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Germany Can Lead the Immigration Debate

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Chancellor Angela Merkel said Tuesday that the migration crisis was "unworthy of Europe" and her government announced that it would make it easier for Syrian refugees to remain in Germany. Her country will no longer enforce a European Union rule requiring the migrants to be returned to the country through which they first entered the EU -- usually Greece, Hungary or Italy. By taking a leading role in dealing with the flood of immigrants, Germany now has the motivation and the ability to conduct the kind of cool-headed cost and benefit analysis that should inform an intelligent immigration policy.

Immigration is an emotional issue everywhere. In the U.S., Donald Trump has taken the lead among Republican presidential candidates by calling for building a wall along the U.S.-Mexican border and the forced deportation of undocumented immigrants. By some estimates, these measures would cost at least $166 billion and no one, least of all Trump himself, can provide a credible assessment of the potential benefits. As my Bloomberg View colleague Marc Champion pointed out recently, the U.K. spends $790 million a year trying to determine if asylum seekers qualify for that status. That exceeds the amount the U.K. has earmarked for Syria-related aid this year. 

Although immigration excites negative feeling in Germany, too, Merkel and some other German politicians are taking a more sensible approach. Merkel wants to do what she can to help, and Finance Minister Wolfgang Schaeuble said Tuesday that the cost of accepting refugees would not ruin Germany; it just would force budget drafters to consider "other priorities." 

Germany's decision not to expel Syrian refugees isn't merely humane, it also is rational: The money spent on deportation would be wasted because bankrupt Greece, for example, wouldn't be able to resettle the deportees and many could wander back to Germany.

Furthermore, Germany expects 800,000 immigrants to arrive this year. Today, it has only a slightly smaller share of residents who are either immigrants or children of immigrants than the the U.S. -- 20 percent compared with with 24 percent -- and it's taking in far more asylum seekers per capita. As one of the world's new immigration hubs, it has the means to conduct the research required for a comprehensive, well-thought-out policy. 

The Hamburg Institute of International Economics's 2006 paper "The Costs and Benefits of European Immigration," which was commissioned by the Organization for Economic Cooperation and Development and partly funded by the European Union, could provide the building blocks for the debate. It calculates the effects of immigration, including the impact on wages, employment, labor market efficiency, demographics, public finances, trade, capital flows and economic growth.

This comprehensive approach makes sense. Attempts to study isolated aspects of immigration only feed the emotional responses. In 2013, the Center for Research and Analysis of Migration produced a paper on the fiscal effects of immigration to the U.K. It concluded that from 2001 to 2011, non-European newcomers paid 2 percent more in taxes than they claimed in benefits. It also asserted, however, that between 1995 and 2011, the net cost of immigration to the U.K. taxpayers was 95 billion pounds ($148 billion at today's exchange rate): the latter calculation took into account all immigrants, not just recent arrivals, and many of them are now drawing pensions and increasing their use of health care. So both proponents and opponents of immigration found fodder for their arguments, but the research couldn't serve as a basis for public policy because it was too narrow.

The Hamburg Institute's report avoided that trap by assembling research and theoretical models. Among other conclusions, it found that:

  • To maintain their working-age populations, the core 15 EU countries need 1.5 million immigrants a year. But Europe would need an influx of 700 million immigrants between 1995 and 2050 to maintain its ratio of working-age population to retirees, meaning immigrants cannot provide answers to the old continent's long-term demographic problem.
  • In Greece, Italy, Spain and the U.K., immigrants didn't push down wages or displace the native-born from jobs. In Germany, with a less flexible labor market, and Belgium, which has experienced large population inflows in the past, immigration had more of a negative effect.
  • In southern Europe and the U.K., immigrants tended to have a positive impact on public finances, though in Northern Europe they usually were a drain -- in part because of discrimination and poor access to schooling.

That was nine years ago, and these results probably don't hold up today. Since then, Germany has liberalized its labor market and the southern European countries have suffered an economic crisis that drove unemployment levels to previously unimaginable highs. Their large shadow economies can't absorb too many migrants. The EU has expanded to include countries in eastern Europe that have little experience of immigration. And the turmoil in the Middle East has caused a surge in immigrant inflows.

It's time to revisit the 2006 report. It can still serve as a framework, and its conclusions could still apply to new immigrants: Accelerate their integration into the labor force by giving them legal status and teaching them local languages as soon as possible, liberalize labor markets, and promote workforce mobility so that locals are less affected. 

It's Germany's job to organize the research effort, if only because it falls to Merkel to persuade other European leaders to follow her lead.

Putting together the the data would allow a reasoned political debate and make it possible for Europe to prepare a common response that includes a realistic quota system for asylum seekers. There are no good alternatives: Germany's top migration official, Manfred Schmitt, has mentioned the possibility of reintroducing border controls between EU countries to keep migrants bottled up in the countries they first enter. That would be going backwards.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net