How did Indian immigration affect Canada?

Immigration to Germany - Problem and Opportunity for the Labor Market

Since 2008, more and more immigrants have come to Germany than have moved away, especially from the European Union. They were not motivated by the generous social benefits, as feared, but by the prospect of work. At the same time as the structure of the countries of origin, the qualifications of immigrants have also improved, which, in view of the forecast shortage of skilled workers, has a positive effect on the labor market.

Immigration as an opportunity for Germany

Christina Gathmann, Nicolas Keller, Ole Monscheuer

The topic of “immigration” has always been a highly political one in Germany. For a long time, politicians denied that Germany was in fact a country of immigration. For many years this has prevented a pragmatic and forward-looking immigration policy as well as a fact-based debate about the economic, social and political challenges of immigration. In the course of EU integration, there is currently a lot of discussion - and often polemic - about potential problems of mass immigration and poverty migration to Germany. It is to be hoped that the public and political debate will make greater use of the research findings of recent years and that the opportunities and potentials of immigration will come to the fore.

Immigration to Germany

If one first looks at the immigration flows to Germany over the last two decades, it is noticeable that immigration is subject to strong fluctuations (see Figure 1). Since the opening of the wall, Germany has experienced two periods of high immigration: the first in the early 1990s due to the opening of the wall and the collapse of the Eastern Bloc; the second since 2008 in the course of the euro and financial crisis and the further realization of the free movement of persons within the EU member states. In both cases, 1 million to 1.2 million people came to Germany annually (estimates for 2013 indicate a further increase in immigration), while in the years in between only slightly more than half, namely 550,000 to 700,000 people , came to Germany every year.

However, the number of immigrants alone is only partially meaningful, as it must be seen in relation to emigration. It turns out that the net immigration to Germany is significantly lower than the figure of 1 million immigrants often reported in the media suggests. Net immigration has been between 0 and 225,000 immigrants annually since the mid-1990s and even a slight net emigration of non-Germans. Only since 2011 has net immigration increased to between 300,000 and 400,000 people per year. However, this immigration balance is still well below the balance of almost 600,000 (1992). Overall, there can hardly be any talk of permanent mass immigration to Germany, as immigration is partially offset by simultaneous emigration.

In order to better understand the economic effects of immigration flows, one must also keep in mind the regional distribution of immigrants within Germany. As in other countries, it is also evident in Germany that immigrants mainly move to economically dynamic regions. The most popular destinations are the economically strong regions in southern and western Germany, but also Berlin as the capital. Relative to their population, Baden-Württemberg, Berlin and Hesse show the greatest increase in immigration. Baden-Württemberg, for example, only makes up 13% of the population, but 17.7% of immigrants migrate there.1 The eastern German states and the more rural states in western Germany such as Rhineland-Palatinate, on the other hand, play a subordinate role.

illustration 1
Moving to and from Germany

Source: Federal Statistical Office, 2012; own representation.

Who are the immigrants?

Not only the extent of immigration, but also the composition of immigrants to Germany has changed significantly in the last few decades. While in the 1960s and early 1970s it was mainly the traditional guest workers, for example from Turkey, Yugoslavia, Italy or Greece, who came to Germany, since the 1990s it has mainly been immigrants from Eastern European countries and - since the euro and financial crisis - also from the "old" EU member states. In 2011, two out of three immigrants to Germany came from EU member states (see Figure 2). In particular, immigration from the “new” member states, which have been members of the EU since 2004 and 2007, respectively, has increased.2 For example, immigration from the acceding countries in 2004 has doubled since their accession to almost 300,000 people in 2012; a further increase can be seen with the entry into force of the free movement of workers (since 2011). Immigration from Bulgaria and Romania has also increased from under 40,000 to more than 170,000 people per year since they joined. It should be noted here that a third of immigrants from Bulgaria and Romania leave Germany again within a year, so that the net immigration from these countries is significantly lower. 3

Figure 2
Immigration from the EU to Germany

Dashed line: respective percentage (right scale).

Source: Federal Statistical Office, 2012; own representation.

A second, presumably temporary development in recent years is the increase in immigration from the “old” EU member states (EU15). Their share of immigration to Germany had fallen to below 100,000 a year during the 1990s and early 2000s. Since the euro and financial crisis, immigration has risen sharply again, especially from 2010, due to the good economic situation in Germany.

A key factor in understanding the economic and social effects of migration for Germany is the human capital that immigrants bring with them. A high level of education, for example, facilitates integration in the labor market and thus the possible advantages for the German economy. The average educational level of immigrants of working age (25 to 60 years) who came to Germany between 1990 and 2009 has actually increased significantly in recent decades (see Figure 3). This positive development can be observed in male and female immigrants alike. Particularly noteworthy here is the increase in the number of people with university degrees. While only 13% of immigrants who came to Germany in the early 1990s had a university degree, this proportion has risen to 37% for immigrants who came to Germany between 2005 and 2009.

