Until present time international analysts have concluded that migrants will promote resolving labor shortage problem and increasing economic growth.
As of today the policy to cover the labor shortage by migrants has led to the fact that in the main immigration countries the number of newcomers has risen to 5-20% of the population generally and 10-25% of its economically active part. During recent years the European migration policy is based on the hypothesis that migrants have a favorable effect on the host country’s economy providing that unqualified labor constitutes the most part of immigrants. For example, representatives of German diplomatic circles often shared a point of view meaning that they try to fill the unqualified labor market with migrants and keep natives for the middle and high-skilled market. This very reason explains why the European Union opened its door to low-skilled workers from MENA countries and Africa coming through the humanitarian migration channel.
German authorities show statistics as of the period refugees from the Middle East being hosted in the country. They give the data reported by the International Monetary Fund saying that German GDP will increase by 0.3% in 2016. According to the IMF in the nearest future such an increase will be caused by safety-net program spending which will increase by 0.09-0.13% in 2016-2017, mainly, due to payments and social benefits to refugees. However, despite the mentioned information, there are factors indicating the ambiguity and duality of the migration impact on the state economy.
For example, effectiveness of the model of economic recovery and growth with migrants involved depends, first of all, on success the new manpower is integrated into society and lifts the financial burden from the host state.
The places with immigrants concentrated on the state sphere of social services and payments are characterized by a strong pressure caused by the poor immigrant families’ need for school education, medical care and social security that are not refunded by them.
The 2013 study entitled ‘The Economic Impact of Immigration in OECD Countries’ with international data evolved showed that in developed European countries, as well as in Australia, Canada and the United States, the positive impact of economic migration is next to none, or is 0.5% of GDP, at least. Its authors concluded that although migrants do not make a significant contribution to the state budget, they do not burden with it. The document stated that in most countries migrants contribute more their taxes and social contributions than benefits they receive. However, an analysis of the level of salaries of migrants and native population shows that since the salaries of migrants are lower than the salaries of local workers, the amount of payments to the budget is less correspondingly.
Unlike highly skilled workers having a positive long-term impact on economic development, unskilled workers, the vast majority in the migrant structure, have mixed economic consequences. The wide involvement of low-skilled migrants to the industries can reduce labor productivity.
The latest industries’ workforce is mainly formed due to highly qualified foreign labor. Thus, in the US information technology sphere 18.3% of the employed are migrants. 60% of the authors of the most cited physics and 30% other natural sciences works in the USA were foreigners by origin. About a quarter of the founders or presidents of US biotechnology companies were also natives of other countries.
At the same time, the use of cheap low-skilled labor of foreigners forms a basis for a number of national industries to function. For example, immigrants in Belgium make up half of all miners, 40% of foreigners work in construction sphere of Switzerland, and 70% of immigrants work in the US agricultural sector amid the acting import programs for seasonal agricultural workers.
Migration has an ambiguous effect on the ratio of working and non-working population as migrants arrive in the country accompanied by a certain number of dependents (children, spouses, non-working parents).
Due to the cheap labor immigrants actually save the financial resources of employers that in some cases slows down the production modernization.
The risks from migrants are posed mainly by unskilled local workers; earlier arrived migrants who have gained a foothold in the labor market and seek to increase cost of labor, and women. For example, the results of French studies say about Maghreb women’s negative impact on employment of local workers and their payment. This increased competition affects natives’ life in the way that they lose their job because of immigrants and have to ask the state for the benefits. As a result, the state budget of the host country remains burdened.
Generally, immigration with dominant low-skilled workers leads to payment level drop relative to the payment of skilled workers, and subsequently makes the gap in their salaries huge. However, this factor has the opposite effect: an increase of the number of specialists of any level leads to decreasing the service cost that is beneficial for the society generally, but poses risks to the local workforce. Thus, worsening the conditions for low-skilled categories of workers, migration promotes improving the situation for more qualified groups of workers.
Migration has the same mixed effect on the national budget. On the one hand, the average immigrant receives less social benefits and pays more taxes and budget contributions than the average representative of the indigenous population, and the net financial balance of budget expenses and income related to their stay contributes to the state treasury. However, the impact on the budget depends on how long the foreigner stays in the host country and his immigration dynamics. Newly arrived foreigners have a short-term negative impact on the country’s budget as they seek for job and strong government support. As migrant’s period of stay in the country and his income increase, their payments to the budget grow, and the granted state benefits decrease. Thus, the negative impact on the economy increases in case of a sharp inflow of migrants, or a permanent trend of immigrants’ growth in the country.
Based on the fact that highly skilled migrants find work faster than unskilled migrants, they contribute to the treasury more than they get from it. Therefore, the budget state takes advantages from an increase of the number of highly educated migrants and a decrease of the share of poorly educated migrants in their total mass. To some extent this can be applied to middle-skilled workers. However, the main sources of migrants to developed countries (excluding internal migration within the EU) provide mostly low-skilled labor that means that its impact on the state budget is more negative.
Migration cannot solve future budgetary problems related to an aging population. Regardless of age, migrants are definitely not able to boost the treasury.A significant part of migrants continues to be hosted for humanitarian reasons, they come illegally without being subjected to selection or control, or arrive on family reunification programs, thereby, bringing the positive effect on the economy to nothing. For example, 70-80% of migrants in the USA, Sweden and Denmark are migrants arriving on family reunification programs, thereby, depriving the state of the ability to regulate the quality of labor resources, and therefore their impact on the economy. Thus, due to the low percentage of strongly job-motivated migrants (10-15%), the volume and structure of immigration do not always meet the economic needs of the host society that means that its economic effect has a dual character and difficult predictable long-term effects.
