Utilizing Europe’s Migrant Population

Since the start of the 21st century, the European Union (EU) has experienced a migrant problem. According to Eurostat, asylum applications from non-EU countries to members of the EU have steadily risen from 200,000 in 2008 to over 600,000 in 2014. Only a little under a half of these applications were approved in 2014, and these are just the documented numbers. The International Organization for Migration estimates that, as of Oct. 6, in 2015 alone about half a million migrants have entered the Mediterranean region by sea. The United Nations even predicts that from 2015 to 2050, net migration in a moderate scenario will account for 82 percent of population growth in these high-income European countries. With ongoing difficulties of integration and assimilation, the response by the public to this crisis has not been positive.

Is this wave of irregular migration simply a curse or a blessing in disguise? Historically, periods of unusually high immigration have also been periods of strong innovation and economic progress, especially in the United States. For example, the Industrial Revolution in the United States during the 19th century was a period of rapid increase in immigration. From 1850 to 1930, the population of foreign-born citizens in the United States increased from 2.2 million to 14.2 million according to the Census Bureau. This flow of immigrants into the labor force of the United States greatly influenced production in the United States. Expanding industries such as the railroad industry and the creation of the intercontinental railroad were largely driven by the extreme low cost of labor of immigrants. Likewise, at the beginning of the 20th century the steel industry expanded rapidly due to an availability of labor provided mostly by European immigrants. These two instances of economic growth demonstrate the meeting of demand for labor by supply through immigration.

The large influx of immigrants in the United States during the 20th century boosted the U.S. economy because there was a growing demand for labor amongst expanding industries such as the steel and railroad industry. Applying this reasoning to the movement of migrants into Europe, one needs to determine if there is a demand for labor in Europe to decide whether or not this migration could strengthen the economies of countries in the European Union. Eurostat’s statistics suggest that a demand for labor is currently opening up in Europe due to Europe’s age distributions. According to Eurostat, the median age of population in the European Union has increased steadily from 38 year old in 2001 to 42 years old in 2014. With an average retirement age of about 64 years old amongst the countries in the European Union, Eurostat estimates that in 2014, about 18.5 percent of the population in the European Union aged 64 years old and above is therefore retired; it also projects that that percentage will steadily increase to about 28.7 percent in 2080. Consequently, Eurostat also predicts that the age group of 15 to 64 years old, the labor force, as a percentage of the population will decrease from 65.9 percent to 56.2 percent by 2080. To meet hypothetical constant demand for labor in the future, countries in the European Union would presumably have to increase the retirement age. The integration of migrants can fill the potential gap in the labor force in the future. The Organization for Economic Co-operation and Development (OECD) stated that migrants accounted for 70 percent of the increase in the workforce in Europe from 2004 to 2014. With a native population steadily increasing in age, the migrant population is an economic opportunity for Europe to boost its declining labor force.

Figure 3. Projection of EU Population Structure by Age Group
Figure 1. Projection of EU Population Structure by Age Group

The greatest fear of this migration’s effect on the labor market in Europe is the idea that this sudden availability of cheap, foreign labor will either lower the wages or take the jobs of native workers through competition. Data gathered by the Institute for the Study of Labor (IZA) demonstrates this fear to be irrational. IZA research is unable to account for any significant correlation between migrant immigration and changes in native wages; whereby immigrants are not lowering the wages of native workers. Furthermore, there were no EU OECD nations that experienced a significantly negative effect of immigration on native employment. With the two key facts that immigration affects neither the wage of native workers nor their employment rate, integration of migrants into the labor force of Europe is likely uncorrelated to the position of native European workers already in the labor force.

Figure 2. Percentage effects of non-OECD immigrants on average native wages
Figure 2. Percentage effects of non-OECD immigrants on average native wages

 

Figure 3. Percentage effects of total immigration on employment of all natives
Figure 3. Percentage effects of total immigration on employment of all natives

The migrant problem in Europe is not necessarily a problem of invasion or a threat to the native population; it is a problem of resettlement, assimilation and human rights. If kept under control, these waves of migrant immigration could prove to benefit the economy of the EU at a time where, in terms of demographics, the nations are in their “darkest hours.”