trade Organization, posted workers. The report also shows how low-skilled workers and highly-skilled workers are overrepresented among the EU/EFTA posts. (Low skilled workers mainly work within agriculture, construction, and manufacturing, and within transport whereas highly skilled migrant workers mainly work in IT or health sectors). The OECD report points out that temporary migrant workers have a major effect on labour markets in many OECD countries. For example, in six out of twenty countries, migrant workers add two percent or more to the country’s overall labour population. 

The IOM report estimates that there were a total of 244 million international migrants in 2015, an increase of 90 million from 1990, and 160 million from 1970. The estimated 244 million international migrants in 2015 means that one out of every thirty people in the world is a migrant. Europe and Asia are the two largest migrant destinations, with approximately 75 million migrants each in 2015, collectively representing sixty per cent of the total international migrant population, as well as an astounding ten percent of the total European population. Most of the international migrants (72%) are of working age (20–64 years old). Artuç, et al. (2015) estimates eighty percent of all highly skilled migrants travel to OECD member countries.

The EU report states that the EU, together with EFTA countries, hosts around 16 million third-country nationals. Intra-EU mobility increased in 2017, with 12.5 million EU citizens of working age living in a EU country other than their own, with another 1.3 million EU citizens living in EFTA countries, which is an increase of approximately 5% compared to the previous year. Two countries Germany (3 million) and the United Kingdom (2.6 million) host almost half of all labour migrants. Spain and Italy are the main destination countries after Germany and the United Kingdom, though Spain and Italy have not regained their pre-recession attractiveness (in 2008 an immigration crisis rocked Europe, and the repercussions are still being understood). The country with the fifth largest number of inflowing EU labour migrants is France. The main source countries – Romania, Poland, Portugal, Italy and Bulgaria – account for more than 50% of labour migrants relocating into France. The report also points out that the skill level of the migrating workers has changed, with the skill level of the migrants increasing as compared to the nationals of the host country. However, the skilled migrants still represent a minority, being less skilled occupations the most common source of employment. 

In Table 1, I use data to track the flow of intra-EU migrant movement from origin to destination. Here, we see that Germany is the main destination country for migrants originating from Bulgaria, Greece, Croatia, Italy, Luxembourg, Hungary, Netherlands and Austria. The UK is the main destination country for people originating in Ireland, Poland, Spain, Portugal, Latvia, Lithuania and Slovakia. In both Germany and the UK, EU migrants account for almost six percent of the population. However, the country with the highest percentage of EU migrants is Ireland (with an especially large population from Poland), where EU immigrants represent more than one tenth of Irish nationals. The case of Italy is interesting in the sense that more than one and half million of its citizens live in another EU country, while Italy is simultaneously a main EU destination country. Almost as many EU immigrants are moving into Italy as moving out. Most migrants moving into Italy originate in Romania.

Of the source countries, Romania is the country with the highest percentage of its population living in another EU country, with more than 17 percent. Five countries that have more than ten percent of their population living in another EU country are Bulgaria, Croatia, Latvia, Lithuania and Portugal. 

Table 1. The Intra-EU Mobility with the Source Countries and the Destination Countries 

Source: Author’s own calculations on data from EUROSTAT

The EU global race for talent 

For the EU to develop and prosper as a continent, it needs its companies to thrive. However, these companies will only thrive if they are able to find talented workers to hire. This means that companies need to retain and acquire the most talented workers; i.e., European companies must retain workers while recruiting non-EU workers at the same time. Therefore, it is in the best interest of the EU to embrace laws and regulations that encourage talented and skilled workers to migrate in order to compete with other countries, such as the US. If US companies remain more proactive in their encouragement of high-end workers, the US will have a competitive advantage over EU companies. Therefore, for European companies to be competitive, the EU must adjust its attitude towards laws and regulations of skilled workers. When 71 percent of software engineers in Silicon Valley, the software capital of the world, are migrants (with about 60 percent holding master’s degrees), that means the US software industry is dependent on foreign-born engineers. However, the US is bending its own laws, and US companies are employing engineers under the controversial H-1B visa, which is why US companies needing engineers are able to satisfy their needs with skilled foreign engineers. Google has hired more than 2,500 and Apple nearly 2,000 engineers with H-1B visas (Baron, 2018). Furthermore, a staggering 75 percent of all high-end migrants reside in the United States, the United Kingdom, Canada, and Australia (Kerr et al, 2016); i.e. the majority of high-end migrants do not work in EU countries. Therefore, the race for talent is a competition the EU is losing, and this loss comes at a time when the global demand for talent is getting more and more competitive while the demand for high-end migrants is only increasing.

An IOM report from 2014 estimates that by 2020 there will be a worldwide shortage of 38-40 million workers with tertiary education (trade schools, colleges and universities; 13% of demand) as well as a shortage of 45 million workers with secondary education (High Schools). Aware of this, many countries are implementing policies to attract skilled workers. The EU must address the challenge of attracting talent to the EU, as otherwise EU companies will remain at a disadvantage to their competitors. In a Boston Consulting Report (Strack et al. 2014), it is estimated that Germany will see its labour supply decline from roughly 43 million people in 2019 to 37 million in 2030. In fact, Germany will experience a shortage of 2.4 million workers in 2020, and possibly between 8.4 million to 10 million by 2030. The most direct consequences of this labour shortage is that the engine of the European economy will not be able to achieve its historical GDP high growth rates.

