Opinion

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

Can immigration improve Germany's precarious demographic situation?

By: and Date: September 11, 2015 Topic: Macroeconomic policy

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 [email protected].

Read article More on this topic
 

Blog Post

Climate migration: what do we really know?

While uncertain, studies suggest that climate change will cause significant internal and international migration over the next century.

By: Klaas Lenaerts and Simone Tagliapietra Topic: Global economy and trade Date: April 25, 2022
Read article More by this author
 

Blog Post

European governance

Bold European Union action is needed to support Ukrainian refugees

Hosting Ukrainian refugees could cost European Union countries in excess of €40 billion this year. A dedicated EU fund is needed to manage the fiscal burden.

By: Zsolt Darvas Topic: European governance, Global economy and trade Date: April 6, 2022
Read article More on this topic More by this author
 

Blog Post

The economic policy consequences of the war

The Ukraine war will have significant economic policy consequences for the European Union and its members, arising from the adverse supply shock triggered by the rise in oil and gas prices, energy independence measures, the inflow of refugees and boosted defence spending. Their direct budgetary implications could be 1.1/4% of GDP in 2022.

By: Jean Pisani-Ferry Topic: Global economy and trade Date: March 8, 2022
Read about event More on this topic
 

Past Event

Past Event

What will the EU's new migration policy do differently?

What does the EU's new migration policy look like and is it likely to succeed?

Speakers: Hanne Beirens, Margaritis Schinas and Guntram B. Wolff Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 10, 2020
Read about event More on this topic
 

Past Event

Past Event

EU-LAC Economic Forum 2019: New perspectives in turbulent times

The third edition of the EU-LAC Economic Forum.

Speakers: Diego Acosta Arcarazo, Ignacio Corlazzoli, Maria Demertzis, Mauricio Escanero Figueroa, Alicia García-Herrero, Carmen González Enríquez, Bert Hoffmann, Edita Hrdá, Matthias Jorgensen, Juan Jung, Tobias Lenz, Carlos Malamud, J. Scott Marcus, Elena Pisonero, Belén Romana and Guntram B. Wolff Topic: Global economy and trade Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 11, 2019
Read article More on this topic
 

Blog Post

Considering intra-EU migration and countries’ net inflows

The authors here review the latest EU migration figures. Southern, eastern, and central Europe have broadly experienced net losses in cumulative intra-EU migration, while western and northern Europe have experienced gains. Spain and Italy, however, have still experienced gains in net migration inflows.

By: Jan Mazza and Akira Soto Topic: Macroeconomic policy Date: March 28, 2019
Read article More on this topic More by this author
 

Podcast

Podcast

Backstage: Reforming the European asylum system

This episode of 'The Sound of Economics' features Bruegel visiting fellow Elina Ribakova in conversation with Marc-Olivier Padis and Jean-Paul Tran Thiet about the reform of the Common European Asylum System (CEAS).

By: The Sound of Economics Topic: Macroeconomic policy Date: March 7, 2019
Read about event More on this topic
 

Past Event

Past Event

Saving the right to asylum

How to improve the European asylum policy?

Speakers: Karen Mets, Nicolas Bauquet, Marc-Olivier Padis, Elina Ribakova, Jean-Paul Tran Thiet and Guntram B. Wolff Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 5, 2019
Read article More on this topic
 

Opinion

Immigration: The doors of perception

Surveys show that people systematically overestimate the share of foreign-born citizens among resident populations. Aligning people's perceptions with reality is vital to the betterment of public debate and proposed policies.

By: Inês Goncalves Raposo and Bruegel Topic: Global economy and trade Date: December 12, 2018
Read article More on this topic More by this author
 

Podcast

Podcast

Director’s cut: What Syrian refugees need to return home

This episode of the Director’s Cut features a conversation between Bruegel’s director, Guntram Wolff and Maha Yahya, the director of the Carnegie Middle East Center

By: The Sound of Economics Topic: Global economy and trade Date: November 15, 2018
Read article More on this topic More by this author
 

Podcast

Podcast

Backstage: How think-tanks can make themselves heard in an information-rich world

Think-tanks have come a long way since their organisational blueprint was first conceived, but they have work to do in order to adapt to meet the needs of both policymakers and the general public, and transmit their signals above the noise of the modern age.

By: The Sound of Economics Topic: Global economy and trade Date: November 8, 2018
Read about event
 

Past Event

Past Event

Global Think Tank Summit 2018

The public session of the Global Think Tank Summit will discuss trade and fair global competition

Speakers: Edward Kofi Anan Brown, Aart de Geus, Zhao Hai, Jacob Funk Kirkegaard, Cecilia Malmström, Catherine McBride, James McGann, Jan Mischke, Izumi Ohno and Guntram B. Wolff Topic: Global economy and trade, Green economy Location: Bozar, Rue Ravenstein 23, 1000 Bruxelles Date: November 7, 2018
Load more posts