Facebook: Bringing the world closer together in the age of isolationism.
In the age of isolationism and deglobalization how will businesses in developed markets, such as Facebook, which have benefited in the past from immigrant and offshore labor, adapt to the increasing pressure imposed by governments and an increasingly restless and disenchanted public, demanding curbs in immigration and the provision of better quality jobs to citizens?
A new world?
Since his election as president of the United States in 2016, the administration of Donald Trump has taken a hard stance on immigration and proposed radical measures to control and limit immigration into the country, especially targeting illegal immigrants. This is consistent with growing sentiment among the public in the United States and across Western Europe that immigrants are making it more difficult for locals to find and keep decent jobs at reasonable wages and that immigrants also impose a significant burden on public funds, in the form of social welfare programs and using public services without contributing through taxes. As an example of this increased pressure from governments, on Tuesday, September 5, 2017, the Trump administration formally announced the end of DACA — a program that had protected nearly 800,000 young undocumented immigrants brought to the US as children from deportation (1).
Facebook responds
The announcement provoked a strong and united response from more than a hundred Silicon Valley executives, including the likes of Tesla CEO, Elon Musk, Amazon CEO, Jeff Bezos and Apple CEO, Tim Cook (2). One of the most vocal opponents to this move towards greater isolationism has been Mark Zuckerberg, CEO of Facebook. He has openly condemned the DACA decision as well as earlier decisions by the administration to ban immigration from seven Muslim countries. Facebook is especially vulnerable to President Trump’s crackdown on immigration as according to one study, more than 15% of the company’s U.S. workers in 2016 were immigrants needing work visas (3). Facebook and other technology companies (including non-tech U.S. companies) increasingly rely on a mix of local and immigrant labor to be competitive in the global market (4) and the move by the U.S. to more isolationist policies threatens to detract from the goals of companies such as Facebook to source the best talent from around the world. Facebook’s supply chain of talent is especially exposed. The response which Facebook has taken to these issues is to engage the government and voice its concerns through petitions to the government (2) and a more concerted long term effort to push for immigration reform with lawmakers on Capitol Hill (5).
Looking forward: What options does Facebook have?
Going forward and in addition to steps already taken, I would recommend Facebook to partner with other firms in reaching out to lawmakers and providing ideas and suggestions for how an immigration deal most palatable to all stakeholders can be reached and to also invest in educating the American public on the net benefits of legal migration to the country. The general public may not be aware of studies which claim that immigrants contribute to the success of the American economy and that if, for instance, the rescission of DACA is allowed to stand, the economy would lose $460.3 billion from the national GDP and $24.6 billion in Social Security and Medicare tax contributions, or that immigrants play an outsized role as entrepreneurs and create millions of jobs (6). Other research suggests that more than 40% of the companies in the Fortune 500 were founded by immigrants or their children (6). Some of these firms include Amazon, Google, AT&T, Proctor and Gamble, Apple and eBay (7). Yet another study found that immigrants have started more than 50% of $1 billion start-ups in the United States (8). Another argument to be made to lawmakers and the public for easing restrictions on immigration is that America is so competitive on the global stage because of its ability to attract and retain the best talent, not only from within the United States but also from around the world (9) and that Silicon Valley faces increasing competition from cities in India, China and France, which are friendlier to entrepreneurs (10).
Unanswered questions
How much can Facebook and other companies do to adapt to a world threatening to be more isolationist? Is there merit in competing more aggressively for the best labor to be found in America? How best can the company engage with lawmakers?
References:
(1) Trump ends DACA but gives Congress window to save it.
http://www.cnn.com/2017/09/05/politics/daca-trump-congress/index.html
(2) Open Letter from leaders of American Industry.
https://dreamers.fwd.us/business-leaders?utm_source=twitter&utm_medium=social&utm_campaign=protect-dreamers&utm_term=&utm_content=
(3) Facebook vulnerable to expected changes in key visa program.
https://www.reuters.com/article/us-facebook-immigration/facebook-vulnerable-to-expected-changes-in-key-visa-program-idUSKBN15H2WY
(4) Public Policy Institute of California research paper on Silicon Valley’s skilled immigrants.
http://www.ppic.org/content/pubs/rb/RB_699ASRB.pdf
(5) Facebook CEO Mark Zuckerberg On Capitol Hill To Press Lawmakers On Immigration Reform.
http://www.foxnews.com/politics/2013/09/18/facebook-ceo-mark-zuckerberg-on-capitol-hill-to-press-lawmakers-on-immigration.html
(6) Report by New American Economy “Reason for Reform: Entrepreneurship”
http://www.newamericaneconomy.org/wp-content/uploads/2016/12/Entrepreneur.pdf
(7) Immigrants made American business what it is today.
