Monday

21st Aug 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 and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  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.

Column / Brexit Briefing

The return of the chlorinated chicken

Britain has only just started on the path towards a post-Brexit trade deal with the US, but you can already see the same all-too-familiar disagreements.

Stop blaming Trump for Poland’s democratic crisis

If you were to judge events purely on the US media's headlines, you would be forgiven for wondering if the Polish government had anything to do with its recent controversial judicial reforms.

News in Brief

  1. Austria has begun checks at Italian border
  2. Slovenian PM: Brexit talks will take longer than expected
  3. Merkel backs diesel while report warns of economic harm
  4. UK to publish new Brexit papers this week
  5. Macedonia sacks top prosecutor over wiretap scandal
  6. ECB concerned stronger euro could derail economic recovery
  7. Mixed Irish reactions to post-Brexit border proposal
  8. European Union returns to 2 percent growth

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference

Stakeholders' Highlights

  1. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides
  2. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  3. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  4. Martens CentreWeeding Out Fake News: An Approach to Social Media Regulation
  5. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  6. Counter BalanceOut for Summer Ep. 1: How the EIB Sweeps a Development Fiasco Under the Rug
  7. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  8. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way
  9. European Friends of ArmeniaEuFoA Director and MEPs Comment on the Recent Conflict Escalation in Nagorno-Karabakh
  10. EU2017EEEstonian Presidency Kicks off Youth Programme With Coding Summer School
  11. EPSUEP Support for Corporate Tax Transparency Principle Unlikely to Pass Reality Check
  12. Counter BalanceEuropean Parliament Improves the External Investment Plan but Significant Challenges Ahead