Integration key to reaping benefits of migration, say economists

Financial Times Financial Times

Migrants’ arrival could help Europe tackle ageing populations

yesterday

The arrival of more than a million migrants in 2015 could help solve one of the biggest economic challenges facing the eurozone, so long as leaders manage to overcome the political risks associated with the unsuccessful integration of settlers, according to a Financial Times poll of economists.

Most migrants came to the region’s largest economy, Germany, where Chancellor Angela Merkel introduced an open-door policy to refugees arriving from war-torn Syria.

Several of the 33 economists asked thought that their arrival could help Europe tackle the crisis of ageing populations. Tom Rogers, economic adviser to EY Eurozone Forecast at the financial services firm EY, said: “Migration into the eurozone on this scale is clearly a major logistical challenge. But it also offers an opportunity for countries with the greatest demographic challenges, in particular Germany, to add to their working age population.”

Germany’s ageing society is threatening its economic success: what remains one of the region’s strongest economies is expected to be short of 1.8m skilled workers by 2020, with that number potentially hitting close to 4m by 2060.

Mr Rogers added: “The sooner the support mechanisms such as accommodation, language training and social services are put in place, the sooner that the economic benefits of migration can be felt.”

Philippe Legrain, senior visiting fellow at the London School of Economics’ European Institute, said: “Welcoming refugees is an investment that can pay dividends as soon as they start working. With demand [in the eurozone economy] depressed, additional spending on refugees acts like a small fiscal stimulus. Looking forward, refugees boost the labour supply, and hence growth.”

The economic benefits of migration could, however, be derailed by a rise in support for anti-establishment parties of the far right. Some respondents flagged mis-steps in the response in Brussels, which they feared could fan support for anti-immigration politicians.

Nick Matthews, an economist at Nomura, said: “As European leaders continue to search for comprehensive solutions, these have the potential to interact with domestic political trends, with increasing risks to established centrist parties across the EU from any perceptions of a ‘mishandling’ of the crisis.”