Study: Immigrants Don’t Drain Public Coffers in Rich Countries

The World
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Aug. 28 2013 5:17 PM

Immigrants Don’t Drain Public Coffers After All

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German Chancellor Angela Merkel poses for a family picture with youths during the second youth integration summit on May 5, 2008 in Berlin.

Photo by Andreas Rentz/Getty Images

One major argument used by opponents of looser immigration laws is that immigrants—particularly low-skilled workers—will impose a fiscal burden on their new countries, taking advantage of rich countries’ generous welfare states while contributing little in taxes.

Joshua Keating Joshua Keating

Joshua Keating is a staff writer at Slate focusing on international affairs and writes the World blog. 

The Organization for Economic Cooperation and Development’s 2013 International Migration Outlook (via Michael Clemens) takes an in depth look at the fiscal impact of immigration on the 34 OECD member countries, finding “an overall fiscal impact in terms of GDP that is positive but small”:

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Depending on the assumptions made and the methodology used, estimates of the fiscal impact of immigration vary, although in most countries it tends to be very small in terms of GDP and is around zero on average across the OECD countries considered. The impact, whether positive or negative, rarely exceeds 0.5% of GDP in a given year.  

The following chart shows the net fiscal position of immigrant households in these countries, meaning their taxes and social security contributions minus the social transfers they receive:

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For the countries where the contribution is negative, the reports suggests this is because their “immigrant populations are relatively old and thus overrepresented among the population receiving pensions.” In the case of Ireland, the negative contribution applies to both immigrant and native-born households following the country’s economic crisis.

It is true that immigrant households tend to have a worse fiscal position than non-immigrant households, though the reverse is true in the crisis-ravaged countries of Italy, Greece, Spain, Portugal, and Ireland. Not surprisingly, “employment is the most important factor that weighs on migrants’ net fiscal contribution.”

In the end, the authors conclude that immigration is “neither a major burden nor a major panacea for the public purse.”

The OECD also reports that immigration to its members is rising overall, though still below pre-crisis levels, and highlights the eye-popping fact that “immigration accounted for 40 percent of total population growth in the OECD area over the period 2001‑2011.”