Figure 3
Educational level of immigrants (by year of arrival), 1990 to 2009

Source: Microcensus, 2009; own representation.

This means that the proportion of highly qualified immigrants who have come to Germany since 2005 is almost twice as high as in the German workforce, of which 19% have a university degree. In contrast, immigration with intermediate qualifications (completed vocational training) has fallen sharply from 50% to 35%. In addition, the proportion of low-skilled (without vocational training or high school diploma) has decreased by 10 percentage points from a very high level (36% for immigrants who came to Germany up to 2004) since 2005. At 26%, however, the proportion of low-skilled people is still high compared to 10% low-skilled in the population living in Germany.

Effects of immigration on the labor market

The fear of the negative effects of immigrants on the labor market is a constant focus of the public. In connection with the EU enlargements in 2004 and 2007 as well as the entry into force of the free movement of workers from Romania and Bulgaria since January 2014, the question of the potential economic effects of immigration is again increasingly discussed in Germany, but also in other EU countries such as Great Britain .

From an economic perspective, immigration can lead to lower wages or higher unemployment, if

  1. the demand for labor and the capital stock in the economy remain constant;
  2. the labor supply is not completely elastic; and
  3. Immigrants and native workers are perfect substitutes, i.e., roughly speaking, competing for the same jobs. In this case, immigration increases the supply of labor, which results in lower wages or, if wages are not downwardly flexible, higher unemployment.

In this case, local workers who compete with immigrants for the same jobs lose out. Owners of capital and locals who do not compete with immigrants for the same jobs (e.g. if locals are highly qualified, but immigrants are primarily low-skilled), on the other hand, benefit from immigration even in the case of constant labor demand.

The assumption of constant labor demand and a constant capital stock is only realistic in the short term, but not over a period of several years. If this assumption is abandoned, there are various ways in which an economy can optimally adapt to the new situation of a larger workforce. On the one hand, companies receive incentives to invest more in the capital stock. In equilibrium, wages remain at their original level while economic output has increased overall. Another adjustment mechanism could be for firms to invest more in technology or services that take advantage of the immigrants' additional labor force. In this way, the shortage of skilled workers in certain occupations in Germany, which is caused, among other things, by the demographic aging of society, could be compensated for by immigration. If, for example, there is a lack of specialists in the IT industry, investments in this area may not be available, or companies may even decide to migrate abroad. If, on the other hand, it succeeds in attracting foreign IT experts to Germany and integrating them into the labor market, investments will be made in Germany and jobs will be secured here. From an economic point of view, immigration therefore represents great potential that can lead to job security and more growth in the long term.

Empirically there are hardly any negative consequences of immigration for the labor market

But what does the reality look like in Germany? Has immigration had a positive or negative effect on the wages and employment of the local population? The empirical literature on the effects of immigration has made great strides in recent years. Studies are now also available for Germany that allow reliable conclusions to be drawn about the effects of immigration on the labor market.

For example, a more recent study analyzes the effects of the immigration of repatriates from Russia and other former Soviet republics, who were able to immigrate to Germany without restriction until 1993. A causal effect is empirically identified by the fact that repatriates were assigned to the federal states using a central distribution key, regardless of local labor demand.4 The study finds no negative wage effects on local workers, but short-term displacement effects: for every ten immigrants who found employment there were 3 , 1 fewer locals employed. 5

Instead, a number of other studies rely on an aggregated production function to analyze the effects of immigration in Germany. The key modeling decision here is to what extent immigrants and native workers are viewed as perfect substitutes. As already mentioned, negative wage or employment effects can be expected in the short term with perfect substitutes. A variant of this approach distinguishes employees according to their level of education and professional experience. Immigrants and locals with the same level of education and work experience compete for the same jobs here (i.e. they are perfect substitutes), while, for example, an older native does not necessarily compete with a young immigrant for the same job.6 Based on immigration data from the 1980s and 1990s there are no substantially negative wage or employment effects. If the share of immigrants increases by 1% of the labor force (which corresponds to roughly 400,000 net immigration), this leads to a decrease in the average wage of less than 0.1%. An extension of this approach also differentiates between newly arrived immigrants, immigrants who have been working in the country for some time, and local workers.7 The authors also take into account that many immigrants work in jobs that are below their qualification profile. Here, too, there are no negative wage or employment effects on local workers; if at all, the wages of former immigrants are affected by immigration.8 Therefore, locals seem to benefit more from immigration - which corresponds to the long-term expectation in economic theory with flexible capital stock or technology.

The results, which are supported by numerous studies in countries such as France, Great Britain or the USA, show that immigration has no negative wage effects on average. However, it cannot be concluded from this that no local employee will ever have to accept a loss of wages. When the majority of immigrants are low-skilled, they compete for jobs primarily with other low-wage earners and workers in the low-wage sector, but not with workers who have completed professional or university degrees. Indeed, a study from England shows that the effects of immigration at the lower end of the wage distribution are negative, but positive wage effects exist for the majority of workers.9 More precisely, the authors come to the conclusion that the bottom 40% of workers in The UK has negative wage effects while the top 60% of workers have positive wage effects. Accordingly, there is a slightly positive wage effect on average.10 Although the specific figures cannot be easily transferred from England to Germany, it is likely that here too the negative effects would be concentrated at the lower end of the wage scale, while those with higher incomes tend to be benefit the immigrants.

