EconoMatters, Rethinking Europe

Germany’s Immigration Challenge

We have to make an honest assessment of costs and benefits of the migration crisis.

Credit: Istvan Csak Shutterstock.com

Takeaways


  • Germans want to help in every way possible. Offering asylum is deeply rooted in our society.
  • It is important not to underestimate financial costs and overestimate benefits from immigration.
  • If advocates of immigration overestimate the financial capacity of Germany, that will boomerang.
  • Germany's mistakes in the past on the immigration front ought not to be repeated.
  • Germany should adopt an active, skills-based approach to management of immigration – à la Canada.

Germany is considered a rational, fact-driven country, not an emotionally driven one. And yet, based on the current immigration debate in Germany, even the advocates of more immigration have little more to offer than emotional arguments.

Given our nation’s history, Germans want to help wherever and however possible. Offering asylum to those in danger is deeply rooted in our society and even those who look for a better living are welcomed by a large segment of German society.

The advocates of more openness point to the benefits which an aging and shrinking population receives from more immigration and they see the potential costs as rather minimal, at least for a rich country like Germany.

That is a rather rose-tinted assumption because it underestimates the financial costs, overestimates the benefits from immigration and clearly overestimates the financial capacity of Germany.

Being overly optimistic helps neither the immigrants themselves nor the cause of promoting greater openness in German society.

Tremendous costs

Proponents of more immigration to Germany refer to the shrinking workforce and the significant unfunded liabilities for pensions and health care, estimated at least at about four times the country’s GDP.

The ultimate answer about how significant more immigration is in that context depends on what the net contribution of immigrants is to the German economy.

Aside from the fact that the answer is very contested, even well beyond the realm of politics in the field of academic literature, there is an additional problem. No one can tell for sure, as the qualification of immigrants, especially refugees, is not registered.

Supporters of immigration point to the high number of academics immigrating, such as Syrian doctors. Critics point to a high number of uneducated and illiterate people. Most probably, Germany is receiving a mix of both, very well educated and uneducated people.

Even making a very optimistic assumption — that 50% of the one million immigrants expected in 2015 are well educated, willing to be integrated and want to contribute to the German society, while the other 50% will remain largely dependent on public support — we can make a simple calculation.

If the 50% share of skilled immigrants before long were to earn 80,000 euros on a per capita basis — well above Germany’s average income of about 40,000 euros – and paid taxes of 40%, their annual contribution to society in form of taxes would be about 16 billion euros per year.

Availability of only high-skill jobs

    At the same time, assuming a social welfare cost of about 25,000 euros per “non-productive” immigrant, those costs would total 12.5 billion euros annually. That would still leave a positive net contribution to German society and the nation’s economy

This underscores that it is obviously critical from an economic point of view to attract a high share of productive immigrants.

But this matters for more than just economic considerations. As an advanced industrial democracy, Germany offers plentiful immigration opportunities for skilled people.

However, unlike the past when large swaths of low-skilled people came to Germany, the supply of low-skilled jobs in the manufacturing sector is drying up quite rapidly, not least due to the increased automation of German industry.

What is available are jobs in the services economy which require language skills and an ability to do abstract reasoning. Germany ought to be quite focused on this issue – not because it is heartless but prudent.

The country has made plenty of mistakes on the immigration front in the past, which ought not to be repeated. Not embracing an active, skills-based approach to the management of immigration – à la Canada or Australia – was one such mistake.

Does it matter?

Of course, one could conclude that net costs of a few billion per year do not matter for a country as rich as Germany. This is true — but only from the current perspective.

If one shifts from static to dynamic analysis and realizes that immigration into Germany may very well continue at the current speed, the picture looks quite different.

  • Assuming a total pool of five million immigrants flowing in and a more likely mix of 30% skilled immigrants to 70% unskilled or low-skilled ones, the net costs would rise to 38 billion euros per year.
  • Over a time horizon of 30 years, this would easily lead to costs of more than one trillion Euros. That is close to the entire costs of German reunification between 1990 and 2010.

Not as rich as it claims

Let’s also understand that Germany is not as rich as it claims. Besides the unfunded liabilities for the aging society of more than 400% of GDP, the strategy to exit from nuclear energy is expected to cost German consumers and businesses about 1 trillion euros.

Even that might be manageable if the euro were structured in a sound manner. As things stand, rescuing the Euro will at least cost another trillion euros. Add in the backlog of investments in public infrastructure and another trillion euros is gone.

A plan for immigration

Obviously, Germany needs to spend its money intelligently. But we also need to change our behavior.

From both an economic point of view, as well as from a humanitarian point of view and from the vantage point of providing of solid integration perspective in German society, we have to make the best out of the wave of immigration coming to Europe and Germany.

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About Daniel Stelter

Daniel Stelter is the founder of the German think tank Beyond the Obvious. Follow him @thinkBTO

  • Joel Wischkaemper

    You want an honest assessment of this migration technique, and you allow it to continue rather than asking the people of Austria and Germany what they want to do.
    This isn’t a question for the elitists who live in the mansions on a hill, and ..away.. from the consequences of allowing the migration to continue.

    This is a question for the People of the country that is being overwhelmed by another group.
    This is a question for the United Nations.
    This is a question for NATO.

    Put migrant camps in Greece and Turkey, and pay well for them and their maintenance. Give those countries a hard, solid promise they will be returned when the disorder is finished. Put anyone in the refugee camps back over the border they came from.. or in a boat.. if they do not tell you the truth, and use a polygraph to make sure you are being told the truth.

  • DelmarJackson

    A nation is more than pluses and minuses of its projected GDP. It is made up of the culture, language, history, values, morals and ethnicity, which is in turn made up of the people. When you change the people you change the culture and country and all academic posturing and positions is made irrelevant.
    For the most part, immigration has become a racket, a transfer of money from labor to capital. The only people who favor it are those who profit and then pass on all the social, economic and environmental costs to the communities. As the once homogenous communities fragment and become balkanized, and the citizens withdraw from civic involvement, they also begin to pick and choose what laws they will obey as they see no penalty when immigrants disobey immigration laws, and anarchy begins slowly. The society becomes tribalized and the government more powerful in order to maintain peace among the different ethnic groups.
    The real truth is most western people in all countries do not want more immigration and more diversity, it is being forced onto them by an open border globalist oligarchy which has bought most of the media and political parties. Those in power smear all who dare speak out with hate speech laws and terrible racist labels which worked to quiet the native population in the past, but that strategy is no longer working as decent middle class citizens are now risking being accused of terrible names for daring to speak out against themselves and their children from being dispossessed from their own nations.
    If you want to give your country away, there are plenty of outsiders willing to come and take it. However, do not expect those on the bottom to go quietly as in many cases the country is all they have, and your belief that they hate immigrants is your fatal mistake as who they really hate is you on top who made this happen.

  • ErikKengaard

    Bravo! Well said.

    “At one time or another, acceleration of population growth [via immigration] . . . has been sought, [not by the people, but] by militarists in need of cannon fodder, by rulers in search of hegemonic expansion, by industrialists in want of cheap and docile labor, by ecclesiastical spokesmen in search of souls, and by land and other speculators hungering for unearned increment.
    (after Joseph J Spengler)

  • ErikKengaard

    ” . . . we have to make the best out of the wave of immigration coming to Europe and Germany.” The best way (for the Germans) is to send the migrants back.