The financial capitals of the world have lost their luster. The bright lights of New York City seem to have dimmed. London has far too many issues to contend with, from inflation, messy politics and homes not built for the heat to a dysfunctional international airport. Hong Kong is a dark shadow of what it once was: A former British colony filled with tycoons and billionaires whose fast, wheeling-dealing, free spirit has faded.
Other close contenders like Tokyo, Singapore and Shanghai don't hold the same allure as they once did. So what's left?
Financial centers have typically been places with well-formed regulatory oversight and deep capital markets. Naturally, an ecosystem of workers is created around this, drawing in professionals like bankers, lawyers, accountants and headhunters.
Factors like tax rates and the ability to draw capital — equity and debt — that facilitate business and bolster a city's competitiveness help, too. There are various ways to measure that: The size and depth of capital markets, along with detailed, weighted indices that take into account everything from tax rates to office occupancy and legal jurisdiction.
These measures, though, ignore an underappreciated but increasingly relevant factor in the post-Covid era: human capital. We can no longer measure workers based on one-dimensional factors like education level or income bracket. Where do people want to live? And where can professionals do their jobs smoothly and, therefore, successfully? That's changed since Covid turned our world upside down.
The latest rankings of the Global Financial Centers Index, or GFCI, based on 150 quantitative measures and almost 75,000 assessments of cities, as well as around 12,000 survey respondents, put New York, London, Hong Kong and Shanghai at the top of the list. Notably, human capital was the most-mentioned area of competitiveness when respondents were asked what issue they considered the most important.
Contrary to popular understanding, financial-sector development was the lowest on that list because remote working and the ease of digital services through the pandemic have shown that there's a different way to do business. The caveat, however, is the need for "a reliable and trustworthy ecosystem."
It's time to redefine global financial centers based on more subjective criteria. But where do you even begin? Cost and quality of living, for instance, help set a baseline to assess the cities that help attract — or put off — talent. Hong Kong remains the most expensive city, with its sky-high rents and Covid-19 measures that have made the cost of logistics, and life in general, exorbitant. Even the price of beer has shot up there. It ranks 71 on consultancy firm Mercer LLC's quality of living index, while places like Vienna and Zurich top the list. London is 41, while the world's foremost global financial center, New York, comes in at 44.
Then there's connectivity. Travel to and from any of the top three financial centers is currently in shambles during what executives have described as the busiest season ever. Hong Kong barely has any flights out, and let's not even start talking about its quarantine system, while London can't handle passengers and New York remains hectic and full of delays.
It isn't hard to see why, then, people in the US and elsewhere are leaving their jobs for greener pastures. The Great Resignation has been as much about people doing what they want — and not being tied to work — as the other economic factors that have allowed it. People choose to live in big cities because being employed in the finance world, or the ecosystem around it, is lucrative. Yet, it's also expensive to live in and around these areas. Consider what's happening with tech jobs — the first sector to go remote: US white-collar salaries are converging across the country, regardless of whether they are in a major hub or away from headquarters. Wages in DC are reaching those in the Bay Area.
To retain talent and lure the best and brightest, businesses will have to shift tactics. As BlackRock Inc.'s and Goldman Sachs Group Inc.'s office openings in places like West Palm Beach and Birmingham show, it isn't all that difficult. Spreading talent out across places that offer better living standards, easy travel and flexible work hours to match time zones and trading hours could go a long way to resolve the current labor problems and, ultimately, the cost of human capital.
This isn't to say companies should let workers head off to remote islands with spotty wi-fi and poor infrastructure. Instead, it's about acknowledging that places traditionally thought of as white-collar finance workers' hubs just aren't that anymore.
Globally, there are now few places where the world's financiers want to live. One fast emerging hub for instance, is Dubai. (Full disclosure: I've lived in New York, London and Hong Kong and am a recent Dubai transplant.) It isn't just the influx of expats fleeing other less-friendly regimes like Singapore and Hong Kong. Capital is flooding in too. The emirate has put in place measures to attract talent through visa programs, housing and incentives for asset managers to set up shop. Schools are plenty and increasingly well-established. Its neighbor, Abu Dhabi, has done similar things, too.
There are, no doubt, shortcomings, like Dubai's move to protect its telecom operator at the expense of consumers (you can't use applications like WhatsApp or FaceTime to make voice or video calls, for example).
But history shows financial centers can evolve quickly, breaking with their traditional molds. In the aftermath of the global financial crisis, hubs vying for importance like Dubai, Shanghai and Sao Paulo emerged, although some haven't quite lived up to their promise.
One of the most significant changes was the evolution of financial technology, or fintech, which raised questions over whether it would eventually make financial hubs unnecessary for the global economy to function.
Such changes — and the ability for employees and employers to live with them and make it work — show that it's time for a reassessment.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. Previously, she was a reporter for the Wall Street Journal. @anjani_trivedi
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.