http://money.cnn.com/2017/09/05/news/companies/immigrant-employers/index.html
(8) National Foundation for American Policy: Immigrants and billion dollar start ups
http://nfap.com/wp-content/uploads/2016/03/Immigrants-and-Billion-Dollar-Startups.NFAP-Policy-Brief.March-2016.pdf
(9) Why Silicon Valley wouldn’t work without immigrants
https://www.nytimes.com/2017/02/08/technology/personaltech/why-silicon-valley-wouldnt-work-without-immigrants.html
(10) Tensions rising in Silicon Valley over Trump’s immigration crackdown
https://www.cnbc.com/2017/06/27/tensions-rising-in-silicon-valley-over-trumps-immigration-crackdown.html
As an international studying in the U.S., the challenge proposed here is a living and concerning reality. Being a tech and “asset-light” company, the sustainable, high-quality supply of talents is arguably the most important part of its supply chain. If Facebook wants to maintain its long term competitiveness, there is no other way than recruiting and maintaining its talents. Unlike other tech company, I would argue that the impact of isolationist is even higher for Facebook as the its company mission is to connect the world. An isolationist approach will be opposite to its company value and its customer promise. If this remained unsolved, there is a medium risk that not only the foreign employees and employee satisfaction at Facebook will be impacted, so will its customers who echoes with the value of the company. Therefore, I would recommend Facebook to seriously evaluate building or enlarging a European headquarter. One of such options could be Germany, where Berlin is an emerging tech hub, with high-skill workforce, and last but not least a national policy that welcomes highly educated immigrants.
This is an extremely interesting topic, especially if you combine it with increased pressure in re-shore jobs to the US that is affecting other giants of the tech industry (e.g. as Maddy wrote in her essay “Apple: a homecoming from abroad”)
As Swan mentioned in the previous comment, high quality supply of talents might be the most important part of the supply chain for Facebook type of companies. Therefore, she suggests scale up of European HQs of these companies since they already have presence in Europe and since EU has been relatively welcoming to educated immigrants. There are two questions to this approach though, keeping in mind what Maddy pointed out and also the changing dynamics in Europe, especially post-Brexit decision.
The first question really is what the current administration will do if they see increased outsourcing of jobs that are currently present in the US – will they increase pressure on these companies? However, unlike in Apple’s case, could the administration actually increase pressure on these companies given that they wouldn’t import any physical product?
Second question is related to the job market dynamics in the EU. Given the imminent Brexit and unknown conditions under which it will happen, some companies have already started to shift some of their operations to continental Europe. If we believed that we are going to see hard Brexit in the coming years, we would expect this trend only to strengthen as many companies loose tariff-free, simple access to the EU markets. However, that would increase pressures on the local job markets that are already now struggling to fill in certain roles (using the example I know the best – the Czech Republic is at natural rate of unemployment). Therefore, immigration would probably have increase to cover the new demand for labor. However, while not as strong as in the US, we can see nationalist tendencies in many European countries and hence increased immigration, even if of qualified workforce, might cause significant issues in the future for many local governments, especially since these tech companies have tendency (and ability) to tax their profit in the most convenient locations (vs. taxing profits locally).
Thank you for an interesting read! I agree that the U.S. has benefited greatly from the influx and retention of immigrants who go on to build businesses and contribute to society. I am fearful that should recent U.S. policies continue that FB and other businesses that rely on this influx of talent will need to focus on expanding operations into more immigration-friendly nations (i.e. Canada and some of Europe). This is course will have a strong impact on labor availability and tax revenue in the U.S. if companies not only store capital elsewhere, but look to build out human capital and talent in foreign nations. This is the type of leverage that innovative companies like FB and Google will need to rely on when lobbying with lawmakers and decision makes as you alluded to in your third question.
There certainly seems to be merit to competing more aggressively for the best talent in America, but as you pointed out, the current supply is set to become even more constrained and it will become quite expensive to do so.
Thanks for writing about an interesting and important topic, made more relevant over the past year given the current political climate in the US. First, I agree with previous comments that human capital is perhaps the most valuable asset for “asset-light” technology companies. Historically, the US has had an advantage when it comes to highly-educated labor resources due to its well-developed education system–particularly in higher education institutions (e.g. MIT). As immigration standards shift towards isolationism, we may not only see that highly educated foreign talent leave the country due to visa restrictions, but also that international students choose to pursue their education in countries other than the US (e.g. the UK) because their US job prospects become so limited. Thus, I see the threat to be even broader than the high technology industry. Second, I am hopeful that as the US technology industry becomes more and more powerful, they will have a greater lobbying voice on these immigration matters. It has been heartening to see so many admirable, well-known business figures from Silicon Valley speak out about this issue. Finally, I wonder how much of this shift towards isolationism is temporary and an outcome of the recent election cycle. While we have seen this shift globally over the past few years, I do think that election cycles tend to exhibit “pendulum swings” and in 4-8 years, we may see a regression back towards globalization. The question then becomes is that time horizon too long and therefore damaging for high-tech companies, like Facebook and Google, that must innovate quickly to survive?