The global race for talent is not a new phenomenon. However, it has attracted new attention because recent EU member states wish to include talent drain and its consequences on the agenda in the dialogue of the future European Union. Not surprisingly, new member states are requesting a limitation in the free movement of people (Brain drain conference, 2015). These countries see skilled-worker migration as a real threat that increases the differences between regions and countries. For source countries, emigration may have detrimental effects on society, which is why they question the fairness of the free movement of workers. They claim that there is a need for an effective action plan for EU members concerning intra-EU labour movements of skilled workers.

What the EU needs is a well-grounded plan for labour opportunities for all regions and countries, allowing poorer EU member states to feel they are part of creating a better and just EU, rather than an EU where the rich become richer. However, the European Commission has, thus far, been reticent to making any resolution on the topic, perhaps because free movement of people is one of the core principles of the EU. Earlier discussions within the EU on talent drain have touched on the runoff of skilled labour from non-EU countries to the EU or from the EU to non-EU countries. A strictly intra-EU view is that since the European Union is a single market, and by definition, talent drain cannot happen within a single market, because all Member States share a common labour pool in a single market. Classical economic theory considers labour mobility a win-win for Member States, as workers ferret out the highest rewards somewhere without mobility obstacles. Consequently, classic theories on labour mobility in a single market are unambiguously good, because mobility increases the welfare of migrant workers, while the total welfare of the single market improves, and, in principle, the single market does not experience talent loss.

In Western and Northern Europe there is a lack of skilled workers, while at the same time the unemployment rate of skilled workers in Southern and Eastern Europe is high. It follows, then, that if there is a lack of skilled workers in, say, Germany, and there is an excess of skilled, unemployed workers in a neighboring country, the unemployed, skilled workers would be tempted to move. And since the German government has a proactive approach to the immigration of skilled workers, it also follows that migration to Germany is a win-win situation. Nonetheless, not everyone sees the migration of the skilled workers to Germany as a win-win, specifically because of the talent drain from the source country. Several countries have been disproportionately affected, some to the utmost of their existence. This is especially the case with the 2004 member states (see Table 1), where a vacuum of skilled labour resulted from the mass migration of high-end workers. As a result, the quality of life of the remaining citizens is negatively affected. For example, Romania has the lowest density of doctors in the EU, Kosovo has the lowest in Europe. However, it is not only in the healthcare sector that there are major staff shortages. For example, in Eastern and Central Europe, it is often difficult to complete the construction projects due to labour shortages (Mappes-Niediek, 2018).

EU source countries have two primary problems regarding emigration: one, the loss of skilled workers, and two, a demographic decline. Therefore, while source countries not only have difficulties to replace the emigrants, they also have difficulty replacing the aging population. While other regions and countries experience the migration of skilled workers, unique to some EU source countries is the phenomenon of simultaneous emigration and demographic decline, leaving these source countries with little hope of recovering productivity. These revolutionary consequences of a migrating high-end workforce may send the source country into a spiraling recession, which may take years, even decades, to recover from. A possible silver lining (or at least copper) to the dark cloud of emigration from these countries is that studies show how skilled workers are more likely to return to their home countries than low skilled workers (Bijwaard and Wahba, 2014).

What are the factors that affect the global race for talent? The main reason for the great mobility of labour movers is the growing importance of human capital playing in today’s knowledge economy. Companies and countries need skilled workers and will do all they can to attract skilled workers to their respective labour pool. Healthcare and the Fourth Industrial Revolution require skilled workers. Other factors influencing the attractiveness of destination countries are the respective country’s expenditure on education, wealth per capita, geographical proximity and labour force size (Petersen and Puliga, 2017).

What strategy should the EU adopt concerning “the global talent race?” 

When the European Union chooses a strategy pursuant to the global talent race, it is important that the chosen strategy benefits all EU member states rather than some EU member states, and that the strategy is sustainable and can be applied at least in the near future. 

Below, I have listed three points that von-der-Leyen-led European Commission should accomplish in order to attract skilled workers to the EU market and which are best for the overall prosperity within the European Union. Simultaneously, these three points will increase the EU’s competitiveness outside the EU when it comes to the global race for talent: 

First. It is clear the EU has and, without significant changes being made, will continue to have an increasing shortage of skilled workers. This shortage will continue to promulgate disadvantages for EU companies in their competition with non-EU companies that proffer more generous opportunities for skilled migrant workers. This is not a small thing, because without skilled workers the competitiveness of the EU will slowly or rapidly degenerate the prosperity of the Union. Consequently, the first thing Ursula von der Leyen should do is to prioritize the EU’s commitment to winning the global race for talent. Currently, the EU is losing this race. Therefore, the EU must make its Blue Card visa competitive with visas of similar markets. This will require radical improvements in order to make the Blue Card Visa system attractive to a large population of skilled workers, who, as a result, can enter (and remain in) the EU job market. However, changes to the Blue Card system must be mindful of the potential drain such changes will have on non-EU source countries and mitigate the consequences as much as possible. (One mitigating factor might be for the EU to set up collaboration with the educational system in these non-EU source countries to help bolster education, both financially and by supplying other educational resources.) 

