Europe still needs the migrants

BRUSSELS – Last week’s terrorist attacks in Paris are likely to compound Europe’s deep divisions over how to respond to its refugee and migrant crisis, particularly given reports that one of the perpetrators arrived amid the ongoing influx. But calls for the reintroduction of border controls and a new “Fortress Europe” risk giving Europe’s demagogues the lead and making it harder than ever to convince people of the need to integrate more newcomers into the European Union’s workforce.

The climate of fear that the attacks have created threatens to obscure a key statistic: unless EU countries open their doors wider to immigration, the current ratio of four working-age people for every pensioner will fall to 2:1 by mid-century, if not earlier. Pension and social security systems are already under severe strain.

Nobody denies that this year’s wave of migration is overwhelming some EU countries, and that solidarity among them is crumbling. But the truth is that the European economy badly needs the young people pouring across its frontiers from the greater Middle East and Africa.

Judging by the cultural difficulties encountered when immigration was only a trickle, integration of this year’s estimated 1.5 million migrants and refugees will be a mammoth undertaking. The face and character of Europe will be changed, unleashing dangerous new political tensions.

Nonetheless, despite old and new fears, there is an overriding case for welcoming the newcomers, as well as the millions more expected to arrive in the coming years. This is particularly well understood in Germany, despite the backlash against Chancellor Angela Merkel’s open-door policy; on current trends, the country’s population of 82 million will fall to 65 million by 2060. As Marcel Fratzscher, who heads Germany’s Institute for Economic Research (DIW), has put it, “In the long run, the refugees are an incredible opportunity for Germany,” with the benefits outweighing the costs “within the next 5-10 years.”

This is not a new story. Five years ago, a “wise men’s” group headed by former Spanish prime minister Felipe González reported that 100 million migrants will be needed by mid-century to maintain Europe’s active labor force at current levels. Other studies indicate that if immigration returns to pre-crisis levels, today’s labor force of 240 million will drop to 207 million. And if immigration were to be severely reduced, ageing would cut the workforce to around 169 million.

Removing some 70 million jobs, and therefore taxpayers, from the European economy would clearly be disastrous. Leading economists like Germany’s Klaus Regling, who heads the European Stability Mechanism, the eurozone’s bailout fund, calculated a decade ago that the EU’s shrinking workforce is set to impose severe limits on economic growth. He forecast that labor shortages are creating a ceiling that restricts annual GDP growth to 1.8% in the years up to 2030, and a mere 1.3% from then to 2050.

Comparatively few Europeans seem to contest the moral obligation to accept asylum-seeking refugees fleeing from Syria’s civil war or political oppression elsewhere. Whether or not public sentiment changes in the wake of the Paris attacks, economic migrants are viewed more negatively. The newcomers, it is said, will place a burden on EU countries’ benefit systems, either because they are scroungers or because they cannot find suitable employment. And if they do find jobs, it will be because they compete unfairly with unemployed young Europeans.

These objections don’t stand up to scrutiny. A European Commission analysis of national statistics has found that the economic contribution of migrants is greater than their cost to EU governments. There are currently 34 million non-citizens living in the EU, with 69% classified as “economically active” (in some countries, the figure rises to 80%).

Almost four-fifths of these people are of working age, with 15% still at school and only 7% older than 64. The OECD notes that those immigrants who find it hardest to get a job are the most highly qualified, a correlation that largely reflects the red tape surrounding recognition of credentials.

So what of the risk that Europe’s youth unemployment problem – the “lost generation” created by the years of economic crisis and austerity – will be exacerbated? It is a potent argument in terms of shaping public opinion, but it has little substance. The OECD’s Employment Outlook for 2015 laments the rise in long-term unemployment, with well over a third of Europe’s 25 million jobless out of work for a year or more, but situates the youth unemployment problem firmly in Greece, Italy, and Spain – countries where many migrants arrive but from which most move on.

Labor shortages, on the other hand, are on the rise. In a survey of 41,700 hiring managers in 2015 by the employment agency Manpower, around a third of those interviewed in Poland and France complained of recruitment difficulties, while almost half did in Germany and Greece. The most serious skills shortages appear to be in engineering and information technologies, areas where migrant labor poses little threat.

But policymakers have no magic wand to wave over the refugee crisis. The pressures on government agencies and local authorities in northern Europe are already proving unsustainable, and free movement of people on the continent is in peril. So it is in Europeans’ common interest to recognize the positive side of the crisis.

Introducing fresh blood into the EU economy has short-term as well as longer-term benefits. The immediate spending needed to address the crisis – an estimated €10 billion ($10.1 billion) this year in Germany alone – will help boost growth once the construction of new housing, schools, and hospitals begins to stimulate jobs and consumption.

These effects won’t be straightforward, of course, as some eurozone governments may have to abandon austerity and take on more debt. But when the time comes to look back on the migration crisis, one hopes that, despite the uncertainties and strains, we will be looking back on the economic stagnation of an ageing Europe as well.

Article written for Project Syndicate – November 2015.