A Look at Migration to Europe – Does it Affect the Economy

A Quick View of the Numbers

It's one thing to say that Europe has witnessed an increase in migrant numbers, and it is another in entirety to show the patterns. Let's consider the changes in the migrant population over the years:

1990: 49 million.

2000: 56 million.

2010: 70 million.

2020: 87 million.

The entry into the 21st century saw a 7 million increase, followed by a 14 million increase towards the first part of the century. By 2020, the decade's growth rate had risen to 17 million, and statistics show that the region could be home to at least 100 million migrants by 2030. These unprecedented population changes have led to several debates regarding whether this works for the good of the region. So, what's the truth?

Analyzing the Economic Impacts of Migration

When people move from their countries and seek opportunities in other regions, they have both positive and negative effects in their new homes. Such is the case with Europe's migrants, who have affected the region as follows.

The Upsides

Migrants become part of their new countries and thus contribute to their growth in many ways, as follows:

Increased Labor

Europe attracts many people from non-EU countries who are eager to work in the region due to better wages and working conditions. Some of these workers are skilled while others are unskilled - they can fill the gaps in the labor market, thus providing several industries with the boost they need to be more productive. A 2022 study showed that at least 15% of the workers in OECD (Organization for Economic Co-operation and Development) countries were immigrants. In some countries, immigrants account for over 20% of the workers. Some countries boast higher migrant worker rates, e.g., Luxembourg had a 59% rate as of 2022.

More Revenue

Migrant workers contribute to the economy in several ways. First, they are integral to the industries where they work, e.g., those providing skilled labor in construction. Secondly, they pay taxes and contribute to social security, thus enabling governments to meet their financial targets and provide infrastructure in different regions. This effect is especially apparent in this digital age, where highly skilled migrants can occupy top positions in their professions, thus contributing greatly to the economy. Fiscal contribution often correlates with the number of migrant workers. For example, the UK has a 1.2 migrant net fiscal impact, while Luxembourg shows a 5.2 rate. In the long term, migrants positively impact a country's GDP and can help a country better its financial position.

Migrants also create more jobs by operating businesses and fostering innovation in their host countries.

The Downsides

While migrants add a unique economic perspective and can fill gaps resulting from aging or small populations, they present some challenges that governments must consider:

Added Financial Strain.

Migrants have all sorts of skills - some are skilled, others are semi-skilled, and others are unskilled. As such, they can fit different areas of the economy and can thus introduce competition in job markets where the positions are few. Take the example of low-skilled jobs. Since most migrants (including the skilled) can qualify for these jobs, they tend to attract a lot of competition, which can disadvantage citizens in the host nation.

Increased Competition for Jobs

On the one hand, migrants boost existing industries and contribute to the GDP. On the other hand, some migrants (such as refugees) pose a financial responsibility that host countries must meet. This increased spending tasks the government and can result in strain in the short term. This strain is not just on the government but on citizens, too, as it extends to public resources. Citizens often face challenges when accessing healthcare, education, and other services migrants need. As such, these social costs can be a burden to all.

Housing Market Effects

Increasing migrant numbers put a strain on the housing markets in many ways. First, they increase demand for housing, which makes it harder for citizens to have a wide range of options. Second, the increased demand results in higher housing prices and rents. This effect is especially common in urban areas, as this is where most migrants prefer due to proximity to work opportunities. For example, Germany has witnessed an increase in house prices and rents in the last few years due to migrant workers.

Conclusion

Europe has many pull factors that attract migrants from all over the world. Predictions show that by 2030, this region could be home to a hundred million migrants. This growth comes with an increased labor market, higher revenues, and GDP improvements. However, on the downside, it results in housing pressure, a strain on public resources, and job competition in the long term. Since the positives outweigh the negative effects, governments must seek policies to adjust to this growing population so it can contribute positively to their economies.