Immigration Helps Germany Win—and Not Just at the World Cup

Germany’s triumphant World Cup team included players of Polish, Turkish, African, and Arab descent, showcasing the country’s increasingly multi-ethnic complexion. What’s less well-known is that a record flood of immigrants is also giving a big boost to the German economy. Over the past five years, Germany has surpassed Britain to become Europe’s No. 1 immigration destination as foreign newcomers take jobs that otherwise would go begging.

Germany had a net influx of 437,000 people last year, mainly from other European Union nations, according to a report from economists at Deutsche Bank. The migrants are coming from troubled economies across Europe’s southern rim, as well as from Central and Eastern European nations that once sent workers to countries such as Spain.

The influx is good news for Germany, which has Europe’s oldest population and second-lowest birthrate after Monaco, making it harder and harder to fill jobs as workers retire. Even better for Germany, the new immigrants are well-educated. Some 29 percent of those aged 20 to 65 who have arrived over the past decade hold graduate degrees, according to the Deutsche Bank report, compared with an average 19 percent of native Germans with graduate degrees. And more than 10 percent have degrees in science, information technology, math, or engineering, compared with only 6 percent of the native population.

“These are key qualifications that Germany urgently needs to maintain its position as a production location,” the economists wrote.

The Deutsche Bank findings corroborate earlier research by the Organisation for Economic Co-operation and Development, which reported in May that 34 percent of immigrants arriving in Germany were highly educated, and that the employment rate among immigrants in Germany in 2012 was 69 percent, up from 66 percent five years earlier. The immigrants clearly aren’t taking jobs away from the locals, because Germany’s unemployment rate has been declining for several years. It’s now 5.1 percent, less than half the euro zone average of 11.6 percent.

In fact, Germany could use still more of these newcomers. A report by Ernst & Young earlier this year estimated that a shortage of qualified workers is costing small and midsize German companies some 31 billion euros ($43 billion) in annual revenues.

The German government adopted policies more than a decade ago to encourage immigration of skilled workers. But as recently as 2009, it had a net immigration outflow. That now has reversed sharply, with an immigration boom that “has been rarely observed in any major OECD country,” Thomas Liebig, an OECD economist, told Bloomberg News recently.

Before the start of the global financial crisis in 2007, “many citizens from Central and Eastern European EU countries migrated to Spain and other peripheral countries,” the Deutsche Bank economists wrote. Now those migrants are likely to head to Germany, while at the same time Germany is attracting workers from weakened euro zone economies who can’t find jobs at home. Greece, Ireland, Portugal, and Spain all have had net migration outflows for the past few years.

Germany’s immigration boom is a win-win situation, the Deutsche Bank economists said, acting as a “safety valve” for unemployment across the euro zone, while boosting German growth. They estimate that 10 percent of Germany’s economic growth over the past few years “can be attributed to an increase in employment of citizens from Greece, Ireland, Portugal, and Spain, and Eastern European partner countries.” About three-fourths of Germany’s immigrants come from Europe, with most of the remainder from Asia and Africa.

Britain, which experienced an immigration boom after the EU expanded into Central and Eastern Europe in 2004, now is seeing a second wave of arrivals. Some 602,500 foreign-born adults entered the country last year, about three-fourths from other EU countries, led by Poland. However, Britain’s net EU immigration—the number of EU immigrant arrivals minus the number of departures—was only 212,000, well below Germany’s.