Wednesday

13th Dec 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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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.

Iceland: further from EU membership than ever

With fewer pro-EU MPs in the Iceland parliament than ever before, any plans to resume 'candidate' membership of the bloc are likely to remain on ice, as the country prioritises national sovereignty and a more left-wing path.

News in Brief

  1. EU bank delays gas pipeline decision
  2. Hungary's leftwing parties join Jobbik in anti-Orban protest
  3. Barnier: EU will not accept UK backtracking on Brexit deal
  4. Puigdemont to return to Catalonia if elected
  5. Commission approves EasyJet partial takeover of Air Berlin
  6. EU medical command centre due next year
  7. Auditors: EU 'green' farm payments fail ecology criteria
  8. Austria gas explosion creates Italian energy 'emergency'

Stakeholders' Highlights

  1. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  2. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  3. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  4. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  5. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  6. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  7. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  8. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  9. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  10. EPSUEU Blacklist of Tax Havens Is a Sham
  11. EU2017EERole of Culture in Building Cohesive Societies in Europe
  12. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage

Latest News

  1. Last chance for Poland to return property to its rightful owners
  2. Commission attacks Tusk on 'anti-European' migrant plan
  3. Volkswagen tells EU: we will fail on our recall promise
  4. EU will not start Brexit future talks before March
  5. Bitcoin risky but 'limited phenomenon', says EU
  6. Panama Papers - start of sensible revolution in EU tax affairs?
  7. Lebanon crisis overshadows EU aid for Syrian refugees
  8. New Polish PM brings same old government

Stakeholders' Highlights

  1. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  2. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  3. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  4. Bio-Based IndustriesRegistration for BBI JU Stakeholder Forum about to close. Last chance to register!
  5. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  6. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  7. EU2017EEEAS Calls for Eastern Partnership Countries to Enter EU Market Through Estonia
  8. Dialogue PlatformThe Turkey I No Longer Know
  9. World Vision7 Million Children at Risk in the DRC: Donor Meeting to Focus on Saving More Lives
  10. EPSU-Eurelectric-IndustriAllElectricity European Social Partners Stand up for Just Energy Transition
  11. European Friends of ArmeniaSignature of CEPA Marks a Fresh Start for EU-Armenia Relations
  12. Nordic Council of MinistersNordic Energy Ministers Pledge to Work More Closely at Nordic and EU Level