Wave of refugees a major boost to German economy, society: Economists

The economists and public policy analysts who highlight the positive contribution the refugees an make to the German economy reject calls by other policymakers for introducing a special refugee tax or raising the pension age to cover the costs of the crisis.

“Such measures would be wrong and counterproductive, and would only help stoke unfounded fears in the population, that Germany can’t afford or manage these refugees, that they take money from us, steal our jobs and lower our wages,” Fratzscher said. He warned: “It’s clearly easier to gain political support at the moment by stoking fears.”

Fratzscher noted that some German economists and policy makers were uncomfortable highlighting the refugees’ positive contribution for fear of being criticized for treating the refugees issue as solely an economic issue, ignoring its political and cultural aspects.

“Few people dare to speak out on this issue, because it’s highly emotional and whatever you say you will get criticized,” he told the Guardian. “Until now the most prominent voices have been those that look exclusively at the government perspective, and focus on what the refugees cost now, which admittedly in the short term is enormous, rather than looking at what the refugees that come now provide to the country and the economy in the long run.”

Government economists estimate that each refugee costs the public purse about €12,000 a year until he or she begin to earn a living – if they are allowed to stay. The total cost to Germany so far this year of dealing with the wave of refugees has been about €10 billion, or about 0.3 percent of the country’s GDP.

Fratzscher says that these are costs the country can easily afford.

“Because we have a surplus in the federal, state and local budgets of about €15 billion this year, there’s enough money to bear those costs, and the same holds for next year,” Fratzscher said.

“Financially, the government is in an incredibly unique position to shoulder that burden.”

He noted that Germany’s coming demographic crisis, which would see the country’s working population shrink by around 4.5 million over the next decade unless a sufficient number of immigrants is allowed, offers great opportunities for new arrivals to be integrated into the workplace.

“There will be a lot more open positions. Companies are already looking for many skilled and unskilled workers and that problem is only set to intensify,” he said.

“The opportunity is for refugees to not only fill the gap, but as we know every person who finds a job and pays taxes makes a contribution to economic productivity and output. We will see that the benefits will outweigh the costs within five to ten years. This is not me being an optimist, I’m just looking wider than this myopic, short-term perspective, that in the long run, refugees will be a net gain for the economy.”

DIW says that the study based its calculations on one million refugees arriving this year, a similar number next year, and half a million each year until the end of 2018. It assumes that 40 percent of those will end up staying in Germany for twenty years or longer.

“But even if they go back after four years, we should not think it’s bad to invest in people’s integration, education and training,” Fratzscher said. “There will be those who go back sooner, but we also have many Germans who do that. Lots of German doctors train here and then go to Switzerland where the salaries are better, and many qualified people from other European countries have come here with a good training, which didn’t cost Germany anything, so it goes both ways.”

Fratzscher stressed the boost to the German economy from the building boom, which would result from the construction of new kindergartens, schools, and social housing, after years in which much German infrastructure had been neglected, with money put into social welfare spending instead.

“It’s a wake-up call for a fundamental shift in the thinking about our economy and our country,” Fratzscher said. “We need to recognize that we must invest now in our future and that it will pay off in 10, 20, or 30 years’ time,” he said.

— Read more in Marcel Fratzscher and Simon Junker, Integration von Flüchtlingen — eine langfristig lohnende Investition (DIW Wochenbericht Nr. 45, November 2015)