The Economic Argument for Admitting Refugees in Germany

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800,000 refugees from the Middle East are projected to apply for asylum by the end of 2015 – double the number that German officials had estimated as recently as July. This influx is not without its consequences: Angela Merkel’s decision to open up Germany’s borders will cost the nation between nine and 10.5 billion euros this year. As a result Merkel—once practically unassailable in Germany—has seen her approval ratings drop to their lowest levels in four years. But the German business system and its demographic situation put the country in a position to benefit from the influx of migrants.

Having weathered the global financial crash and the Euro Crisis better than any of its EU partners, Germany faces a problem that should make the rest of the EU envious – a labor shortage. Germany’s unemployment rate stands at 4.5%, compared to a 7.9% long-term average. Even so, there are currently 600,000 unfilled jobs and apprenticeships in the country.

Of course, opponents of immigration argue that vacant jobs do not mean immigrants will find work. It is true that many refugees have little education or marketable skills. But because Germany has made access to higher education so affordable to its native population, many of these vacancies are for jobs that do not require a degree. Further, Germany already has one of the best apprenticeships systems in the world. These programs combine classroom education with work experience to provide trainees with all necessary skills and have been a large contributor to the success of Germany’s famed mid-size Mittelstand manufacturing companies. They are also one of the reasons that in 2012, the 6.6 million people with a foreign passport living in Germany paid, on average, $4,127 more in taxes and social security than they received in social benefits.

The biggest barrier to matching immigrants with jobs and apprenticeships is language. Before learning German in a government integration course, a migrant must have proper residency status, which is partly determined by employment status. Even though asylum-seekers can receive support from job centers, most do not have access to these integration courses without a job, which is difficult without language skills. German government will have to revise legislation and expand language classes to ensure that migrants are able to lead productive lives.

There is a long-term economic argument for immigration as well. Among developed nations, Germany faces demographic issues second only to Japan. The average age in Germany is 46 (the second highest in the world) and the fertility rate is 1.4 children per woman – the replacement rate is 2. Last year, Angela Merkel cut the retirement age for many workers by two years and boosted pensions for non-working parents, even though the country’s current labor force is projected to shrink 12 percent in 15 years. , Of course, the recent influx of migrants won’t last forever, and thus cannot wholly reverse this trend. But given that so many asylum-seekers are under 25 and are likely to find gainful employment (with some help from the German government), it would be foolish to turn them away.

After all, these demographic challenges have broader implications for Germany on the world stage. The nation’s two biggest EU partners, France and Britain, are expected to see their populations grow. By 2050, Germany may no longer have the continent’s largest economy or have the largest population, and will not be able to control EU policy as tightly as they do now.

Turning refugees away would have been a poor economic decision.


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