Is the Global Free Trade on Talent Coming to an End?

Britain’s looming independence from the EU and fresh interest in nationalist policies in the U.S.has firms reconsidering their global talent strategies.
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It didn’t take long for fallout from last year’s Brexit vote to cross the Atlantic Ocean from London straight into Nicole Sahin’s Boston office.

Sahin’s staffing firm manages salespeople and other overseas employees for U.S.-based multinationals and high-growth technology firms. Within three months of Great Britain’s June 2016 decision to leave the European Union, clients were asking for help reworking their talent strategies.

London became a mecca for multinationals’ EU headquarters after the organization’s origin in 1993. But once Brexit is completed in 2019, it won’t be as easy for EU citizens to travel between the United Kingdom and their home countries. That means it will be less efficient for organizations to center EU operations there, said Sahin, founder and CEO of Globalization Partners.

“They’re spreading out their sales teams,” she said. “They’re hiring maybe one person in Germany, one in the Netherlands and one in Ireland.”

The nationalist, protectionist politics embodied by Brexit and championed in the United States by President Donald J. Trump are now spreading elsewhere around the world. It’s a seismic shift from decades of globalism that encouraged the free flow of talent throughout the world. The shift is giving corporate leaders pause by forcing them to reconsider who and where they hire — a change that could lead to a significant, global talent management reboot.

“The concerns are huge,” said Katherine Jones, a partner and director of talent research at consulting firm Mercer. “They’re widespread. They cross a huge variety of industries and many kinds of job roles, more than we would have expected.”

The anti-globalist sentiment is a reaction to long-held economic theories that supported the idea of a global supply chain and the outsourcing and talent mobility that stemmed from it. But while free trade and open borders may have made some portions of the population better off, people whose jobs where concentrated in sectors adversely effected by globalization and the rise of automation technology — namely, manufacturing and other low-skilled occupations — suffered mightily.

“They couldn’t find a place in this new world of globalization,” said Steven Tobin, a senior economist with the International Labor Organization, a United Nations agency based in Geneva that works on labor and human rights issues.

But closing the borders and clamping down on trade could exacerbate the problem rather than fix it if the larger dilemma of supporting underserved communities isn’t dealt with, Tobin said. Either way, “It raises questions about movement of talent,” he said.

Reshaping the Talent Economy

Nowhere is that more apparent than in the U.S., where the Trump administration’s nationalist doctrine has led to promises of tighter immigration and trade policies that threaten to throw existing talent structures for a loop. Although the administration’s efforts to this point have remained largely symbolic — Trump has signed executive orders supporting a more nationalist agenda, but has yet to pass significant legislation on that front through Congress — anticipation of what’s to come has business leaders guarding against profound implications for the talent economy, both in the U.S. and abroad.

Requests from earlier this year for H-1B visas from U.S. companies that want to hire highly skilled foreign workers for tech and other positions dropped for the first time in five years, according to U.S. Citizenship and Immigration Services, the agency that runs the program. After the Trump administration announced a series of measures to crack down on H-1B abuses, Indian outsourcers that have been among the biggest users of the visa program to staff stateside operations announced they would switch tactics, including hiring thousands of U.S. workers, and possibly offshoring more work. Historically, U.S. companies have relied on H-1B visas to hire the best and brightest foreign students graduating from American university STEM programs. However, the new administration’s anti-immigrant policies have fewer students from India, China and the Middle East applying to U.S. colleges and universities, one reason total applications from foreign students dropped 38 percent for fall 2017, according to the American Association of Collegiate Registrars and Admissions Officers.

Across the globe, the uncertainty created by the current political climate will affect some industries more than others. British health care enterprises, for instance, employ significant numbers of documented foreign-born employees. Because of Brexit, those workers are uncomfortable with the ambiguity of their positions and are looking for opportunities that will move them back to their home countries, according to Jones, who helps keep human resources executives at Mercer’s midsize and enterprise-level clients abreast of global human capital trends. “The discomfort in the individual employee is probably something politicians didn’t think about” when promoting nationalistic agendas, she said.

