In March 2020, people’s relationship with work fundamentally shifted, and with it their relationship with their country and citizenship. In a world of remote work, location and opportunity are uncoupled. Gone are the days when the best jobs were concentrated in the major world cities. Now they are available on the internet. We are entering a period when more roles than ever are “anywhere jobs”[_] and increasing numbers of people have the option to work from anywhere.
As far back as the 1960s, technologists and futurists predicted the emergence of a new demographic who would use technology to work “just as well from Tahiti or Bali as they could from London”.[_] By the 2010s, their vision had come to fruition: the world’s first digital nomads left their home countries in North America and Western Europe to work remotely from lower-cost destinations in Southeast Asia and Latin America. Early nomads travelled primarily on tourist visas, which means their temporary relocations were poorly measured by existing migration monitoring systems.
The consultancy firm MBO Partners has published annual research on American digital nomads since 2018. While its survey only covers US residents, the 2020 edition found that 10.9 million Americans already identify as digital nomads (up from 7.2 million in 2019).[_] It also found that 19 million Americans plan to become nomadic in the next three years and another 64 million are considering it. If those numbers prove accurate, almost 30 per cent of the US population could be digital nomads by the middle of the decade.
Global survey data from tens of thousands of active digital nomads shows that 62 per cent come from the US or the UK, their median income is $80,000 per year, and 90 per cent are university educated.[_] They are most likely to work in software or web development, startups, marketing and the creative industries. The most visited destinations among digital nomads are London, Bangkok, New York City, Berlin and Paris.[_]
Online tools such as Nomad List and Teleport provide an online interface for digital nomads to compare potential destinations and decide where to go. These websites gather open data from sources all over the internet to rank the world’s cities in terms of their suitability for remote work. Each city is measured on its performance in more than 50 criteria including wifi speeds, coworking spaces, air quality, healthcare and cost of living. When people can work from anywhere, this is how they choose where to go.
With media stories fuelling public awareness, it’s likely many more citizens will take the opportunity to combine remote work and travel in the years ahead. Prominent companies such as Airbnb and WeWork have already launched new products designed for the nomad market, and entrepreneurs predict there could be as many as 1 billion nomads worldwide by 2035.[_] Globalisation has already delivered the free flow of trade, capital, knowledge and communication across borders. Now the mobility of people is taking centre stage.
The Challenge
Since the Covid-19 pandemic began, many governments have taken action to respond to this shift, launching visa programmes, tax incentives and talent grants aimed at remote workers and digital nomads. Countries will need bold strategies to attract and retain citizens as the global competition for talent heats up.
The immediate priorities for governments are:
1) to better understand the nomad demographic that is emerging in response to remote work; and
2) to determine the best ways to compete for talent in the context of increased global mobility.
Considerations
There are five main areas to consider in formulating an effective response to digital nomads: tourism, residency, citizenship, taxation and business registration.
Tourism
Tourism is not expected to fully recover from the effects of the pandemic until at least 2024.[_] Such projections are motivating countries whose economies were previously dependent on overseas tourism to target digital nomads.
On the Portuguese island of Madeira, for example, the village of Ponta do Sol has declared itself the world’s first “digital nomad village”.[_] Its government recognises that remote workers can provide much-needed support to hard-hit sectors, and that nomads are likely to stay longer, spend more and integrate locally compared with tourists.
A seamless way for governments to leverage the nomad opportunity is by clarifying that remote work stays of a few months are allowed on tourist visas, subject to certain conditions. This provides the opportunity for digital nomad visitors to help revitalise tourism-dependent sectors, and local businesses to market to them without concerns over regulatory changes.
Residency
Beyond shorter stays, governments can deepen their relationship with nomad visitors through residency programmes. So-called “nomad visas” have already launched in more than 30 countries, including Barbados, Bermuda, Croatia, Iceland and Thailand.
A nomad visa grants visitors temporary residency of a country, usually for up to 12 months, enabling them to work as a freelancer or entrepreneur while living there. They can either be based in the country continuously for the length of the visa, or travel elsewhere and return as they wish. These programmes are the first step in defining the parameters for nomads to legally register with multiple countries simultaneously.
