Opinion

Germany’s handling of immigration will shape the future of Europe

Can immigration improve Germany's precarious demographic situation?

By: Date: September 11, 2015 Topic: European Macroeconomics & Governance

Financial Times
A short version of this op-ed was originally published in the Financial Times

When religious persecution around 1700 drove the Huguenots to Prussia’s Berlin and Brandenburg, they added more than 1% to the native population and brought skills, knowledge and technology, with lasting positive effects on Germany’s productivity. 300 years later, religious persecution, war and poverty are driving hundreds of thousands to Germany again. Germany’s authorities expect up to 800000 asylum seekers in 2015, an estimate that may be too high but would represent about 1% of Germany’s population. Immigrants other than asylum seekers would increase that number to far more than 1 million. In 2014, more than 600000 asylum seekers reached the EU. How quickly these immigrants are integrated (or not) will be decisive for Germany’s economy and Europe’s monetary union.

Immigrants are significantly younger than the domestic population. Given Germany’s major demographic challenges , this is welcome news. As Wolfgang Schäuble, Germany’s finance minister, has pointed out, the immediate costs of handling refugees and immigrants are manageable. Long-term benefits to public finance and the sustainability of pensions can be substantial. Research has documented that foreigners currently living in Germany pay more to the state than they receive in social benefits. But the long-term benefits depend on whether and how immigrants are integrated into the German labour market.

Many immigrants bring specific skills and the ability and willingness to work. German industry has discovered this opportunity and has called for legal changes to facilitate the integration of qualified workers in the German labour market. Industry groups are calling for immigrants to be granted the right to apply for apprenticeship positions in Germany, in order to adapt and upgrade their skills. In the last few years, the integration of migrants in the German labour market has been made easier,  but significant obstacles remain, and Germany still has a reputation of being restrictive on immigration.

Opening  the German labour market quickly and comprehensively to migrants would provide a boost to the German economy. The substantial increase in the labour supply should contribute to increased German output. More workers would mean more investments, increasing growth further. Immigrants would also need housing, benefiting the construction sector. The additional investments in the economy and immigrants’ lower saving rates would boost German demand. The demand boost should also benefit Germany’s neighbours and could help bring down Germany’s current account surplus. In fact, countries with high immigration rates often run current account deficits, such as Spain in the 2000s and the United States. The effect is unlikely to be as big in Germany – but additional workers will need capital and housing.

Some fear that immigrants will dampen wage growth, and make it harder for euro area countries to regain much needed competitiveness relative to Germany. However, the empirical evidence on wage effects is inconclusive. Relatively low-skilled immigrants could even contribute to higher wages for skilled German workers. Qualified workers, such as nurses from Syria and Iraq, may however compete with German workers and potential immigrants from other euro area countries.

More immigrants entering Germany from outside the EU could make it more difficult for migrants from other euro area countries to find a job there.  From 2009 to 2014, more than half a million immigrants arrived in Germany from Spain, Italy, Portugal and Greece. These numbers are small given the huge unemployment rates in Southern Europe. There is thus not enough migration within the euro area to make the currency union adapt to the shocks and reduce unemployment rates sufficiently. Immigration from outside Europe won’t help bring down unemployment in Southern Europe – but it could at least contribute to adjustment in Germany, making job creation in Southern Europe easier.

Chancellor Angela Merkel has a historic chance to turn the refugee crisis into an opportunity for immigrants, for Germany and for Europe. Integrating large numbers of migrants is a huge challenge to society and to social cohesion. However if successful, it could boost Germany’s economy – and contribute to re-balancing the monetary union.

Immigration could turn around Germany’s main weakness – its precarious demographic situation – and help pay the pensions of tomorrow. Opening German borders to immigrants will change the economic and political balance in Europe for decades, as did the migration of Huguenots 300 years ago.

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read article More by this author

Podcast

Podcast

Director’s Cut: Europe’s migration policy challenge

Immigration is one of the most contentious policy matters currently facing the EU. In this Director’s Cut of ‘The Sound of Economics’ Bruegel director Guntram Wolff welcomes Ana Palacio, member of the Spanish council of state and former foreign affairs minister, as well as Bruegel visiting fellow Elina Ribakova for a constructive discussion as to which approaches will yield the best results.

By: The Sound of Economics Topic: European Macroeconomics & Governance, Global Economics & Governance Date: September 14, 2018
Read about event More on this topic

Past Event

Past Event

Youth UP Europe: transforming the migration narrative

This joint Bruegel - European Youth Forum event will discuss how we can shift the narrative of migration to a more positive one ahead of the European elections next year?