On the more positive side, Trump’s pro-business stance and support for U.S. manufacturing, energy, defense and infrastructure industries could be a boon to those industries to step up hiring, said Fran Luisi, a partner at global executive search firm Odgers Berndtson and head of its U.S. HR practice. Meanwhile, the uncertainty leading up to the U.K.’s Brexit vote and the U.S. presidential election caused companies to hit the pause button on C-suite hiring, Luisi said. Regardless of how organizations felt about the outcome, the results provided clarity they are now using to shape hiring plans, Luisi said.

Bad for Small Employers,
Good for Gig Workers

In the U.S., tech companies are among the first coming to terms with the Trump administration’s nationalist policies. If they can’t move people as freely between countries as they used to, not only will it make them rethink where their physical workplaces should be but it will intensify competition for available top talent, ILO’s Tobin said. This is likely to be toughest on small- and midsize companies. Smaller companies traditionally have been big employment generators, but that advantage will be eliminated if they aren’t able to compete with larger companies on talent, he said.

As companies grapple with replacing sources of lower-cost talent such as the H-1B visa program, it could lead to wider use of independent contractors in industries across the board, not just in information technology. The number of so-called gig workers is already increasing, and the current political climate could add to it, said Yvette Cameron, SAP/SuccessFactors senior vice president for strategy and corporate development. The changes have ramifications for the HR department, according to Cameron, whose team advises thousands of SAP/SuccessFactors customers worldwide on implications of current events on their own businesses. Historically, procurement managed contractors, but if gig workers become more integral to an organization’s workforce, the role should shift to HR. “It’s a chance for HR to take a new look at how they are staffing,” Cameron said.

High-level, high-wage workers aren’t the only employees affected by talent economy shifts to a more nationalist, protectionist agenda. Stepped up deportation of undocumented aliens, Trump’s idea to build a U.S.-Mexico border wall and potential tariffs on foreign imports threaten an already beleaguered agricultural industry workforce. Farmers depend on migrants to pick berries and avocados — jobs U.S. workers haven’t shown much interest in. A broad-brush approach to immigration reform and tariffs on foreign goods doesn’t account for that, said Jones, the Mercer analyst. “If everyone who picks avocados goes home, and we have a tax on food coming from Mexico — where avocados are also grown — you and I won’t have guacamole we can afford for the rest of this administration,” she said.

If undocumented workers are deported and migrant laborers are afraid to travel here to work, it affects not just their jobs but jobs in industries that support them, like retail. In families, if one parent is legal and the other isn’t, “they’ll all go home or go underground,” Jones said. Filling the vacuum those workers would leave behind isn’t as simple as moving in people who were laid off when U.S. companies downsized or took work offshore. Even if people are unemployed, they might not want the jobs, be willing to relocate to where jobs are or have the right training, she said.

Add an ongoing shortage of talent in many other areas, “and it’s a huge mess,” Jones said.

A More Adaptable Workforce

Whether or not the era of Brexit and Trump directly affects them, organizations can use the opportunity to build more agile practices into their talent management strategies, said Cameron, the SAP/SuccessFactors SVP. As part of that effort, Cameron said companies should be constantly building and monitoring their talent pool so they have the right mix of candidates to draw from to respond to changes.

Companies also need to invest in mentorships, apprenticeships, feedback mechanisms and other forms of training for their entire workforce — employees and contractors — so people have the know-how required to adapt to changes, Cameron said.

Sahin said Globalization Partners is already helping its clients adapt. The company has offices in 150 countries that handle employment paperwork, payroll, local taxes and anything else that comes up when a client company hires a new employee. Along with moving EU workers out of London to other European cities, Sahin said she is getting more requests for help relocating foreign-born employees of U.S. companies back to their home countries because they are afraid their visas won’t be granted or extended.

When it comes to keeping up with changes, it pays to be flexible, Sahin said. As the current political climate takes shape, that’s an attitude more organizations could adopt for their own talent policies.

Michelle Rafter is a business writer and columnist based in Portland, Oregon. To comment, email editor@talenteconomy.io. This story originally appeared as part of the cover package of Talent Economy‘s Summer 2017 quarterly journal. Click here to view the complete digital edition of the issue.