08/12/2011: An even greater threat

Here's an even greater threat to Ireland's 'economic model' - the one based on attempting to attract into this country a new generation of FDI - FDI that is increasingly based on human capital-intensive activities.

BBC report here covers increasing mobility of skills across the borders (link). And I co-authored recently a report on this (here).

But Ireland, folks, is not a serious contender for this capital due to the confluence of the following trends here and abroad:

1. Our taxes on top earnings - earnings associated with higher human capital, once we remove the egregiously high salaries at the top of the public sector bureaucracies and in sheltered private/semi-state sectors;
2. Our quality of public services that can be meaningfully utilized by people with higher human capital is not up to scratch - in health, education, transport, urban amenities, cultural amenities and Government services;
3. Our quality of promotional opportunities within the country is restricted, especially for foreign talent due to archaic promotion practices and cronyism; and
4. Our quality of public discourse, when it comes to higher earners is toxic - in part justified by absurdities of our top public sector brass who enjoy earnings well in excess of their talents, and in part justified by our absurd 'bankers' whose performance in the past is also unmatched to their earnings.

So we are witnessing an outflow of key talent from Ireland. In recent months a large number of high quality academic researchers have packed up and left (or currently leaving) this country. In a number of sectors - including the 'flagship' ICT services sector - we are seeing jobs moving after key workers (not key executives, as our Government mistakenly thinks, judging by the special measures in the Budget 2012, but key skills-holders). In a number of sectors, we are failing to develop critical mass of skills and activities due to lack of talent - one example would be funds management in IFSC, the area where policymakers have been trying to build activity for some 5 years now.

Now, we might think that these issues should be priority number 734 or so on the list, given the gravity of our crisis, but they are not. Long term competitiveness no longer rests on simplified harmonized indicators for brawn labour, but on yet-to-be-compiled indicators of our human capital pool. And here, mass-produced degrees with plausible-sounding names of poorly ranked institutions on them won't do the job. Ireland is facing two roads ahead: one road leads to a low wage, low income autarky of skills, another to a high wage, high income open skills economy. So far, our policy wheels are pointed firmly in the direction of the former.

Economics 05/03/2010: Can immigration help our Smart Economy?

Does targeted immigration policy (focusing on skills and capability) deliver the results for research, science and engineering? This question is important to Ireland, since

• we have ambitious objectives in driving up R&D and science activity; and
  
• we do not have a meritocratic immigration policy here (aside from by-now virtually stifled 'green card' scheme, our immigration policy is geared toward almost exclusively on internal EU27 migration)
  

A new study published this month by NBER (here) evaluates the impact of high-skilled immigrants on US technology formation using H-1B visa admissions.

Higher H-1B visa admissions are shown to increase immigrant science and engineering employment and patenting by inventors of Indian and Chinese origin in cities and firms dependent upon the program when compared against cities and firms which do not avail of the visa.

There is only a limited effect on native science and engineering employment or patenting, ruling out displacement effects, with only small crowding-in effects. Total science & engineering employment and invention increases with higher admissions primarily through direct contributions of immigrants.

“A 10% growth in the H-1B population corresponded with a 1%-4% higher growth in Indian and Chinese invention for each standard deviation increase in city dependency”. Anglo-Saxon origin inventors continue to account for approximately 70% of all domestic patents. Crowding-in is small, with a 10% growth in the H-1B population corresponding to a 0.3%-0.7% increase in total invention for each standard deviation growth in the degree of city dependency on participation in the visa programme.

Tests also confirm that these positive results “are not due to endogenous changes in national H-1B admissions following lobbying from very dependent groups."

"Total patenting shares are highly correlated with city size, and the three largest shares of US domestic patenting for 1995-2004 are San Francisco (12%), New York City (7%), and Los Angeles (6%). Ethnic patenting is generally more concentrated, with shares for San Francisco, New York City, and Los Angeles being 22%, 10%, and 9%, respectively. Indian and Chinese inventions are even further agglomerated. San Francisco shows exceptional growth from an 8% share of total US Indian and Chinese patenting in 1975-1984 to 26% in 1995-2004, while New York City share declines from 17% to 10%."