The US and China both have a talent problem

The world's two most important economies are dealing with a widening talent gap. The US is losing talent thanks to slowing population growth, a failing education system and nativist resistance to immigration. Meanwhile, China is struggling to formulate rules that would allow it to bring in talent from the rest of the world.

In a Twitter Spaces conversation, Bloomberg Opinion columnists Adrian Wooldridge and Adam Minter discussed the challenge with Bobby Ghosh.

Ghosh: Adam, why don't you start by telling us a little bit about what's going on in China?

Minter: For me, it really starts with the Olympics and Eileen Gu, an Olympic freestyle skier who was naturalized by China in 2019. She's extremely talented and while there's been a lot of controversy in the US over this, very little has been generated in China because she speaks very good Chinese and is ethnically half-Chinese.

The way China has long defined citizenship has been through that cultural and ethnic commonality. If people want to go to China and become Chinese citizens, or even permanent residents, without those qualifications, it's very difficult for them. A few hours ago, another Olympic athlete Zhu Yi — a naturalized Chinese citizen who grew up in the US — took two falls in figure skating. As I speak, she is been absolutely pilloried by hundreds of thousands of comments on Chinese social media for not being Chinese and for having achieved her naturalization through connections. Her father is a very well-known artificial intelligence scholar who returned to China from UCLA. As long as China has these kinds of unwritten criteria for naturalization or permanent residency, it's going to struggle with its ability to attract global talent.

Ghosh: It is worth pointing out that in the 2010 Census, China had only 1,448 naturalized citizens. That's a ridiculously small number for a major economy.

Minter: Exactly, and one more figure for you: China only handed out 1,576 green cards to foreigners in 2016. That's a year in which the US handed out hundreds of thousands, if not millions of them. That tells you just how hard it is to get permanent residency in China.

Ghosh: The US didn't use to have this sort of problem: There was plenty of talent to be had both from within the country and without. This was crucial to the success of the American economy. What's changing?

Wooldridge:  My essential argument is that the American talent model is breaking down. America used to have an unparalleled ability to suck in people from the whole of the world, whilst also generating plenty of talent internally through a very high birth rate and an educational system that was ahead of the rest of the world. Now, all the components of the talent machine are breaking down.

Population growth is becoming European in the sense that it's beginning to stagnate. It's getting more difficult for America to import talent from around the world because of internal anti-immigrant sentiment. And at the same time, the educational system is not the great capacity capturing machine that it used to be in terms of importing talent. America is obviously still better at that than China, but it's not doing so in sort of numbers that it used to. It also can no longer rely on the emerging world, particularly India and China, to continue to provide the talent that it needs because the emerging world is, indeed, emerging and generating demand back at home. More and more talented people who go through the American university system are being called back home either on a quasi-compulsory basis by, for example, China or because opportunities are opening up. At the same time, the university system is becoming much more like a finishing school for rich people than it is a voracious machine looking for talent, wherever it might appear across the country.

Ghosh: That point you made about countries which the US could rely upon as a supply line for talent are now improving their economies and getting better at retaining that talent. A lot of the conversation in the political sphere in the US tends to focus on talent at the unskilled level —  the nativist fear of being overrun by the huddled masses. But there is an acute talent shortage even at the top of the tree.

Wooldridge: There are two things that are going on. One of the most important is that countries such as India and China are generating their own successful educational systems. They're generating their own startups, their own venture capital, their own knowledge economy. So people are naturally drawn back to their own countries. America doesn't have first dibs on these people.

We talk about about protectionism and nativism as directed towards low-skilled immigrants, but there is also a good deal of protectionism and nativism directed at high-skilled immigrants, particularly from within the tech industry itself. I've been inundated with emails saying "I work for the tech bosses and all the tech bosses really want to do is lower wages." So all of their campaigning for green cards is a way of grinding the faces of tech workers. There's a certain amount of protectionism going on in the knowledge economy, as well as elsewhere.

Bobby: Speaking of tech, can China's great ambitions in technology be achieved if they don't suck in talent from elsewhere in the world, the way Silicon Valley has historically? Is there even a concern in the Chinese tech industry to mirror the kind of anxiety that you see in Silicon Valley these days?

