Since 2011, Harvard Business School (HBS) have produced a number of reports on competitiveness in the United States, the latest of which was published recently. In Recovery Squandered, HBS professors explore progress on productivity over the duration of the research, and seek to identify trends in the six reports produced since 2011.
The report highlights that while the United States has seen a decade of economic growth in the aftermath of the Great Recession, they have done little to address the structural weaknesses that undermine both the economy and society as a whole. Indeed, they argue that the fruits of this recovery have largely been squandered.
“Though America has squandered the recovery, we need not squander the future,” the authors say. “America retains great strengths, and many of the basic policy directions required to enhance U.S. competitiveness and boost shared prosperity are well understood and widely supported.”
Partisan barriers to progress
The report suggests that a major barrier to progress is the inherent partisanship of the American political system, with both Republicans and Democrats striving to advance their particular interests rather than those of the public more broadly. They highlight how electoral and legislative rules cause gridlock in decision making, but their remains the ill-informed belief among the public that the election of the right people can overcome these structural concerns.
In many ways, the business community has perpetuated this situation, as they have profited from the political dysfunction that results. Through the use of lobbying and other mechanisms, the business community is undermining the effective functioning of government, even whilst at the same time largely washing their own individual hands of responsibility.
Nowhere is this dysfunctionality more evident than in migration, where the business community are largely unified in the challenges they face in attracting the highly-skilled talent they need from overseas. Despite the consensus that change is required, however, the lack of political cooperation on the matter results in little real progress being made.
The gift of global talent
Professor William R. Kerr, author of The Gift of Global Talent, makes the case for a substantial change to the immigration system that so often denies organizations access to the talent they need to remain competitive. The report highlights how 68% of HBS alumni feel their companies would be significantly less productive if they were denied access to skilled workers from overseas, with the majority blaming the immigration system for causing delays to accessing this talent.
A significant concern among the alumni community is the harmful effect the framing of immigration in the political rhetoric has on the debate, and subsequently on the ability of organizations to attract workers from overseas. The report reveals that whilst nearly all alumni believe that highly skilled immigrants should be allowed to move to the U.S. to work, the business community as a whole have done an insufficient job in making that case. This has resulted in this support for immigration dwarfing support across the public as a whole, with roughly twice as many HBS alumni supporting immigration than members of the public who identify as Republicans.
The survey revealed that there was no real consensus between the business and wider community about the role immigrants play in the economy, which is significantly problematic as immigration reform offers a considerably more cost-effective route to enhanced competitiveness than areas such as infrastructure investment and taxation reform.
“It’s important for many people to contribute to the fact building around immigration, its impacts and the issues surrounding it, because the more we can bring evidence to the table, the more we can have an informed dialog on the issue,” Kerr told me recently. “If anything, I would love to encourage people across the country to think about how migration can help their area, as in many cases, depopulation is a bigger issue than overpopulation.”
Starved of talent
In a world that is increasingly urbanized, there is a considerable brain drain from small towns and rural areas, as low birth rates are coupled with outward migration of citizens to larger towns and cities in the hunt for jobs. This lack of inward migration helps to fuel the sense that communities have been ‘left behind’, as for those that remain, that is often literally what they are.
With global population set to peak by 2070, the question becomes less about keeping people out, as attracting them in, with the evidence mounting on the value diverse and talented communities can bring. Unfortunately, countries across the western world are adopting a different approach, and unnecessarily starving themselves of the talent they need to thrive.
As the Harvard report emphasizes, this is especially unforgivable given the relatively robust economic performance over the past decade. Rather than use this long economic expansion to create a prosperous and welcoming society, it has instead allowed both geographic and economic inequality to spread, with large swathes of the country blaming migrants for their malaise.
This wastefulness was aptly highlighted by a recent paper from Nanyang Technological University, which found that companies who win the H-1B visa lottery were consistently more innovative and successful than their peers.
“We find that a firm’s win rate in the H-1B visa lottery is strongly related to the firm’s outcomes over the following three years. Relative to ex ante similar firms that also applied for H-1B visas, firms with higher win rates in the lottery are more likely to receive additional external funding and have an IPO or be acquired,” the researchers say. “Firms with higher win rates also become more likely to secure funding from high-reputation VCs, and receive more patents and more patent citations. Overall, the results show that access to skilled foreign workers has a strong positive effect on firm-level measures of success.”
For this success to emerge, we need our leaders to have a shared vision of both where we currently are, and why we’re here. Unfortunately, the Harvard paper shows that this clarity and consensus is destroyed by partisan bickering that has undermined attempts to capitalize on this decade of growth and build the structural foundations that can deliver prosperity for all. With predictions of a recession looming large on the horizon, we can only hope that it’s not a decade we come to look back on with regret in the years to come.