Political opportunities and challenges

What can be concluded from the previous considerations and where are the opportunities and political challenges in the next few years? First of all, immigrants in Germany in recent years have been equipped with much more human capital than the guest workers of the 1960s and 1970s, but also in comparison to the immigrants shortly after the fall of the Berlin Wall. This development is to be seen very positively, since the advanced economy in Germany is dependent on a well-trained workforce. The immigration of well-trained workers should continue to be pursued and actively promoted in order to counteract the effects of the aging German society, in particular a shrinking workforce.

However, immigration should not be seen as a panacea for the aging society in Germany. For one thing, it is unlikely that the workforce can be kept constant in numbers through immigration alone. On the other hand, the fundamental problems of some professions, such as the increasing demand in the care professions with relatively unfavorable working conditions and comparatively low pay, cannot be solved by immigration alone. It is very unlikely that the federal government's recruitment programs will be able to meet the growing demand for nursing staff in the long term; Instead, decisions in principle have to be made about the organization and financing of care needs, which are largely independent of immigration as such.

The second important finding is that immigrants to Germany, especially in recent years, represent an increasingly heterogeneous group. The needs and expectations of immigrants are correspondingly different: the needs of an immigrant IT professional are different from those of an immigrant without professional training. An exception is certainly the acquisition of the German language, which is generally an important basis for the successful economic and social integration of immigrants. The efforts of the Federal Government to expand the range of language and integration courses, especially since 2005, can be rated positively in principle

In addition, however, the creation and maintenance of a flexible labor market - with few access barriers or bureaucratic hurdles, but with a wide range of opportunities for advancement - appears to be the most important prerequisite for the successful integration of immigrants.A flexible labor market that offers diverse employment and development opportunities for the broadest possible range of talents and skills is the best guarantee that immigrants benefit from Germany and Germany from its immigrants.

  • 1 Federal Statistical Office: Fachserie 1, Reihe 1.2., Wiesbaden 2012.
  • 2 countries joining the EU enlargement in 2004: Estonia, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, the Czech Republic, Hungary and Cyprus; Accession countries of the EU enlargement 2007: Bulgaria and Romania.
  • 3 Of all immigrants, 30% have already emigrated one year after arriving in Germany; for immigrants from the “old” EU countries, the rate of 20% is somewhat lower than the average.
  • 4 Cf. A. Glitz: The Labor Market Impact of Immigration: A Quasi-Experiment Exploiting Immigrant Location Rules in Germany, in: Journal of Labor Economics, 30th year (2012), pp. 175-213.
  • 5 A second study uses the border commuter regulation in Bavaria, which has allowed Czechoslovaks to work in the border region of Bavaria since the early 1990s; it comes to similar results as with the late repatriates. See C. Dustmann, U. Schoenberg, J. Stuhler: Empirical Evidence on the local labor market impact of immigration, mimeo, University College London, 2013.
  • 6 See H. Bonin: Wage and employment effects of immigration to Germany: Evidence from a skill group approach, IZA Discussion Paper, No. 1875, Bonn 2005.
  • 7 Cf. F. D’Amuri, G. I. Ottaviano, G. Peri: The Labor Market Impact of Immigration in Western Germany in the 1990’s, in: European Economic Review, 54th year (2010), pp. 550-570.
  • 8 Another study even allows a segmented labor market; no effects on the unemployment of natives or former immigrant cohorts can be found here. See H. Brücker, E. J. Jahn: Migration and Wage-setting: Reassessing the Labor Market Effects of Migration, in: Scandinavian Journal of Economics, Volume 113 (2011), pp. 286-317.
  • 9 Cf. C. Dustmann, T. Frattini, I. P. Preston: The Effect of Immigration along the Distribution of Wages, in: Review of Economic Studies, Vol. 80 (2013), pp. 145-173.
  • 10 A positive wage effect can arise if immigrants and locals have complementary skills. For example, the marginal productivity of a highly qualified native can increase due to the presence of low-skilled immigrants if, for example, routine activities or the like can be delegated.
  • 11 There have not yet been any evaluations of the integration courses that meet the highest scientific standards, but would be of great importance for assessing the effectiveness and cost efficiency.

Immigration: important for the future for economic and demographic reasons

Thomas Straubhaar

The data speak for themselves. The influx of foreigners to Germany is currently higher than it has been in two decades. Like a magnet, the prosperous German labor market attracts people from the recession-plagued countries of the EU. Initial estimates by the Federal Statistical Office assume that in 2013, for the first time since 1993, over 400,000 more people moved from abroad than left abroad (see Figure 4). The already high migration gains in the two previous years (2011: +279,000, 2012: +369,000) were thus exceeded again last year. After a short phase as a country of emigration (2008 and 2009), Germany has again become what it has been for a long time: a highly attractive country of immigration.