Adam: There is concern in China and it's at a couple of levels. There's the very high-level talent that everyone competes for and China is aware that it's going to continue to struggle to get that talent. We have a hint of just how hard it is through  the "Thousand Talents" plan, China's program to attract a thousand world class talents into its universities and use those talents to spur innovation. It didn't work very well. They had a very hard time attracting people to China for a number of reasons including politics and pollution.

We got a sense of how hard it is with the conviction of Charles Lieber, the former chair of Harvard's department of chemistry and chemical biology. To get him affiliated with the Wuhan Institute of Technology, he was paid $50,000 a month, $150,000 living expenses and, at one point, $1 million for a lab — and he didn't even relocate there. That was just to get him part-time.

The other thing the tech industry in China is very concerned about is skilled workers. We're not necessarily talking about Harvard dropouts here. These are people with basic programming skills. There is a tremendous shortage of these kinds of skilled workers for a number of reasons, but perhaps the number one reason is that China's education system, which we hear lauded over and over again, really isn't very good outside of the big cities: About 70% of China's workforce has no high school education.

Ghosh: There is a tendency among Chinese parents and students to prefer to go to a university to acquire a traditional degree rather than a vocational school, which is regarded as less prestigious and not as certain a route to financial stability and prosperity.

Minter: Absolutely, and this is all to do with the upward expectations that have occurred in China over the last 30 years. When I first started visiting Chinese factories in the early 2000s, the employees were young — teenagers and early twenties at the oldest. By the mid 20-teens, you really started seeing most of the factories inhabited by middle-aged people. Where did the young people go? Expectations had been raised and opportunities had been raised, but those factories still need workers and you don't see those young people going in there. Class consciousness plays a huge role and the class divider, like in so many other countries, is access to higher education. There are just so few slots available, especially to the top universities.

Now, China has gone on a spending binge to build universities over the years. In 1998, China had 3 million college students. 20 years later, there are almost 30 million. But those are not all high-quality graduates and everybody knows there's only a handful of universities that will give you those great opportunities. That creates the psychology of stratification and keeps people from wanting to get those vocational jobs.

Wooldridge: There's a huge problem with vocational education in the US, too. There's no real vocational stream, partly because of institutional failures, but also because of a notion of status. Americans are really confronted with a rather dismal choice when they leave school of either going to college — which is enormously expensive and quite often doesn't lead to the jobs that people expect from that huge investment — or missing out entirely. There isn't an alternative of going into reasonably well-paid and well signposted vocational schools like there is in Germany. You're often almost dismissed as a failure if you don't go to college, and that's a terrible way of of dealing with those people, who are still a majority, but also a terrible way of providing the economy with the sort of technically-trained people that it needs like plumbers and IT technicians.

Right across the world, we need to upgrade the provision for, and status of, vocational education. We should look to Germany, above all, to be a model for that.

Ghosh: How important is slowing population growth to the lack of talent?

Wooldridge: Massively. America has traditionally been a highly fertile society. Now we have a growing number of people in their twenties and thirties deciding not to have children because they think it's too expensive or because they don't want to bring children into a world that is about to boil itself to death. So I think the US is becoming European in its fertility rate and in its attitude, and that's not good.

Ghosh: We're living during the time of the Great Resignation, with more and more Americans simply not looking to get into the talent pool.

Wooldridge: What you are seeing is what would have inevitably happened in the next few years with the retirement of the huge generation of Baby Boomers. It's been brought forward by Covid and people leaving work earlier than they planned. But also I think that America's problem with the cost of childcare is really being made manifest. A significant number of people dropping out of the labor market are women who just don't think work is worth it, because it costs so much to get childcare.

Ghosh: We don't hear about the Great Resignation in China, but Covid will have had an impact on talent situation there, right?

Minter: What we do hear about is the "Lie Flat" movement, which was born in China. The term emerged during Covid, but the attitude itself dates back to the pre-Covid era. The population in China is shrinking, the cost of living is rocketing and prospects for young people are very tenuous at best. If you're a young college graduate in Shanghai, it's going to cost you the equivalent of $1 million to buy a home so, unless you have parents to finance that, you're just not going to be able to. The high cost of childcare plays into that — people are not able to start families. It's extremely alarming. People are thinking: "We can't get ahead in this economy, so we're stepping away from it."

