The Economics of International Recruitment

The Economics of International Recruitment

There is clear evidence that immigration and hiring international workers leads to positive outcomes. However, this point often gets overlooked or misunderstood because certain metrics are hard to determine. For example, a company’s revenue might not necessarily increase simply because they hired people from abroad. However, the foreign workers might have created a more diverse environment that increased productivity and creativity. 

Evidence Supports the Economics of Immigration

Just because it’s tricky to put a financial figure or percentage on the impact the foreign workers had, that doesn’t mean they didn’t have a positive effect. That’s something Andrea Ario discussed in her 2023 report titled Foreign Workers Lead to Better Products. Studying the impact of foreign workers in the Swiss labour market, Ario noted that “the gradual opening of the Swiss labour market to EU citizens” led to “lower information frictions, better products, and thus more trade and more effective global value chains”. 

Ario ultimately concludes that “foreign workers led to higher exports”, which, in turn, led to a more productive labour market [1]. There are some counter effects of hiring foreign workers. Research by the Migration Observatory at the University of Oxford found that immigration to the UK from 1994 to 2016 “reduced the hourly wage of UK-born wage earners at the 5th percentile (i.e. the lowest earners) by around half of one pence per year”. At the top end, however, the highest earners (90th percentile) saw their wages increase “1.7p per year.” 

The overall conclusion is that the impact on local workers is negligible in terms of earning power, but there is some difference. Indeed, if we assume many of those in the 90th percentile bracket are business owners, the increase in earning power due to immigration suggests that hiring foreign workers is a positive. This may be why more UK-based businesses have been hiring skilled foreign workers in recent years. Companies must hold a sponsor licence to recruit foreign workers. In turn, the people they recruit need a visa. 

International Recruitment is Mutually Beneficial 

One of the most popular visas is the skilled worker visa. This visa is open to suitably qualified people. For example, the applicant must hold qualifications equivalent to A-levels in the UK (known as RQF Level 3). The applicant must also be proficient in English and their chosen field. Assuming they meet these requirements and others, they’re granted a skilled worker visa and guaranteed certain benefits as a result, such as a salary of at least £38,700. 

For anyone familiar with the Human Development Index [2], benefits such as a guaranteed minimum salary are desirable because it means the person can afford a certain standard of living. Therefore, they’re more likely to find a job offer abroad more appealing. Thus, what you’ve got with a visa, such as the skilled worker visa, is a system that’s beneficial to both the employer and the employee. 

Indeed, that’s why UK government data shows that the number of skilled workers granted visas increased 34% between 2022 and 2023, from 51,811 to 69,421. Essentially, business owners are becoming increasingly more aware of the benefits of recruiting internationally, and workers are aware of the benefits of working abroad. Put simply, the economics of international recruitment are positive.   

Further Reading

1. Report

2. Human Development Index