Figure 4
Immigration balance for Germany

Source: Federal Statistical Office: Long time series “Migrations” (from 1950); available at https://www.destatis.de/DE/ZahlenFakten/Indikatoren/LangeReihen/Bevoelkerung/lrbev07.html; for 2013 estimate by the Federal Statistical Office: Another increase in the population expected for 2013, press release, No. 007 of 8 January 2014.

Eastern Europe in particular was in the foreground of the countries of origin (see Figure 5). In 2012, immigration from Poland was at the top, ahead of Romania and Bulgaria and the southern European EU states that were particularly hard hit by the financial crisis. In 2012, almost four fifths of all immigrants (77.5%) came to Germany from another European country.1 EU internal migration now accounts for 58% of all immigration to Germany. 20.8% of all immigrants came from the fourteen "old" states of the European Union (EU15 excluding Germany) and 43.1% from the twelve new EU states (EU12). In contrast, the trend that has been observable since 2006 continues that there is an annual loss of migration from Turkey.

Figure 5
Immigration to Germany in 2012

Source: Federal Office for Migration and Refugees (BAMF): Migration Report 2012, Nuremberg, January 2014, p. 18, http://www.bamf.de/SharedDocs/Anlagen/DE/Publikationen/Migrationsberichte/migrationsbericht-2012.html?nn = 1366152.

In particular, the immigration from Bulgaria and Romania that followed the free movement of people within the European Union made political headlines at the beginning of 2014. At the end of last year, the transitional arrangement that had been agreed with the EU states Romania and Bulgaria, which joined the EU on January 1, 2007, ended. Accordingly, the free movement of workers and, in some areas, the provision of services by posted workers were restricted.2 Even in the run-up to the field, immigration from Romania and Bulgaria rose significantly. In the case of Romania, the number of immigrants increased roughly fivefold between 2006 and 2013, and in the case of Bulgaria almost eightfold

It is hardly surprising that this has become a political issue in view of the sharp increase in migration from Eastern Europe. It is feared that Germany will not be able to cope with an impending onslaught of poverty refugees. In particular, a stop must be put to social abuse. “If you cheat, you fly” was a provocative demand

A whole series of different studies makes it clear how there is a gap between “perception” and “truth”, myth and reality, especially when it comes to immigration from Bulgaria and Romania.5 It is correct that the quantitative increase is remarkable and requires further analysis. However, it is also correct that immigration from Bulgaria and Romania did not burden the German labor market, but rather relieved it. Romanian and Bulgarian citizens are among the qualified and well-integrated immigrant groups with a level of qualification that is higher than that of southern European EU citizens who come to Germany.6 Romanians and Bulgarians have high employment and low unemployment rates in Germany compared to immigrants from other countries of origin. “The claim that migration would correlate positively with high benefits for the unemployed and that there is consequently a 'welfare state tourism' can just as little be empirically proven for Romanian migrants as in the case of EU internal migration in general.” 7

The strong influx of immigrants has increased the share of people with a migration background (16.3 million people in total) in the total German resident population (from a total of 80.5 million people) to 20% is close to the values ​​of classic immigration countries (USA, Canada or Australia). With almost 3.0 million people, people with Turkish roots make up the largest group (18.3%) within the population with a migration background (see Figure 6). 9.4% (1.5 million people) come from Poland, 7.4% (1.2 million people) from Russia, 4.6% from Italy.

Figure 6
Persons with a migration background by country of origin1 2012

1 Or country of origin of at least one parent.

Source: Federal Office for Migration and Refugees (BAMF): Migration Report 2012, Nuremberg, January 2014, p. 190, http://www.bamf.de/SharedDocs/Anlagen/DE/Publikationen/Migrationsberichte/migrationsbericht-2012.html?nn = 1366152.

If you summarize the data, it can be seen that, thanks to its stable labor market, Germany has once again become a highly attractive immigration country and that more people have moved here in recent years than in the last 20 years. It also shows, however, that Germany is doing a lot of things well with its immigration and integration policy, and in any case is perceived much better than public opinion.9 Most people with a migration background earn their living through their own work, pay taxes and differ - the longer they live here - the less from the host society.

The data for EU internal migration do not show “poverty migration” but “labor migration”. EU nationals migrate when they have an employment contract in their pocket and not at random. The fear that the free movement of persons would lead to a disproportionate increase in the migration of European unemployed people or recipients of social benefits has not come true. On the contrary: the “blue collar” migration of guest workers to heavy industry or to the assembly lines of German industry has increasingly turned into a “white collar” migration of comparatively well-qualified skilled workers. This also has something to do with the structural change in the German economy from a mass industry to a knowledge-based economy, in which simpler industrial activities are becoming rarer.