The "Lie Flat" movement has captured the attention of the Chinese government, but so far they really haven't quite figured out what to do about it. They've tried to start offering subsidies and encouragement to families to have children, in part as a way to keep women in the workforce, but it's very early days. Based upon the track record of other east Asian countries, the prospects for China, at least for the moment are quite grim.

Ghosh: In the academic and intellectual space, is there any kind of hand-wringing or demand for policy changes in order to address this problem?

Minter: The first place you're seeing a shift is really towards childcare and lowering school fees. There is a very belated recognition that the status of women in the workplace is a very important economic issue. That's really just now starting to dawn on top-level Chinese policy makers. It's been bubbling underneath in the academic community for a while.

But it won't be easy. A lot of the time, we're thinking of the major economic centers — Beijing, Shanghai, Guangzhou and Shenzhen. It's somewhat easier to get policy moves made there, but as you move inland into second-tier cities, policy makers find it more and more difficult to get policies to stick. They tend to be more traditionally-minded when it comes to gender issues. But I think that's the first place you're really going to see action.

The second area where there's already action is vocational education. They know they need it. One of the things that the propaganda ministry is doing has been really promoting the status of vocation-oriented jobs. You see articles dropped into state media saying things like "I didn't do very well on my college entrance exam, but look at this terrific life I have working as a skilled machinist." There's also more and more money going into vocational education. I don't think it's enough to just build vocational institutes without apprenticeship programs, but China seems to realize it has to do something.

Ghosh: As you pointed out, the "Thousand Talents" initiative didn't really go anywhere. Are there any new efforts to import talent from the wider Chinese diaspora and elsewhere?

Minter: That's been the ongoing challenge, they started their permanent residency program in 2004. It's becoming harder for them to expand that kind of program and harder to expand naturalization, simply because of the nationalist moment that China's living in. On one hand, they want global talent. On the other hand, they're calling in to question the loyalties of anybody who's not Chinese. There's a real tension there.

It's why you see so few naturalizations or foreigners with a permanent residency. There are foreigners who have been working in China for 15 years, who still have to renew their visa every year. They're going to have to change that. Right now, China seems to think that the nationalist moment is more important than than gathering global talent.

Ghosh: In the US, companies are trying different ways to hold on to talent — from increasing the hourly wage of unskilled workers to surprise $180,000 bonuses. The Biden administration came in saying that they were going to roll back some of the restraints on immigration that the Trump administration imposed. Are they going about it the right way?

Wooldridge: I think the problem with America is that the corporate world is wedded to the idea that you can solve these problems by paying more money and by making jobs a bit nicer. You can achieve something as an individual company by doing that, but you can't collectively solve the problem of talent shortages because you are just competing for the same limited pool of talent. Companies should think more intelligently about long-term policy and about increasing the supply of talent. The problem with Washington is that it's divided between two parties, both of which have dumb approaches to this problem. You have a Republican party which is very hostile to immigration and a Democratic party that is shifting to the left, and is increasingly committed to the idea that there's some sort of tension between diversity and inclusion. They don't see diversity as a tool of excellence, they see excellence as a threat to diversity. Until they see that the only way really to promote both a more just, inclusive and efficient society is through excellence — via gifted education programs and highly selective schools — they will be doubling down on dumb essentially.

Ghosh: Since we were talking about the thousand talents program in China, some of the people that you've spoken with have made the argument that the US needs a "million talents" program, especially in STEM subjects.

Wooldridge: Absolutely. It needs to have a more structured approach to recruiting people from around world. More importantly, because that source can no longer be relied upon as China shifts into a more and more antagonistic position, it needs to generate talent internally. Although America is very good at sifting the top 2% of the population for talent, it's not very good at sifting the other 98% of the population for talent. It needs to have a greater emphasis on excellence, a greater emphasis on selectivity, a greater emphasis on high-quality STEM education. America needs to go back to the extraordinary spirit of the late 1950s after Sputnik, when suddenly it realized that the Russians were out competing it in the sciences.

Bobby Ghosh is a Bloomberg Opinion columnist. He writes on foreign affairs, with a special focus on the Middle East and Africa.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.