Tuesday

28th Feb 2017

Opinion

Refugees will contribute to growth in Germany

  • Germany will benefit in the long term from accommodating and preparing refugees for the job market, says the Cologne Institute of Economic Research. (Photo: wikipedia)

Germany currently faces a big societal challenge in dealing with an enormous influx of refugees. The infrastructure – from administrative capacities to housing and education – is undergoing an involuntary stress test.

Economically speaking, the country would benefit in the long term from accommodating and preparing the refugees - mainly the youths - for the job market. Although this calls for significant public expenditure, the German government has a financial surplus and can so far afford it.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

More than one million refugees were registered in Germany in 2015 alone.

This is a significant surge compared with previous years, when there were only a little more than 120,000 asylum seekers in Germany, which at that time already posed a huge challenge for the German economy and society.

The public administration struggled to handle the situation appropriately as it attempted to balance legal requirements, such as proper registration, with urgent humanitarian relief, such as shelter, first aid or food.

At present, local and other authorities are dealing with even more substantial costs deriving from housing and supplies.

These costs run up to €1,000 per person per month. Costs for language and integration courses are also considerable. In 2015, the courses cost €1 billion and are expected to quintuple in 2016 and 2017.

Public expenditure

From an economic standpoint, this is actually good news - the public budget expenditure for the admission and integration of refugees create a cyclical upturn in the short term.

The state has allocated more than €20 billion above and beyond the planned budget.

The fiscal stimulus has generated additional demand and has affected the sustainability of public finances, while boosting economic growth in 2016 by 0.3 percent.

The additional funds are effective for several reasons, starting with the impact on real estate and education.

In 2017, the funding for social housing was increased by €800 million and the necessary German language and integration classes in schools will add more teachers and other staff.

Nearly one-fifth of Germany’s GDP growth over this year is related to government spending for refugees. Refugees contribute to higher domestic consumption rates as they enter the job market.

Of course there are risks and liabilities too, not least of which is the over-burdening of social systems.

Most of the newly arrived are unskilled and uneducated workers. The Cologne Institute for Economic Research estimates that in addition to this year’s €22 billion, the government will spend approximately €28 billion in 2017 for accommodation and integration – assuming that another 800,000 refugees arrive in 2016 and 500,000 in 2017.

It is important to recuperate these expenses sooner rather than later. But this depends on the amount of time needed to integrate refugees into the German labour market and the tax revenues they provide once they are gainfully employed.

German companies

The success rate will primarily be determined by language knowledge and the qualifications of potential workers. German companies and business play a decisive role by providing paths into the labour market, which include internships and training programmes.

There is a high demand for workers in manufacturing as well as in healthcare and nursing. Statistics show that historically many migrants have found jobs in the medical sector. Today, about 15 percent of the general practitioners for example in Germany are foreigners.

A survey by IW Consult among 900 German companies showed that 11% of the respondents, who at present do not employ refugees are willing to do so in the future. Among those already employing refugees, almost every other company will continue to do so in the future. This indicates that they had positive experiences with the integration process. But it will take some time for most refugees to get a regular job.

Not every refugee or asylum seeker will remain in Germany in the long term. Nevertheless, it is clear that with the current immigration, the share of the population of working age increases substantially.

This could not have come at a better time. Economists and demographers have been sounding the alarm bells for years, warning of a critical shortage of skilled workers for the German labour market due to demographic change and an ageing society.

Forecasts show that by 2050 there will be two senior citizens for every teenager in Germany. Social security systems would be hugely affected. Refugee immigration will not reverse this trend but at least slow it down.

The refugee situation is a stress test, not only for German society but also for its economy. However, the country has accrued a financial surplus in recent years.

Investing in the right infrastructure and managing integration properly will ultimately not only benefit refugees but can, in the long term, yield positive effects for the German labour market and the economy as a whole.

Dr. Tobias Hentze is a researcher and Sandra Parthie is head of the Brussels liaison office for the Cologne Institute of Economic Research.

Focus

Sweden must put refugee women into work, OECD says

The Organisation for Economic Co-operation and Development says Sweden is a model for integration of refugees, but says more should be done to address housing shortages and support those with low labour skills as well as unaccompanied minors.

Germany: Refugee crisis is like euro crisis

The migration crisis is like the euro crisis because the solution is for member states to cede more power to the EU, Germany’s defence minister has said.

EU cities want say on refugee policy

Overwhelmed by refugees and let down by national governments, European cities had to step in. Now they want more funding and a seat at the table on migration policy.

News in Brief

  1. Le Pen party in new EU fraud allegations
  2. May to end rights of EU nationals after Article 50 triggered
  3. Nato warns against Armenia-Azerbaijan 'escalation'
  4. EU: No military solution to Nagorno-Karabakh war
  5. EU adopts visa-free brake mechanism
  6. Trump and Brexit drew on same resources
  7. Romanian protestors form EU flag at anti-government rally
  8. Over 3,500 attacks on refugees in Germany: report

Stakeholders' Highlights

  1. UNICEFA Deadly Journey for Children: The Migration Route From North Africa to Europe
  2. International Partnership for Human RightsFreedom of Association and Expression Under Threat in Kazakhstan
  3. QS World MBA TourMeet with Leading International Business Schools in Brussels on March 6th
  4. EURORDISJoin Rare Disease Day and Help Advocate for More Research on Rare Diseases
  5. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  6. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  7. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  8. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  9. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  10. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  11. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  12. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen

Stakeholders' Highlights

  1. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  2. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  3. Centre Maurits CoppietersMinorities and Migrations
  4. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  5. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  6. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  7. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  8. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  9. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"
  10. CISPECloud Computing Leaders Establish Data Protection Standards to Protect Customer Data
  11. Malta EU 2017Landmark Deal Reached With European Parliament on Portability of Online Content
  12. Belgrade Security ForumBSF 2017: Building a Common Future in the Age of Uncertainty