Expatriates are reshaping global economies and fueling growth

Expat news
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Published on 2024-01-22 at 14:00 by Asaël Häzaq
Expats were thought to have been swept away by the COVID-19 pandemic and then by the rise of remote work. Recent international upheavals were expected to hasten the end of expatriation. But that was without taking into account labor shortages, which are prompting governments to roll out the red carpet for foreign workers. Even the most conservative among them are opening the door to them. Let us take a closer look.

Industry, a major job provider for expatriates

In November 2023, William Russel, an expatriate insurance expert, published a study on the contribution of expatriates to local economies, revealing a direct contribution through employment and the payment of taxes but also indirectly through high levels of education. The report identifies the countries to which foreigners contribute most. Based in particular on OECD data, the study analyses 4 criteria: expatriate employment rate, unemployment rate, the proportion of expatriates who have completed higher education, and the ratio of incomes generated by foreigners to those of natives.

Against a backdrop of continuing tensions, the sectors with the most significant labor shortages are those that recruit the most foreign workers. Industry tops the list, with more than 105 million expatriate workers. Retail and wholesale trade comes second (more than 100 million expatriates). Although in 3rd place, the health and social services sector recruits 'only' just over 56 million foreign workers. Other sectors in short supply, such as agriculture, construction, education, transport, hotels and restaurants, finance and electricity, employ between 54 and 5 million foreign workers. Nevertheless, three countries stand out in the overall rankings: New Zealand, Poland, and the United Kingdom.

New Zealand: the open economy that attracts expats 

First on the list, New Zealand and its economic model attract expatriates. They contribute significantly to the country's economy, with an employment rate of 80.8% and an unemployment rate of only 3.2%. 53.1% of foreigners have completed higher education. The employment rate for foreigners is even higher than for native-born New Zealanders (77.2%). New Zealand has an "open" economy, which is the result of a history and a policy that has been described as "welcoming" to foreigners, as well as political and economic stability. In December 2022, the New Zealand Ministry of Immigration launched a series of new measures to counter the severe labor shortage and attract foreign workers. New Zealand is particularly targeting skilled and highly skilled professionals. Its aim is not only to attract them but, above all, to ensure that they stay in the country for the long term. The Ministry is pursuing a policy that began as soon as the borders were reopened.

Like other countries, New Zealand's economy is emerging from its fragile state. To boost immigration, Immigration Minister Michael Wood is talking about "94,000 approved international positions and more than 40,000 working holiday visas issued" by the end of 2022. Quotas were increased, and relations with neighboring countries were strengthened. In March 2023, several jobs were added to the green list to obtain residency. In November, the duration of the "accredited employer work visa" was extended from 3 to 5 years. The visa allows people to immigrate to the country as soon as they get a job offer and even study for 3 months. Other measures have been taken to encourage skilled immigration. High-demand occupations, such as nursing, benefit from additional facilities. Other sectors, such as new technologies and engineering, are also affected by shortages.

Poland: an emerging destination for expats

Poland and the UK are the other two countries where expats contribute the most (2nd and 3rd respectively). The results may come as a surprise, as these two countries are known for their restrictive immigration policies. However, according to William Russel's study, the employment rate among foreigners in Poland is 80.4%. That's only 0.4 points lower than in New Zealand. On the other hand, the unemployment rate is higher (5.1%). But Poland is making up for this with a higher percentage of highly qualified expatriates than New Zealand (59.6%).

With 970,000 permits granted, Poland is the European country issuing the most residence permits in 2021. This is much more than Spain (372,000) and France (285,000). But these permits are mainly intended for seasonal workers. At the beginning of 2023, the country had more than 1 million foreign workers. Sectors hit by labor shortages, such as construction and transport, are encouraging the arrival of expatriates, but on a long-term basis. The executive is not so enthusiastic—priority to Polish. The nationalist-populist right in power, led at the time by Prime Minister Mateusz Morawiecki, made its voice heard, particularly on European migration policy. His defeat in the October 2023 elections in favor of the pro-European centrists represented by Donald Tusk marked a turning point.

