Why Hiring Globally is the Key to Beating the Talent Crunch
While popular attention focuses on the specter of robots taking everyone’s jobs, a more fundamental issue is building in the background. The talent crunch, caused by a lack of humans with the necessary skills for the modern workplace, threatens to leave companies in endless holding patterns as they mount futile searches for workers to fill vacant positions.
Left unchecked, it’s an eventuality that would prove catastrophic for the global economy. Indeed, according to a Korn Ferry report, continuing on the current path would lead to a global human talent shortage of more than 85 million people by 2030, resulting in a loss of about $8.5 trillion in unrealized annual revenues.
Stranded on the Growth Plateau
While there are options on the table, such as upskilling workers, the fundamental issue is demographic shift—with developed countries facing stubbornly low birth rates. It’s a problem that Amritpal Singh, President, Field Operations of global employment platform Multiplier, has thought deeply about.
“Every developed country eventually reaches a plateau in their growth rate—simply because they are not able to grow their population base fast enough,” says Amrit. “Countries like the UK are experiencing stagnant growth. Even China is projected to be in a talent deficit situation by 2030.
“What has been interesting is that in the last six months or so, we are seeing signs of that come up in the market. Everybody in China is saying: ‘Oops. Our one-child policy is screwing us over, and we can’t grow the economy as fast as we should.’”
Capital Versus Jobs
As countries scramble for ways to remain un-screwed, one option is attracting foreign capital. “If you look at the UK, a very basic idea is that a rich oligarch comes to London, buys a penthouse worth £10mn, and spends £15mn on it—because he can. That’s fresh capital coming into the country, and whoever that British owner was can reinvest that capital into buying three other properties in Manchester, for instance.”
However, this influx of money does not create the one thing modern economies most need: jobs. “Accessing capital is easy. All you have to say to the market is: ‘We are not going to do any money laundering checks anymore,’ and millions suddenly flood in. What everyone is struggling to do is create jobs.”
As Amrit explains, job creation outshines the influx of capital for the simple reason that it engages people in economic output: “Very simply, if people are working, they are contributing income tax to the government. If people are not working, the government has to pay their bills.”
Declaring War on the Cost of Transaction
With halting growth an inevitability for advanced economies, the answer has long been to import workers. Governments are incentivized to increase migration into their country to overcome low birth rates and prevent economic stagnation. “Governments hope that by adding more people into their country, they add to the supply, and so the cost of hiring a person in that country remains low—and companies become more productive,” says Amrit.
However, the pre-existing model of increasing economic output by physically moving people into the country is creaking, to say the least. The problem is that facilitating immigration can be prohibitively expensive for companies. “It all boils down to the cost of transaction,” Amrit explains. “The cost of transaction required to physically move a person from India to the US, for example, is in the thousands of dollars—because of the cost of a flight, rental cars, visa costs, and so on.”
At the same time, the H-1B visa is a constrained good—with only 65,000 issued yearly. That leads to fierce competition and spiraling costs. “It’s basic economics—supply and demand curves. If the supply is low, the price goes up. Again, that makes your cost of transaction much higher than necessary.”
Offshoring for All
Multiplier was created to offer businesses a way around these issues, letting them access global talent without requiring their physical relocation, thanks to a platform that handles everything from payroll to taxes, social contributions, and insurance.
The company’s mission is simple to state. “We reduce the cost of transaction,” says Amrit. “Thanks to our technology, we make it fundamentally easier for companies to hire individuals in a foreign country.”
Previously, such an approach was only available to the largest organizations. “Two of the most important business phenomena over the last 30-40 years were outsourcing and offshoring, which enabled businesses to access cheap labor and reduce their cost base,” says Amrit.
“But that was only available to the biggest companies. An SME manufacturing company or a small accounting firm couldn’t randomly build a team in Mexico—because they didn’t have the capital, the resources, or the time. Now, because we’ve lowered the cost of transaction, all businesses can access talent overseas.”
Grow or Die
Accessing foreign talent in this way isn’t just nice to have. With the talent crunch looming, it’s potentially existential. “As a company, you don’t have a choice but to generate more revenue,” Amrit explains. “And that’s all because of inflation. If you’re generating the same revenue as last year, you’re falling behind. Businesses don’t have an option not to grow.
“Say my revenue is $10mn per year. My cost base is $6mn a year. By hiring globally, I can reduce my cost base and, with the exact same revenue, generate, say, $2mn more profit. The company is more profitable, and the government is happy—because they collect more taxes from a more productive company.”
As much as that matters for individual companies, the dynamic is even more dramatic for countries at large. “Just as companies don’t have a choice but to generate more revenue, countries don’t have any choice but to increase their GDP.
“The big ticking time bomb is pension obligations. If, in a given year, we owe our pensioners $2bn, it will be $2.2bn next year—because people everywhere are getting older. Just like companies, countries do not have the option of sticking with the status quo.”
A Rising Tide Lifts All Boats
Multiplier’s ambition is to help companies escape stagnation and boost their productivity by hiring globally, but that doesn’t mean only the companies using the Multiplier platform reap the rewards.
“Companies benefit because they have more productive assets,” Amrit explains. “People in developing countries benefit from access to better quality jobs. Countries importing talent benefit from having more productive companies.”
It’s not a question of stealing talent from developing countries; the countries exporting their talent stand to gain just as much as the rest. “Multiplier is helping create more formal job opportunities in places like India, the Philippines, Poland, Serbia, Mexico, Argentina, and so on,” he says.
“Governments in these countries enjoy improved employment rates and enhanced currency stability because more people are being paid in the local currency. And then they also get access to more income taxes from working people.
“Simply put, lowering the cost of transaction means everybody benefits.”
Beat the Talent Crunch with Multiplier
Multiplier is here to help businesses navigate these issues to grow and scale their global workforces effortlessly. Want to take advantage of the exceptional global talent out there waiting but need help figuring out where to begin? Talk to our experts.