Tight immigration laws making countries less competitive, says think tank

IMD experts Arturo Bris and José Caballero on immigration and competitiveness.

With floods of migrants pouring out of the Middle East and a simmering debate about immigration in Europe, politicians and the public should make sure not to throw the baby out with the bath water when formulating policies. Immigration can have some very positive effects and one of our recent IMD Competitiveness Center studies backs this up.

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Competitiveness greatly depends on the extent to which governments facilitate an environment conducive to business. One key indicator is the impact of immigration laws; that is, whether or not immigration laws curtail the ability of enterprises to conduct their activities effectively.

A large survey of senior executives, carried out for the IMD World Competitiveness Center’s recently released IMD World Competitiveness Yearbook, shows that decision-makers at companies view nations with strict immigration regulation as less competitive and lower on talent.

From 2014 to 2015 Germany, Malaysia, Switzerland and the United Kingdom have clamped down on immigration. At the same time data shows that executives perceive that these countries have experienced a decline in the availability of skilled labour and senior managers with significant international experience.

Because of this, the business leaders say, the business environment in Germany and Malaysia has lost attractiveness for highly-skilled foreigners who can contribute to boosting company performance. Switzerland and the United Kingdom did not lose attractiveness for the executives according to the survey, however.

Conversely, executives indicate that in the same period while Qatar has ‘relaxed’ its immigration policies that the country has experienced improvements in the availability of skilled and competent workers, and that its attractiveness has increased.

The survey tells a different story for Mexico. Despite stricter immigration policies, executives indicate that the country has improved its availability of skills and competencies and that the country remains attractive to highly-skilled international talent.

Increasingly strict immigration policy also affects productivity according to the participants. Executives say that in Germany, Malaysia, Switzerland and the United Kingdom, workforce productivity (by international standards) declined during 2014 and 2015. The executives’ perceptions applied to both large corporations and small to medium-sized enterprises, with the exception of the UK, where SME’s were seen to be becoming more efficient. In both Mexico and Qatar productivity indicators improved, according to the survey.

While the survey measures perception and not “hard data”, perception is important because if decision makers at a company favour a location over another, there can be implications for job creation and other factors which impact local populations and prosperity.

Before rushing to close their doors, countries and citizens should think about whether what they’re doing is bad for competitiveness and hence bad for business.

Arturo Bris is Professor of Finance at IMD and directs the IMD World Competitiveness Center from 16-20 November 2015 in Singapore. José Caballero is Senior Economist at the IMD World Competitiveness Center.

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