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EU states not 'welfare magnets' for poor workers

Markus Schreiber/Markus Schreiber/Associated Press

European nations, with their aging populations and declining birth rates, need an influx of new workers to support their cherished social welfare states, economists say.



And yet, there are fears that those same generous social systems will turn countries into 'welfare magnets' for poor, unskilled foreigners.



A number of studies have punched holes in this idea, the latest from researchers at IZA, the Institute for the Study of Labour, in Germany.

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"There's an impression out there that migrants come and they absorb all of our unemployment resources," said Corrado Giulietti, who co-authored the study with colleagues Martin Guzi, Martin Kahanec and Klaus Zimmermann.



"That's absolutely not the case."



Using data from the OECD and the World Bank, the researchers estimated the correlation between immigration flows and unemployment benefit spending as a fraction of GDP.



Their analysis of 19 European countries between 1993 and 2008 revealed no link between immigration and generosity of unemployment benefits.



"Migrants do not move to countries because the welfare benefits are high," said Giulietti. "They move for well-known reasons: because GDP is higher, because their social networks are strong, and because unemployment is lower."



If newcomers put a heavier burden on unemployment schemes, one would expect countries with high levels of immigration to push through more reforms, tightening eligibility requirements and the duration of benefits, he adds. But the study found no evidence that countries with high levels of immigration adopted more restrictive measures. If anything, these countries became more generous.



Further, unemployed immigrants, particularly from countries outside the European Union, collected benefits at a lower rate than unemployed natives, the study notes.

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"We know immigration can pose other problems for countries but from an economic viewpoint, immigration is positive," said Giulietti.



What's more, a looming demographics crisis suggests Europe needs immigrants more than ever. In 2010 there were 3.9 people of working age for every person aged 65 or older, according to Eurostat. In 2060 the ratio is expected to be 1.9 to one.



"If we want a sustainable economy and we want the welfare system to stay as it is then we need migrants because we need someone to pay the social contributions," said Giulietti. "The system is not going to be sustainable with the current demographic trends."



Economy Lab, winner of the 2011 Eppy Award for best business blog. Follow Economy Lab on twitter

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