Speakers: Carina Autengruber, Zsolt Darvas, Thodoris Georgakopoulos, Lilika Trikalinou and Sofia Zaharaki Topic: European Macroeconomics & Governance Location: The American College of Greece, 6th Gravias Street, GR-153 42, Agia Paraskevi Athens, Greece Date: September 6, 2018
Read article More on this topic More by this author

Opinion

Wir brauchen gezielte Migration für unsere Renten

Deutschland benötigt die geordnete Zuwanderung produktiver Arbeitskräfte aus dem Ausland. Um diesen Prozess besser zu steuern, will die Bundesregierung nun ein Fachkräfteeinwanderungsgesetz auf den Weg bringen.

By: Jochen Andritzky Topic: European Macroeconomics & Governance Date: August 22, 2018
Read article Download PDF

External Publication

European Parliament

EU funds for migration, asylum and integration policies

This study provides an overview, analysis and evaluation of how EU funds for migration, asylum and integration policies have been used. Using publicly available information, insights from interviews with various stakeholders and a survey of non-governmental organisations (NGOs), the authors evaluate the allocation, implementation and oversight of EU funds.

By: Francesco Chiacchio, Zsolt Darvas, Konstantinos Efstathiou, Inês Goncalves Raposo and Guntram B. Wolff Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: May 23, 2018
Read article More on this topic More by this author

Opinion

Beyond border control, migrant integration policies must be revived

Border control and burden-sharing of refugees is just one aspect of immigration policies. Greater financial inclusion and the tailoring of regulations to refugees' specific needs would benefit not only the refugees themselves, but also native citizens.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: February 23, 2018
Read about event More on this topic

Past Event

Past Event

Integration of migrants in the EU

This event will discuss the integration of migrants in the EU as well as the EU's response to the recent refugee crisis

Speakers: Manu Bhardwaj, Herbert Brücker, Zsolt Darvas, Naika Foroutan, Marcel Fratzscher, Manjula M. Luthria and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Mohrenstraße 58, 10117 Berlin, Germany Date: January 29, 2018
Read article More on this topic

Blog Post

The ever-rising labour shortages in Europe

Historically high labour shortages in most central-eastern and north-western EU countries suggest that the immigration of central Europeans to north-west EU countries did not take away jobs from local workers on a significant scale. But as labour shortages now exceed their pre-crisis peak, several urgent measures must be considered to help to combat the problem.

By: Zsolt Darvas and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: January 25, 2018
Read article Download PDF More on this topic

Blueprint

People on the move: migration and mobility in the European Union

Migration is one of the most divisive policy topics in today’s Europe. In this publication, the authors assess the immigration challenge that the EU faces, analyse public perceptions, map migration patterns in the EU and review the literature on the economic impact of immigration to reflect on immigration policies and the role of private institutions in fostering integration.

By: Uuriintuya Batsaikhan, Zsolt Darvas and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: January 22, 2018
Read article More by this author

Podcast

Podcast

Inclusive Europe: a journey towards integration

How has immigration become an essential part of the EU? What incentives should be made to encourage EU intra-mobility? Why and how should we proceed to foster refugees' inclusion in the EU? Zsolt Darvas and Manu Bhardwaj of Mastercard Center for Inclusive Growth discuss the future of migration within the EU.

By: The Sound of Economics Topic: European Macroeconomics & Governance, Global Economics & Governance Date: December 14, 2017
Read article More on this topic More by this author

Blog Post

The challenge of fostering financial inclusion of refugees

Creation of a European identification for refugees and a pan-European registry would encourage better financial inclusion, along with clear guidelines about financial regulation and public-private partnerships

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: December 13, 2017
Read about event More on this topic

Past Event

Past Event

Better policies for people on the move

This event discussed the impact and integration of migrants as well as national and European immigration policy challenges.

Speakers: Manu Bhardwaj, Elizabeth Collett, Zsolt Darvas, Eva Degler, Maria Demertzis, Arjen Leerkes, Rainer Münz, Matthias Oel, Alessandra Venturini and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 13, 2017
Read article More on this topic More by this author

Blog Post

Support for intra-EU mobility of people is on the rise

Europeans’ enthusiasm for immigration from other EU countries is steadily increasing –two-thirds of the EU population, on average, now support it.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: December 12, 2017
Load more posts