For employers, Toronto is the lowest risk city in the world, Aon says.
By Aon’s def, risky means it’s hard to find good help. The employment base is uneducated and it’s difficult to recruit people elsewhere and relocate them.
I prefer this to most lists of favorable business climates, which tend to favor areas with low taxes and cheap workers.
I have nothing against low taxes and if I were an employer, I’d like my payroll as low as possible. But those lists always conflict with reality.
Florida, for example, has low taxes and cheap labor, but the state hosts fewer Fortune 500 companies than one square mile of midtown Manhattan, where taxes are high by U.S. standards, and labor is expensive.
So all those Manhattan companies should move to Florida, right? Aon’s survey tells us why that doesn’t happen. New York has great educational and training facilities and a lot of top talent.
Aon doesn’t specifically mention it, but New York and cities like London, Toronto, etc., also benefit from what I’ll call the Facebook phenomenon. If you like Facebook, it’s because a lot of your friends are on it, too. However, if nobody you liked was on Facebook, you wouldn’t join, either.
So Facebook is successful because it’s popular. And if it weren’t so popular, it wouldn’t be successful.
Aon’s top cities have all achieved this sort of critical mass in networking and employment that make it easy for an employer to tap into. Start an insurance company in New York and there are lots of places to get good people. Start an insurance company in Orlando – well, good luck.
This also helps explain why New York insurers are much more reluctant to pay relocation costs for employees. First, they generally don’t have to, since they usually hire from the New York talent pool. Second, you know – or should – that your career will be far more valuable if you are in that pool, so you should be willing to absorb the cost of getting to it.
It also speaks to the risks that Bermuda faces long-term, in my opinion. I don’t find any Bermuda cities on Aon’s list, but I will note that it has been an important insurance center for a generation but, as far as I can tell, has expended little effort building an educational infrastructure and employee base that will let it stay important. So as it’s tax advantage erodes, companies leave.
Bermuda’s goose is not cooked, of course. There are a lot of insurance people there today, and most companies that are moving corporate operations are keeping some operations in the market – underwriting cat business being fairly typical.
But most of the insurance people working in Bermuda come from somewhere else. Absent the construction of a strong educational base, Bermuda’s edge will continue to fade, not in a few years surely, but in a few decades.
Here’s a table of the top 10 and the bottom 10. Interesting, most of the top 10 are important actuarial centers. Chicago, another important actuarial city, finished 11th.