Has Immigration Benefitted European Economies?

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Summary

  • Migrants in Sweden cost on average $10bn per year, around 2.38% of their GDP
  • A single Somali immigrant costs the Finnish state almost 1 million euros during their lifetime.
  • A single asylum seeker costs the Dutch state €475,000 on average
  • In the Netherlands, migrants from Japan, North America, and Oceania were positive contributors of €625,000 while migrants from Africa negatively contributed €625,000 on average.
  • Total net cost of migrants between 1995–2019 in the Netherlands was €400 billion, which is the same amount generated from the country’s natural gas revenues
  • Between the years 1995–2011, immigration cost the UK £114 billion (with non-European Economic Area migrants contributing -£118 billion)
  • Migration is more likely to increase wages at the top of the distribution, and reduce wages at the bottom of the distribution
  • An increase of 100 foreign-born working-age migrants in the UK was associated with a reduction of 23 natives in employment for the period 1995 to 2010
  • The fiscal impact of immigration is small compared to GDP and cannot be used to justify large-scale immigration

The transformative immigration policies adopted in Western Europe have drawn many criticisms, however concerned citizens are assured these drawbacks are offset by the economic boon of allowing fresh labour to enter the market.

But how true is this claim? Let’s find out…

A good place to start is Sweden. The Nordic country has taken in more migrants per capita than any other during the 2015 migrant crisis and while its problems with crime, rape and terrorism are evident, there has been little discussion on the economic impact of their open-door policy.

A recent report estimated of the net tax cost for migrants and migrants’ relatives amounts to an average of $10bn per year, which works out at around 2.38% of their GDP.

Sweden net cost of refugees from 2007–2021

Another report from their neighbours in Finland also yielded shocking results. The authors found that the average Iraqi migrant (aged 20-24 years old) costs €844,000 if they choose to have children, costing €1.27 million more than the average Finnish-born family. Worse still, a single Somali immigrant costs the Finnish state almost 1 million euros during their lifetime.

A study from the Amsterdam School of Economics also found that asylum seekers cost the state a large amount, averaging at €475,000 per immigrant. The Dutch report also found large variance in contribution between different regions. Migrants from Japan, North America, and Oceania were positive contributors of €625,000 while migrants from Africa negatively contributed €625,000 on average.

The analysis also looks into the performance of second-generation immigrants. The first generation migrant groups who positively contribute tend to have children who outperform the natives. With the natives at a base of 100% integration, second generation Japanese score 128%, Chinese score 115% and Scandinavians score 110%. The inverse is true for immigrants from regions which had negative economic contributions.

The report concludes that the total net costs of immigration averaged €17 billion per year. Between 1995–2019, the total costs amounted to €400 billion, which is the same amount of revenue generated from Holland’s natural gas extraction. The authors also project that a further €600 billion in costs will occur in the next two decades.

In the UK, a widely publicised study investigated the fiscal impact of immigration on the economy between the years 1995–2011. The results showed that European Economic Area (EEA) migrants positively contributed £4 billion to the economy, however non-European Economic Area (non-EEA) migrants negatively contributed £118 billion. The analysis found that EEA migrants have slightly higher employment rates than natives, however non-EEA migrants report lower at only 60% on average. Immigrants are more likely to live in social housing, although EEA migrants are less likely and non-EEAs are significantly more likely.

The report also included a secondary ‘recent arrival’ cohort which only accounted for migrants arriving after the turn of the century. The authors conclude that migrants from 2001–2011 were a positive for the economy in this time period. Unsurprisingly, this is the observation which made the mainstream news rather than the £114 million cost over 1995–2011. However, one must put this claim into context; the positive contribution over the 10 years only include the prime years of economic production (the average age of a ‘recent arrival’ is 26 years old) and don’t control for future welfare costs. The chart below demonstrates that the economic burden is highest for the elderly due to pensions and health costs.

Other reports adopt novel methodologies in order to spin positive conclusions from the non-EEA migrant cohort. While a paper from Oxford Economics acknowledges that non-EEA migrants presented a net fiscal deficit in their static analysis, their ‘dynamic’ analysis suggests they will be a fiscal asset. How? By counting their children as natives and by claiming a large share will move back to their country of origin. Using IPS data, they calculated the attrition rate of migrants, however this data isn’t stratified into EEA and non-EEA classes. Another report provided more light on this factor;

Judging by observed migration flows, many EEA immigrants will return home before either point is reached, whereas most immigrants from the poorer members of the non-EEA grouping will remain permanently in the UK. The disparity between inflows and outflows was greatest for the mostly poor countries in the columns labelled ‘New Commonwealth’ (mainly countries in South Asia and Africa) and ‘Other Foreign’.

This challenges the ‘dynamic analysis’ methodology from the Oxford Economic report regarding their conclusion that non-EEA migrants will likely return to their native countries. This is further challenged when we see employment rates among those in the ‘New Commonwealth’. Migrants from Australia, New Zealand and the EU had higher employment than natives, while those from Africa (excluding South Africa) and Pakistan/Bangladesh had considerably lower, having 54.7% and 48.9% respectively. The evidence suggests the economically productive migrants are the most likely to return to their country while the least economically productive would be the least likely.

Regarding the consequences on the labour market, research from the Migration Advisory Committee concluded that immigration impacts wage distribution, finding that migration is more likely to increase wages at the top of the distribution, and reduce wages at the bottom of the distribution. Research has also found that the majority of new jobs went to migrants and another report estimated ‘that an increase of 100 foreign-born working-age migrants in the UK was associated with a reduction of 23 natives in employment for the period 1995 to 2010’. A House of Lords report also supported this while also acknowledging that ‘the fiscal impact of immigration is small compared to GDP and cannot be used to justify large-scale immigration.’

The economic and demographic consequences of large-scale immigration are overwhelmingly negative for the existing populations in European countries. While migrants from regions like Northern Europe, Northern America, Oceania and the Far-East generate a fiscal surplus, migrants from Africa, the Middle-East and South Asia negatively impact the host nation’s economy. A drastic revision to Europe’s immigration policy is needed if Europe wishes to thrive economically.