Intra-European migration is driven by the demand for labor, not the demand for work. It is determined by the availability of jobs, not the availability of labor. Not really surprising. Because the reality largely corresponds to EU legislation. The free movement of persons grants Union citizens and their family members (who may belong to a third country) the right to free entry and residence, settlement, free choice of job and the right to equal treatment.10 Unemployed Union citizens, pensioners and students are entitled to free movement if they have adequate health insurance cover and sufficient Have means of subsistence for themselves and their family members. In itself, “social tourism” and abusive immigration into the welfare systems of the host country are therefore legally excluded - at least in theory. In practice, the enforcement of EU law and, above all, the repatriation of illegally staying immigrants are often limited. Often this has less to do with “immigration” as such than with fundamentally illegal behavior such as illegal work, forced prostitution, drug trafficking or money laundering.

The economic dimension

So although many prejudices and worries about immigration have found little or no empirical confirmation, the fears of large sections of the population must be taken seriously. When Thilo Sarrazin published his bestseller “Germany abolishes itself” in 2010, he clearly hit a nerve in German politics.11 Similar popular and even populist voices against the free movement of people are making themselves heard across Europe. They exist in Great Britain (United Kingdom Independence Party), France (Front National) and Scandinavia (from the Progressive Party in Norway, through the Basic Finns to the Danish People's Party) as well as in the Netherlands (People's Party for Freedom and Democracy) or in Italy ( Lega Nord).

Despite all the differences, the protest parties share a discomfort about free mobility within the EU. The approval of the Swiss for an initiative to prevent feared mass immigration and therefore restrict the free movement of people is only the visible tip of the iceberg. Elsewhere in Europe, too, the immigration discussion can be instrumentalized relatively easily to stimulate primeval fears about foreign infiltration and the loss of national identity. The common front against the foreign has always united local ranks.

The classification of worries and fears about the free movement of people from an economic perspective is difficult because both the causes and the consequences of immigration and integration are enormously complex, diverse and difficult to generalize. Migration is neither always good nor always bad. Advantages and disadvantages are more time and space dependent than other phenomena. In good economic times, immigration can help overcome labor shortages. In bad times, it cannot be ruled out that they will exacerbate wage pressures and unemployment. The effects also depend on the ability and willingness of the immigrant people. As a rule, it is a question of whether immigrants complement or replace the skills and abilities of the locals

Above all, however, the assessment of immigration depends on a very personal cost-benefit analysis. It is not about an abstract, macroeconomic objectivity, but about a concrete, microeconomic concern. And not everything that is positive for the economy as a whole is viewed as desirable by individual people. That is why migration effects are assessed differently from person to person, depending on whether people are directly or indirectly, directly or indirectly positively or negatively affected.

Due to the complexity of migration processes, it is extremely difficult to quantitatively measure the macroeconomic consequences of immigration and integration and, in particular, to filter out the actual contribution that migration makes to overall economic growth, prosperity and employment in an economy. There are a number of empirical studies for Germany that estimate the macroeconomic effects that immigration causes.13 All in all, despite all the differences, the results share one thing in common. They show that immigration has had a positive impact on Germany's economy as a whole. In particular, local workers benefit from immigration in the long term.14 In all qualification groups, wages are rising and unemployment is falling.

Immigrants increase the pool of labor. More human capital becomes available. This increases the return on investment. Economic growth is stimulated. Self-reinforcing effects also promote this growth spiral: The probability of a positive influence of better qualified immigrants on less qualified Germans is particularly high.

It is also true, however, that the economic effects of immigration should not be overestimated. Immigration is not an egg-laying woolly milk pig that is capable of solving all future problems in the long term. In addition, an efficient international division of labor that promotes prosperity can be achieved in various ways. International trade and cross-border factor migration can replace each other in many areas. Whether machines go to work or, conversely, people go to work, depends on transaction and transport costs. This is why the macroeconomic migration effects have much more to do with relative than with absolute effects.

The politico-economic dimension

With the free movement of people, people come and stay. In addition to economic spheres, this also directly affects political, social and cultural issues. Overall economic mobility costs therefore also have a socio-economic and political-economic character. Immigrants compete with native Germans for social benefits, which are financed directly through contributions or indirectly through taxpayers' money, and for the use of public goods (legal framework, justice system, internal and external security), infrastructure (transport, telecommunications and energy networks) and services (health -, education), which are available to everyone and which are financed directly through taxes and fees or indirectly through taxes. This makes the question of the extent to which immigrants receive social and welfare benefits as well as public goods from the state and also co-finance them through taxes, levies and fees.