United Kingdom: Expats are welcome under certain conditions

The British government keeps on tightening its immigration policy. On 4 December, Home Secretary James Cleverly announced an increase in the minimum annual income required to settle in the UK. Previously set at £26,200 (around €30,552), it will rise to over £38,700. This is not the only increase announced by the government. In July last, the Sunak government announced an increase in the IHS (Immigration Health Surcharge), the annual surcharge that allows foreign nationals to access healthcare. It will rise from £624 to £1,035 per year. When it was introduced in 2015, the IHS was just £200 a year.

Other measures to limit legal immigration have been introduced. James Cleverly recalls Prime Minister Sunak's objective: "[...] to reduce annual arrivals by at least 300,000". Under pressure from the Conservatives, the Sunak government wants to make people forget the latest figures from the Office for National Statistics (ONS), which recorded a net migration of 745,000 in 2022. A record figure that has sparked debate, even though the pro-Brexit Conservatives were counting on a drop in migration. But at the same time, Sunak is rolling out the red carpet for top graduates, as confirmed by figures in the Russel report. With 68.4% of foreigners having a degree, the UK is ahead of Poland and New Zealand. The employment rate for expatriates is estimated at 75.5%, with an unemployment rate of 4.4%.

High employment rates for expatriates

Other countries that benefit most from expatriate expertise are Israel (4th), Australia (5th), Hungary (6th), the Czech Republic (7th), Portugal (8th), Luxembourg and Ireland (9th). But if we don't include work, the study reveals a different ranking. New Zealand and Poland retain their rankings (1st and 2nd), but Hungary overtakes the United Kingdom, with an expatriate employment rate of 80.3%. This is only slightly less than Poland (80.4%) and New Zealand (80.8%). The UK is in 8th place, with 75.5%: this rate is almost the same as that for natives (75.4%).

The Czech Republic, Israel, Iceland and Portugal rank ahead of the UK, with expatriate employment rates ranging from 76.9% (Portugal) to 79.8% (Czech Republic). The study observed, in some cases, significant differences between the employment rates of expatriates and natives. In Israel (ranked 5th), the employment rate is 64.1% for natives and 77.9% for foreigners. The results are similar in Portugal, where the employment rate for foreigners (76.9%) exceeds that of natives (69.5%). Thanks to its digital nomad visa, Portugal is a key destination for expatriates.

On the other hand, the study found no significant difference overall between unemployment rates among natives and expatriates. The rankings remain more or less the same, with New Zealand still in first place. The Czech Republic is 2nd, Hungary 3rd. The United Kingdom is 4th, ahead of Israel, Poland, Australia, Mexico and the United States. Luxembourg came 10th. However, the report highlights 4 countries where foreigners are significantly more affected by unemployment than native-born workers (by at least one point): The United Kingdom, Poland, Mexico and Luxembourg. Conversely, the situation is opposite in New Zealand and Hungary.

Countries' struggle to attract foreign talent

There have been other notable changes regarding higher education. Canada ranks first, with 69.7% of expatriates being degree holders. The UK comes 2nd (68.4%) ahead of Australia (59.7%). Poland, Israel, Ireland, New Zealand, Luxembourg, Estonia (which enters the ranking in 9th place), and the United States complete the top 10. Except for the United States, all these countries have one thing in common: expatriates have a significantly higher level of education than native Americans. The difference varies by 10 points on average but can exceed 20 points. In Poland, for example, 32.7% of natives have a degree, compared with 59.6% of foreigners. In Canada, the gap varies from 55.8% for natives to 69.7% for foreigners. In the United States, natives have a slight edge over expats (51.2% compared with 45.1%).

Attracting foreign talent remains a crucial issue for governments. Even for those who have tightened their immigration policies, the immigration of highly qualified individuals, including investors and other entrepreneurs, remains essential. After all, these profiles generate high incomes that benefit local economies. Portugal keeps it in mind, although it has announced the end of the Golden Visa and tax exemptions for foreign retirees. The William Russel study ranks the country 1st in terms of the ratio between the income brought in by foreigners and that of natives. With a ratio of 1.17, expatriates in Portugal contribute more than natives. Switzerland and the UK tied in 2nd place, with a ratio of 1.01 in favor of expatriates. In other countries, such as Ireland, Australia, the Czech Republic, Luxembourg, Norway, the Netherlands, Denmark, and Lithuania, however, natives contribute more than expats.