What’s next for innovation?

Political events like Brexit and Trump’s presidential election might have seen Australia benefit from their aftermath, with Australia’s technology, research and engineering industries set to poach key talent to drive a boom in its innovative, new-economy industries.

 

With Donald Trump’s presidency and anti-immigration policies now upon us and the UK’s “Hard Brexit” about to start in earnest, the world’s top talent may be forced to look for greener creative pastures.

In this context, Australia has a huge opportunity to make itself an attractive destination for talent.

Yet, in April 2017 the Turnbull Government opted to join the party of anti-migrant sentiment present across the developed world, and announce substantial constraints on Australia’s skilled migration policies, in particular the 457 visa and permanent residence visas.

While headline statements like “Australian jobs first” will likely be greeted positively in some parts of society, experts are concerned that the rhetoric and policy announcements will undermine Australian immigration, one of the key drivers to economic growth and innovation in this country, with unknown costs for our future.

Australia’s proposed immigration policies would negatively impact innovative industries

Universities and research

In Australia, the new, stricter skilled worker immigration rules announced by the Prime Minister and Immigration Minister in April 2017 are seen to be a serious overreach in several ways.

One of the major negative impacts was on universities. The changes to the skill lists for 457 visas implemented on 19 April put the skilled worker occupation of “University Lecturer – ANZSCO 242111” into the more restrictive visa category which offers only a two-year stay (with a possible two-year extension onshore) but with no path to permanent residency.

To impose this restriction on universities constrains vital research and innovation in higher education sectors. This is because universities operate in a truly global labour market.

There is intense competition to recruit and retain top researchers, who can come from anywhere in the world. And if Australia’s research-intensive universities are hindered from accessing the best and brightest, Australian universities rankings will suffer, impacting their attractiveness to international students, particularly Asians who are highly conscious of rankings.  Education is Australia’s third largest export industry worth $21 billion a year and generating 130,000 jobs. Immigration policy which puts Australia’s research and education sector at risk is clearly not good policy.

Secondly, research is fundamental to Australia’s potential for innovation. Some of Australia’s leading technology and medical companies are recruiting directly from universities and the research sector, to drive new product innovation and open doors to new markets and customers. The short term-ism of the new immigration policy stands at total odds with Prime Minister Turnbull’s Innovation Agenda which was intended to make Australia a world-leading innovation economy attracting global talent and investment.

Technology and startup sectors

There is another important  impact of the visa changes for companies in the technology sector. As technology CEO Jonathan Barouch wrote in The Australian Financial Review, if his company can’t find the right skilled talent locally, and is now unable to hire it from overseas, then he has no option but to send these functions offshore into his company’s overseas offices.

Tech startup industry group TechSydney pointed out that roles such as user experience (UX) and user interface (UI) developers, front-end software developers and artificial intelligence developers were not on the eligible skills list at all. Also, new caveats on 59 occupations including marketing specialists (“growth hackers” and “digital marketeers”) and management positions (CEO, CFO, general managers) preclude start ups with a turnover of less than AUD 1 million from accessing the global talent pool in those occupations.

[Read: Tech Sydney article c0-authored by Sarah Thapa here: 457: It’s not end-times. Here’s what you need to know.]

Global Australian Companies

CEO’s and senior managers of multinational companies on 457 visas are also in limbo. Australia’s Graincorp’s CEO, Mark Palmquist, is an American and will need to reapply for a shorter, two-year visa under new rules next year. He told the Australian Financial Review that his biggest concern over the changes to make 457 visas available to fewer occupations was impact it could have on the company, which has significant offshore operations and competes globally. Mr Palmquist is among many leading chief executives on 457 visas, including UK-born David Jones CEO John Dixon, Colombian-born Orica CEO Alberto Calderon and US-born private equity KKR Australian head Scott Bookmyer.

There are strong frustrations the changes are being applied retrospectively, this is not good for business.

“What does it do to our ability to attract the appropriate talent in terms of skillset and experience in terms of what we need to compete on the global marketplace?” Mr Palmquist, CEO of Graincorp.

A missed opportunity?