The question of the social security effect of immigration cannot be answered unequivocally ex ante. An empirical check alone provides more precise findings.15 However, empirical research in particular offers enormous method and data problems. Parts of the transfer system can only be mapped with very rudimentary estimates. Previous results are correspondingly fragmentary and contradictory. In particular, the neglect of pension insurance and the dynamic growth effects give rise to discussions about the significance of the empirical results.16 In addition, the calculations are too spatially and time-related to generalize. As a rule, the social security effect of immigration is linked to the economic cycle of the receiving country. It is closely linked to the opportunities that are open to immigrants on the labor market, both economically and in terms of immigration law. Last but not least, the length of stay plays an important role. Ultimately, what matters is how successfully the immigrants integrate, how well they are able to work and earn their own income.

It is obvious that migration can become a problem for the welfare state if too easy, too generous and too unspecific area-wide social transfers are distributed to too many. This also includes an excessive decoupling of earlier benefits from later claims (payments) and a transition from contribution-financed insurance to tax-financed basic security. Then the migration problems are often not specific migration problems, but general problems of the welfare state!

In practice, many of the people with a migration background already living in Germany are among the real losers of further immigration.17 The negative employment consequences that foreigners have on foreigners can be traced back to a simple fact: those who come to Germany for the first time are more similar to people with a migration background than the autochthonous German. This means that the displacement effects for foreigners are much stronger than for the locals. People with a migration background therefore bear the brunt of immigration.

Conclusions: immigration

Contrary to all fears, prejudices and fears that are often hyped up by populists, immigration is rarely the cause of labor market problems, but it often helps to overcome them. Because the fact is that the German population is shrinking and aging. Immigration will not stop this demographic change, but it will at least be able to slow it down a little. It will fill some gaps in the labor market. And it will help finance the social security systems. Thus, a too little rather than too much migration is likely to become the real challenge for the German labor market.

  • 1 According to official statistics, the Federal Office for Migration and Refugees (BAMF) includes the European Union and European third countries including Turkey and the Russian Federation as part of Europe.
  • 2 For example, during a transition period of up to seven years (2 + 3 + 2 model) - i.e. from 01/01/2007 to 12/31/2013 at the latest - national and not EU law still applied. Therefore Romanian and Bulgarian nationals still need a work permit in Germany in order to take up activities for which no qualified professional training is required.
  • 3 Federal Office for Migration and Refugees (BAMF): Migration Report 2012, Nuremberg, January 2014, p. 7, http://www.bamf.de/SharedDocs/Anlagen/DE/Publikationen/Migrationsberichte/migrationsbericht-2012.html?nn= 1366152 (03/03/2014).
  • 4 Cf. CSU wants to act harder against “immigration of poverty”, in: Frankfurter Allgemeine Zeitung of December 28, 2013, http://www.faz.net/aktuell/politik/sozialdienstleistungen-csu-will-haerter-gegen-armutszuwanderung-vorfahren- 12729570.html (3/3/2014).
  • 5 See the extensive information platform of the Institute for Employment Research of the Federal Employment Agency (IAB): EU Free Movement and Immigration from Southeastern Europe, Nuremberg, http://infosys.iab.de/infoplattform/dokSelect.asp?pkyDokSelect= 132 & sortLit = 2 & show = Lit (3/3/2014).
  • 6 Cf. K. Brenke, N. Neubecker: The structure of immigration is changing significantly, in: DIW Wochenbericht, Vol. 80 (2013), no. 49, pp. 3-21, especially p. 13.
  • 7 Cf. M. Jobelius, V. Stoiciu: The fairy tale of “social tourism” - immigration of Romanian citizens to Germany and other EU member states, Friedrich-Ebert-Stiftung (FES), Bonn 2014, pp. 4-5; also Institute for Labor Market and Occupational Research: Immigrants from Bulgaria and Romania - Labor Migration or Poverty Migration, in: IAB short report 16/2013, updated under: H. Brücker, A. Hauptmann, E. Vallizadeh: Immigration from Bulgaria and Romania before the free movement of workers , IAB Nuremberg, current report from December 23, 2013.
  • 8 See Federal Statistical Office: https://www.destatis.de/DE/ZahlenFakten/GesellschaftStaat/Bevoelkerung/Bevoelkerung.html;jsessionid=429F1C00A329B040781F4F0CA9FDCE90.cae3 (3.3.2014).
  • 9 Advisory Council of German Foundations for Integration and Migration (Ed.): Success Case Europe? Consequences and challenges of EU freedom of movement for Germany, annual report 2013 with migration barometer, Berlin 2013, as well as previous annual reports, http://www.svr-migration.de/content/?page_id=4760 (3.3.2014).
  • 10 Federal Office for Migration and Refugees (BAMF), loc. Cit., Pp. 43-44; available at http://www.bamf.de/SharedDocs/Anlagen/DE/Publikationen/Migrationsberichte/migrationsbericht-2012.html?nn=1366152.
  • 11 Thilo Sarrazin: Germany abolishes itself, Munich 2010.
  • 12 See, for example, the discussion about the (empirical) effects of immigration, presented in detail in the literature as the Chiswick-Borjas controversy, presented for Germany in the annual reports 2010 and 2011 of the Advisory Council of German Foundations for Integration and Migration, op.
  • 13 Cf. also H. Hinte, U. Rinne, K. F. Zimmermann: Immigration, Demography and Labor Market: Facts Instead of Reservations, in: A. Heinz, U. Kluge (Ed.): Immigration - Threat or Future? Myths and facts on integration, Frankfurt 2012, pp. 263-278; or K. F. Zimmermann et al .: Immigration Policy and the Labor Market (The German Experience and Lessons for Europe), Berlin 2007.
  • 14 H. Brücker, E. Jahn, A. Hauptmann, R. Upward: Migration and imperfect labor markets. Theory and cross-country evidence from Denmark, Germany and the UK, in: European Economic Review, 66th Jg., February 2014, pp. 205-225, empirically confirm with the help of a new approach that allows the wage and Simultaneously estimate the employment effects of immigration that domestic workers in Germany gain in the long term through immigration.
  • 15 See, for example, H. Bonin: The financial contribution of foreigners to German public finances: A balance sheet for 2004, IZA Discussion Paper, No. 2444, Bonn, November 2006; Or ders .: An overall fiscal balance of immigration to Germany, in: Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, 71st vol. (2002), no. 2, pp. 215-229.
  • 16 It is particularly critical when the empirical analysis of migration effects does not distinguish between economic and humanitarian migration. Because it goes without saying that humanitarian behavior “costs” something. Therefore, in an economic calculation of the effects of immigration, the costs caused by asylum seekers and refugees would have to be deducted. If people who are on the run or are in need are helped from a humanitarian point of view, and if a certain procedure has been set for asylum and refugee law, obligations inevitably arise for the host society, but not so much with "immigration" as such to do with "humanism".
  • 17 See H. Brücker et al., Loc. Cit.