Second. Here, the advice to von der Leyen is to allow intra-EU work mobility to continue, and to promote it, despite the potential negative effects on the hardest-hit source countries. Free movement is the central idea that defines the EU as a single market: not 27 small, limited markets, but rather one big market with 450 million EU citizens, whom are free to move wherever they would like to move within this market. Notably, companies that compete for skilled workers do so for a reason, which is that these companies are successful. Therefore, it is tantamount to the future success of the EU that successful EU companies are allowed to prosper. And that success is predicated on the reality that the EU remains capable of supplying successful EU companies with the skilled workers upon which their success is dependent. To be more specific, companies in southern Germany constitute the engine of the EU economy, and without that engine at full throttle the rest of EU will suffer. Therefore the successful companies in southern Germany must have unbridled access to a skilled workforce supported by, rather than hindered by, EU regulations. 

Despite the talent drain, free labour mobility is beneficial for the citizens of Eastern European source countries, who will move to another EU country to find a job (data suggests temporarily). With that job, migrant workers will receive both the experience and the pecuniary gain they could not have received otherwise in their home country. In this way, the emigrating skilled workers avoid the high unemployment in Eastern countries. 

Finding a job abroad (pull factors) is why migrants move; not having a job at home (push factors) is also why migrants move. The degree to which skilled workers move correlates with the degree that the source country has homegrown issues it must overcome. For example, Romania and Bulgaria are countries with significant levels of corruption, which is indicative of an elite population that looks after their own interests rather than the interest of the country’s citizens. (See for example the corruption rating by Transparency International.) Allowing skilled workers to migrate will expose indigenous flaws of their home countries and allow source country to make profound changes without obviating the potential of its skilled workforce. The data suggests that the skilled workforce will return in correlation with changes made by the source country to address its shortcomings, such as systemic, endemic corruption among the elite. Bijwaard and Wahba (2014) conclude that skilled workers do not stay long abroad, and when they return to their respective home country they do so with skills, professional networks and financial resources; i.e., they return with prosperity. These tangibles are important for a society to prosper, and when the often corrupt countries of Eastern Europe become inclusive societies, the future of all their citizens brightens. 

Third. Article 20(1) of the TFEU states that “Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union.” I hope and urge that Ursula von der Leyen will make it possible for all EU citizens to have the possibility to receive an education regardless of which part of the European Union they are from. For this, the EU must make sure that all member states have an educational system that will give the 450 million EU citizens a chance to fulfill their goals and dreams when it comes to getting an education and a degree. This will consequently give them a better chance on the job markets. At the same time, the EU educational system must be designed to address the needs of the EU wherever and whenever (and whatever) needs occur. While it is understandable that source countries are challenged by the exodus of skilled workers that have been educated at a high cost, but workers must follow opportunity wherever it may lead. and the source country must be satisfied with the hope that emigrating workers will one day return with their new experiences and valuable knowledge. 

I suggest that the EU develops a system that takes the cost of the education into consideration, mitigating the source country’s initial loss with some sort of prorated compensation gauged on factors like the skills of the migrant, the need elsewhere, etc. For example, the Fédération Internationale de Football Association (FIFA) has a system called “solidarity contribution” where the parent club of a player receives compensation when a skilled player is sold from one club to another, where a sum is deducted from the total amount of compensation and given to the parent club. The solidarity contribution reflects the number of years the player has been registered (and educated) with the parent club[s] between the seasons of his/her 12th and 23rd birthdays.) Besides modeling FIFA, the EU could model the EdX education initiative, founded by Harvard and MIT. EdX is an educational platform where anyone can get access to 2000 free online university courses from 140 leading institutions worldwide. The EU could develop its own educational platform for EU citizens, which could be accessed from even the most remote locations using modern technology, allowing access to the best scientists and pedagogical lectures. Hereby, the EU can support source countries both financially and educationally in the education of its citizens. 

Summary

In this article, I have presented three suggestions on which policies the new President of the European Commission, Ursula von der Leyen, should implement regarding the global race for talent. It is in the best interest of all of the European Union to make it easier for its member states to attract global talent. In this sense, I do not envy the job von der Leyen has been elected to perform. It is monumental and fraught with perils, but solutions are out there, such as FIFA and EdX, and no stone should be left unturned. The EU objective must remain that of a single market, matching skill with opportunity wherever it might be found within the EU (in order to maximize the potential of every worker), while simultaneously identifying and addressing circumstances in source markets that drive skilled workers away. These circumstances, which are often legacies of countries new to democracy, must not be criticized as deficiencies, which will only retard progress, but embraced as opportunities that the EU can, and indeed was created, to welcome and overcome.

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References

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