On New York, London and Hong Kong? It is time to move on
Other close competitors like Tokyo, Singapore and Shanghai no longer look the same as they once did. So what’s left?
Financial centers have generally been places with well-trained regulatory oversight and deep capital markets. Naturally, an ecosystem of workers is created around this, attracting professionals like bankers, lawyers, accountants and headhunters.
Factors such as tax rates and the ability to attract capital – equity and debt – that make doing business easier and make a city more competitive also help. There are different ways to measure this: The size and depth of capital markets, as well as detailed, weighted indices that take into account everything from tax rates to office occupancy and legal jurisdiction.
These measures, however, ignore an underestimated but increasingly relevant factor in the post-Covid era: human capital. We can no longer measure workers by one-dimensional factors like level of education or income bracket. Where do people want to live? And where can professionals do their job smoothly and therefore successfully? This has changed since Covid turned our world upside down.
The latest ranking from the Global Financial Centers Index, or GFCI, based on 150 quantitative metrics and nearly 75,000 city ratings, as well as about 12,000 respondents, places 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 which issue they considered most important.
Contrary to popular belief, the development of the financial sector was lowest on this list, as remote working and the ease of digital services during the pandemic showed that there is a different way of doing business. The caveat, however, is the need for a “reliable and trustworthy ecosystem”.
It is time to redefine the global financial centers on the basis of more subjective criteria. But where to start ? Cost and quality of living, for example, help establish a baseline for evaluating which cities help attract or repel talent. Hong Kong remains the most expensive city, with its exorbitant rents and the Covid-19 measures which have made the cost of logistics, and of living in general, exorbitant. Even the price of beer has skyrocketed. 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 leading financial center, New York, is 44.
Then there is connectivity. Travel to and from any of the three major financial centers is currently in shambles during what executives have described as the busiest season ever. Hong Kong has virtually no flights, let alone its quarantine system, while London cannot handle passengers and New York remains hectic and full of delays.
It’s not hard to see why, then, people in the United States and elsewhere are quitting their jobs for greener pastures. The Great Resignation is as much about people doing what they want — and unrelated to work — as it is about the other economic factors that made it possible. People choose to live in big cities because being employed in the world of finance, or the ecosystem around it, is lucrative. Yet it is also expensive to live in and around these areas. Consider what’s happening with tech jobs — the first sector to pull away: American white-collar wages are converging across the country, whether they’re in a major center or far from headquarters. Salaries in DC are reaching those in the Bay Area.
To retain talent and attract the best and the brightest, companies will need to change tactics. As the office openings of BlackRock Inc. and Goldman Sachs Group Inc. in places like West Palm Beach and Birmingham show, it’s not that difficult. Distributing talent to locations with better living standards, easy commuting and flexible working hours to match time zones and trading hours could go a long way to solving current labor issues and ultimately account, the cost of human capital.
That’s not to say companies should let workers travel to remote islands with spotty Wi-Fi and poor infrastructure. Instead, it’s about recognizing that places traditionally considered hubs for white-collar finance workers are no longer so.
Globally, there are now few places where the financiers of the world want to live. A rapidly emerging hub, for example, is Dubai. (Full disclosure: I’ve lived in New York, London and Hong Kong and am a recent transplant from Dubai.) It’s not just the influx of expats fleeing other less favorable regimes like Singapore and Hong Kong . Capital is also flowing. The emirate has put in place measures to attract talent through visa programs, housing and incentives for asset managers to settle. The schools are numerous and increasingly established. Its neighbor, Abu Dhabi, has also done similar things.
There are undoubtedly shortcomings, such as Dubai’s decision to protect its telecom operator at the expense of consumers (you can’t use apps like WhatsApp or FaceTime to make voice or video calls, for example).
But history shows that financial centers can evolve rapidly, breaking with their traditional moulds. In the aftermath of the global financial crisis, hubs vying for importance like Dubai, Shanghai and Sao Paulo have emerged, although some have not quite lived up to their promises.
One of the most significant changes has been the evolution of financial technology, or fintech, which has raised the question of whether it will eventually render financial centers irrelevant to the functioning of the global economy.
Changes like these – and the ability of employees and employers to live with them and make them work – show that it’s time for a reassessment.
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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. Previously, she was a reporter for the Wall Street Journal.
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