Immigration: Opportunity and Challenge

Holger Schäfer

The immigration discussion in Germany has taken a turn several times over the past few years. In 2001 the so-called Süssmuth Commission concluded that a paradigm shift from the policy of “prohibition with reservation of permission”, which had been practiced until then, to a controlled, labor market-oriented immigration policy was necessary.1 Unfortunately, with the labor market crisis that set in at the time, the political willingness to take an offensive approach dwindled occupy. The new immigration law for third-country nationals that came into force in 2005 provided for a large number of improvements, but still followed the guiding principle of limiting immigration

It was only with the relaxation of the labor market from 2006 onwards that the requirements for immigration were gradually eased. This was done with the aim of recruiting highly qualified specialists and thus had a focus on labor market management. However, Germany has suspended full freedom of movement for workers in relation to the Eastern and Central European countries that joined the European Union in 2004, as well as Romania and Bulgaria, for the maximum possible period of seven years. This decision illustrates that the defensive leitmotif of restricting immigration continues to play a major role. The freedom of movement for Croatians, which was suspended last year as part of the accession, points in the same direction.

The desire to limit immigration results, among other things, from the seemingly contradicting fears that immigrants might enter to take advantage of social benefits and that they would force locals out of the labor market. This is reflected in the current discussion, which is by no means limited to Germany, about the supposed or actual immigration of poverty from EU countries. It should therefore be questioned what fundamental effects immigration has on the labor market in the host country, what the situation is like in Germany and what control options are available in view of the great quantitative importance of immigration on the basis of freedom of movement.

Theoretical effects on the host country

In a simple theoretical model framework, immigration has a fundamentally positive effect on the domestic product of the receiving country. The effect is essentially based on the assumption that immigrants become gainfully employed in the host country and generate added value. This can at least be assumed for immigrants who emigrate for economic reasons, i.e. for people whose reason for emigration was a wage difference between home and destination country in the first place. The bill may be different for immigrants who immigrate for other reasons, e.g. because of political persecution in their home country.

The distributional effects of immigration are more controversial than the effect on the overall welfare of an economy. In a simple model of a homogeneous labor market with a fixed capital stock, the social product-increasing effect of immigration is initially based on a lowering of the wage level.3 If wages were fixed, immigration would result in higher unemployment and not higher employment. As a result of immigration, there is a redistribution from labor to capital, unless this effect is compensated by taxation. In the long term, on the other hand, it would be expected that the equilibrium wage would rise again through the adjustment of the capital stock

On the other hand, the question of whether a migration gain remains for the locals cannot be answered clearly. This can only be answered in the affirmative without reservation if an inelastic labor supply is assumed and therefore, by definition, domestic labor cannot be displaced. If this assumption is dropped, the migration gain depends on the degree of wage adjustment and employment gain on the one hand and the extent to which local workers are displaced on the other

Immigration is to be assessed differently again if the assumption of a homogeneous labor market is abandoned. For example, if the labor market is segmented between highly and low-skilled and the segments behave in a complementary manner to one another, the effect depends on the qualification structure of the immigrants in relation to the natives. If it is primarily highly qualified people who migrate in, wages in this segment fall and employment increases. Due to the complementarity, however, the demand for low-skilled workers increases as a result, 6 so that wages and employment rise in this segment - even if there were wage rigidities downwards.