Rather than focusing on culling occupations from the skill list, the Government had a unique opportunity to focus on the skills needed to support the growth of Australia as an innovation economy.

Research shows that diversity is key to innovation and positive economic outcomes. Statistics show that migrants contribute disproportionately to new business formation, innovation, and job creation:

  • As of 2015, foreign nationals held slightly more than half of all patents filed in the United States (1).
  • A 2016 study found that more than half of US start-ups valued at $1 billion or more that have yet to go public — unicorn companies with potential for high growth and job creation — have at least one migrant co-founder (2),
  • An Australian Government Productivity Commission report published in 2016 (3) found that immigration does not harm employment or wages for Australians. The exception was Australia-born workers who have not completed high school, low-skill migrants were found to be a close substitute for the so-called high school drop-out category of Australian workers.

Research also shows that diversity in the workplace, including diversity of gender, ethnicity and experience unlocks innovation and drives market growth. Companies with diversity both in terms of inherent diversity (of gender, ethnicity and sexual orientation) and external diversity (skills and experience) are 45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the firm captured a new market, according to research conducted by the Harvard Business Review in 2013 (4).

“the Government had a unique opportunity to focus on the skills needed to support the growth of Australia as an innovation economy.”

Experience also shows that immigration is good, indeed essential, for business innovation and growth particularly in fast-growing industries such as information and communication technology.

Immigration has boosted Australian business and created more jobs for Australians

A much-cited example of this is IT company, Atlassian. Atlassian has a market capitalisation of more than $6 billion, and is a global IT business is responsible for creating thousands of new jobs in Australia and overseas. Like many other companies in the tech and start-up sector in Australia, Atlassian has been an openly active user of the 457 program bringing skilled IT workers to Australia — talent that doesn’t exist in Australia given the relatively short life of its tech industry. Atlassian has a strong track record of giving educational scholarships to talented young Australians, but has openly stated that inexperienced Australian IT graduates do not substitute for workers with 10 years’ international experience working in Silicon Valley.

The innovation benefits and entrepreneurial energy brought to a market by migrants is a key consideration in the debate.  These nuances are not being articulated in the political debate over the existence of skills shortages.

Top talent will go elsewhere

It won’t just be overseas talent which avoids Australia. Some predict that Australia’s homegrown talent will see very little reason to remain in Australia either and will seek out opportunities to work in more open and diverse markets such as Canada or New Zealand.

And Canada is positioning itself to welcome this talent. On June 2017, the Canada Government is launching a Global Skills Strategy that is aimed at helping high-growth Canadian companies and global companies attract the specialized global talent they need to innovate and grow by providing faster visa processing. They are introducing a new “Global Talent List”, creating a fast-track application process, and removing the need to obtain a work permit for short term (< 30 days), highly skilled work placements.

Conclusion

Overall, migration is a boon for economic growth and a key driver for Australia to reach its full innovative potential. An evidence-based debate on the issue is needed to ensure that restrictions on immigration based on popular, but perhaps under-informed sovereignty concerns, do not undermine Australia’s economic prosperity.

Certainly, measures are needed to improve the integrity of the 457 visa system.  A crack down on visa misuse or abuse is appropriate, in light of the recent cases of migrant worker exploitation involving workers at 7-Eleven, Dominos and other visa scam arrangements.

However, a crackdown on research talent and highly specialised occupations driving our innovative technological industries is not.

(read our related article “Why immigration is good for innovation and business” on Medium here)

References:

  1. US patent statistics chart, calendar years 1963–2015, US Patent and Trademark Office data.
  2. Stuart Anderson, Immigrants and billion-dollar startups, National Foundation for American Policy, March 2016.
  3. Breunig, R., Deutscher, N. and To, H.T. ‘The relationship between immigration to Australia and the labour market outcomes of Australian workers’, Technical Supplement A to the Productivity Commission Inquiry Report Migrant Intake into Australia, Canberra, April 2016.
  4. Sylvia Ann Hewlett, Melinda Marshall & Laura Sherbin, How Diversity Can Drive Innovation, Harvard Business Review edition December 2013.

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