Really interesting read – thank you! I agree that human capital is of huge concern, especially for companies that employ immigrant groups (Uber, Apple, others mentioned above). However, I do think our political contexts makes me questions whether this is a long-term issue or short-term issue. Isolationist policies, immigration, and global perception of the United States are all contingent on the political climate and the administration in house (as Starry also indicated). In my mind, this does not and should not diminish the importance of immigrants losing their jobs today.
Arguably, there might even be more dramatic implications for Facebook, not only pertaining to the labor force. Isolationist policies reduce the impact of the network effect – Facebook’s core competency. We see this in countries like China where the government has placed restrictions around words or things that can be accessed online. If our isolationist policies endure and become even more drastic, as Facebook, I would be worried about multiple components of my business in addition to talent.
From a solutions perspective, I think policymaking is generally easier said than done. While it is important to partner with regulatory stakeholders, often times, incentives are misaligned (as we have observed with ride-sharing and local governments). I think it would be more effective to identify solutions within one’s own business model. For instance, is it feasible for Facebook to change it’s criteria for who it is willing to become a sponsor for? That would allow immigrants to continue accessing opportunities at the firm.
Thanks for writing this, it’s definitely an interesting read. As you stated above with the example you had on DACA, immigrants contribute a great deal to the financial success of the American economy. However, one counter-argument to that point might be that they are amassing capital and wealth that should have been captured by Americans. Due to the fact that immigrants in some instances might be more willing to accept lower wages, they are taking away opportunities that should have gone to Americans.
In order to address that counter-argument and move the discussion on immigration forward, I believe companies like Facebook must be more explicit in laying out to the public why they rely on immigrant labor. Also, not only must they lay out the problems, I believe they need to be part of the solution and develop strategies to help develop U.S. workers so tech companies are less reliant on foreign workers. For example, they could emphasize STEM education in America’s education system. Facebook must not only lobby to lawmakers to address this problem, but they must also be part of the solution.
Very interesting topic to read.
As an international student, I think isolationist is definitely hurting the long-term success of US firms, especially big tech firms which leverage a lot of talents coming from all around the world. Some firm has decided to expand their office in Canada to accommodate the challenges with H1B visa insurance, but I feel this is not solving the problem fundamentally.
Isolationist is deeply impacting foreign talents confidence in whether US is still an immigrate friendly place for them to settle down, does it now makes sense for them to return to home country for long-term career growth.
One lesson I learned from Singapore Government is that work Visa is not based on lottery like H1B, but rather based on merit, this will help high tech firms like Facebook to retain their top talents. I think big tech firms should work together to push the government towards this direction.
I believe that if companies are truly concerned with the recent development of the immigration policies that should take aggressive actions to change the trend. From my point of view, it’s not enough to make claims and calls to action. Facebook, Google, and other tech giants are one of the main taxpayers in the US so they might use their influence to not only correct the social injustice but also to protect their businesses. As the essay mentions, immigrants became an important part of the qualified workforce for enterprises. By tightening immigration policies, the government might be forcing companies to make suboptimal recruiting decisions and hire people that are either lower in qualification or demand a higher salary or even both. This is not beneficial for local and international companies and therefore requires not only their attention but a set of economic “sanctions” imposed on the government to make a bold claim and change the trend.
Thank you for writing about this! It’s such an important and relevant topic and as an immigrant myself, I appreciate you starting this conversation.
I completely agree that the world is changing – there are shifting political dynamics that have very real implications for people’s livelihoods. I do believe Facebook and other companies have influence in shaping some of these regulations. Although the U.S. may be shifting towards a more isolationist stance, not every country in the world is and I think that overall, there are some very positive trends to look towards globally. Facebook and other large companies are hugely beneficial to the U.S. and global economy, and I would like to believe that the U.S. will make rational decisions for the economy, and that means understanding the importance of immigrants to the economy.
There is definitely merit in competing more aggressively for the best labor, both from an social and economic perspective. If the U.S. wants to remain a global leader, it needs to be a moral leader and an innovator, and we cannot do that without immigrants, who are so important to the foundation of our country.