At present, though, there is no consistent standard across nations, and a clear opportunity to establish best practice in collaboration with partner countries and international institutions.
Citizenship
Countries seeking a permanent commitment from remote talent must ensure their citizenship packages are competitive on the global stage. Failure to do so will not only prevent them from engaging digital nomads, but also risks the loss of their citizens to other countries with a more attractive offer. Governments must create effective policies to target new citizens with the potential to bolster their economy, priority industries and business ecosystems.
With growing competition for talent and ageing populations across most OECD countries, citizenship is becoming more like a service, and there are a variety of governments willing to provide it. Temporary residency is often the first step towards permanent residency and then citizenship, for which countries already have well-defined pathways. There is, however, a compelling argument to be made in favour of simplifying those steps.
Notions of citizenship are already fluid, especially for the ultra-wealthy. Through the citizenship by investment industry, estimated to be worth $25 billion per year,[_] the rich have been purchasing second passports and enjoying premium mobility rights for decades. A person’s right to global mobility depends on the passport they hold, or how much money they have. As more workplaces turn virtual, the injustice of this status quo becomes increasingly difficult to justify.
Taxation
Where a person resides and where they are taxed do not necessarily go hand in hand, which has led some countries to make separate bids for remote workers to adopt tax residency in their jurisdictions. Italy and Greece have launched new residency programmes that invite visa-holders to become tax residents and enjoy tax breaks of 50 per cent for up to seven years.[_]
Meanwhile, parts of the US are launching grants for people to relocate to areas in need of revitalisation, betting on tax revenues and local spending. In northwest Arkansas, regional policymakers anticipate that each of their $10,000 incentives for remote workers will generate $50,000 of economic impact in just one year, excluding soft benefits such as diversity and business culture.[_]
In contrast, the Barbados Welcome Stamp programme explicitly allows physical residents to retain their tax residency elsewhere. Policymakers wanted to avoid conflict with other countries on these issues, recognising that there were other ways to capitalise on the presence of temporary, nomadic residents. Income taxes are just one piece of the puzzle; there are also business and consumption taxes to consider.
There are two countries in the world—the US and Eritrea—where policies of tax nationalism mean emigrants have to renounce their citizenship to be relieved of their local tax obligations. With other countries targeting those citizens, such a system runs the risk of driving away tax bases permanently. The most attractive destinations for digital nomads are those that take a flexible approach and facilitate easy access and exit.
Business Registration
For entrepreneurs and the self-employed, the issue of where to register a company is often separate from issues of physical and even tax residency. Freelancing has been steadily rising for years, and the switch to remote work has accelerated the shift.[_] Like global corporations, individuals choose the best business environment for their needs.
To incentivise these groups to transact through their jurisdiction, governments will have to offer an efficient and globally competitive service. Estonia is a world leader in its development of one such service. The Estonian government’s e-residency programme is an effort to extend citizenship beyond its own citizens, inviting anybody in the world to register in its database. Once registered, e-residents can establish and manage an EU company without the need to travel to Estonia.[_]
Summary
The rise of remote work is creating the opportunity for more people to become digital nomads. This shift will have a significant and ongoing impact on people’s relationship with their country, redefining what it means to be a citizen in the 21st century. Governments have the opportunity to respond with proactive measures that bolster the attractiveness of their citizenship packages and guard against increasing competition from other jurisdictions.
Many policymakers’ understanding of digital nomads is limited at present, but a growing number of countries are launching new programmes to take advantage of the phenomenon. To avoid falling behind, governments must balance retaining their current citizens with attracting nomadic visitors who can aid their recovery from the pandemic through spending and local integration.
Policy Recommendations
Introduce measures to monitor the inflow and outflow of digital nomads and establish working groups to examine the opportunities and make recommendations in the context of local priorities.
Collaborate with partner countries to integrate short periods of remote work into existing tourist visa arrangements, exploring the potential for reciprocal arrangements that make citizenship packages more attractive for both sides.
Work with international institutions and multilateral organisations to introduce recognised global standards for temporary residency programmes, or so-called “nomad visas”.
Review their routes to residency, citizenship and business registration against other countries to assess global competitiveness, identifying opportunities to simplify and update processes.
Lead Image: TBI