Such a scenario would hardly be suitable for fueling reservations about immigration. In the segment of the highly qualified, there has been almost full employment for decades, regardless of all labor market crises7 and there are above-average earnings prospects.8 There is also another consideration: The theoretical models assume that the number of domestic providers of work remains constant and that immigration manifests itself as an additional labor supply. However, this hardly corresponds to the reality of a demographically shrinking labor market. In the last 20 years the number of 18- to 64-year-olds in Germany has already fallen by over 2 million, 9 in the next 20 years it will probably decrease by a further 10 million without immigration Cannot clearly determine the effects of immigration from a theoretical perspective. As is so often the case, it depends - primarily on labor market integration and the human capital endowment of immigrants.

Empirical Findings

The available empirical findings on the degree of labor market integration of immigrants are - like immigration itself - heterogeneous. On the one hand, it is undisputed that foreigners are more often unemployed than Germans. On the other hand, there are considerable differences between the nationalities. Most EU foreigners - including Romanians - are hardly more likely to be unemployed than Germans, 11 while nationals of the refugee countries of origin in the Near and Middle East are affected to an above-average extent.12 However, the unemployment statistics only differentiate according to nationality. However, it must be taken into account that citizenship and migration status are not necessarily congruent.

Since the migration statistics do not provide any information about the labor market integration or the human capital endowment of the immigrants, the only data source that remains is the analysis of personal surveys that - such as the microcensus or the Socio-Economic Panel (SOEP) - ask questions about immigration biographies. An evaluation of SOEP13 shows two things. Firstly, the employment rates of people who immigrated to Germany between 1997 and 2011 are hardly below those of the natives - regardless of whether the latter themselves have a migration background or not. Second, however, this observation is essentially due to the fact that immigrants have a more favorable age structure. If, on the other hand, one restricts the observation to the working-age population, then locals - especially those without a migration background - are much better integrated into the labor market than immigrants. Comparable findings result from evaluations of the microcensus, whereby this can be limited to the immigrants from the last few years due to the higher number of cases and differentiated according to further criteria. According to this, there are hardly any differences to natives, especially for immigrants from the EU, while third-country nationals are significantly less integrated into the labor market.14

Differences between immigrants and natives can also be seen when comparing the hourly wages achieved. Newly immigrated people - provided they are gainfully employed - earn significantly lower hourly wages than locals. The median gross wages of people without a migrant background are only reached after 20 to 25 years of residence. It goes faster if a comparison is made with locals with an indirect migration background. Here, new immigrants reach a comparable wage level after around 19 years (see Figure 7).

Figure 7
Real mean gross hourly wages of immigrants, 2002 to 2011

Source: SOEP v28; own calculations.

The human capital endowment of immigrants is just as heterogeneous as labor market integration. The proportion of new immigrants with an academic degree is considerably higher than that of the native population.15 The proportion of immigrants with academics has also increased in recent years, Which is, among other things, a consequence of the shift in the structure of origin of the newcomers: The importance of the EU countries increased, while fewer immigrants from third countries were counted. Even among immigrants from Bulgaria and Romania, the proportion of academics is no less than that among Germans.16 In this respect, immigration makes an important contribution to securing skilled workers. The prerequisite for the positive effects postulated by the theory to materialize, however, is that highly qualified immigrants also carry out corresponding activities. However, this cannot be consistently established for qualified new immigrants from the new EU member states. Only 56% of them have a qualified job, 17 which is possibly also due to the problem of the recognition of foreign qualifications.

In addition, among the new immigrants, the above-average proportion of academics is offset by an equally above-average proportion of low-skilled. The broad segment of the professionally qualified among local residents is significantly smaller among immigrants - which is not surprising given that in many countries there is no institutionalized vocational training comparable to that in Germany. It is therefore uncertain whether the welcome immigration of the highly qualified can compensate for the distributional effects of the immigration of the low-skilled. In the longer term, the demographic shrinkage will minimize the problematic effects of immigration. Immigrants are needed to compensate for the declining labor supply. In the short term, however, immigration control and integration policy are required.

Control options

The realization that the immigration of highly qualified people promises the greatest economic benefit for the host country has meanwhile established itself as a new model of immigration legislation. So far, however, the successes of this paradigm shift have been manageable. In 2012, only 13% of the immigration of third-country nationals recorded by the Central Register of Foreigners were accompanied by a residence permit for the purpose of gainful employment. The dominant purposes of immigration were study and family reasons.18 The majority of labor market-oriented immigration made use of the rather general residence permit under Section 18 of the Residence Act. In contrast, the residence permits created specifically for highly qualified people in accordance with §§19 and 20 do not yet play a significant role. Against this background, efforts are appropriate, on the one hand, to make the immigration opportunities under German law better known to a broad base of highly qualified people willing to immigrate and, on the other hand, to increase Germany's attractiveness as an immigration country through greater transparency and comprehensibility of the immigration rules.