Migrant Miracle

Germany Opens the Door

A potential win-win situation: immigrants in Germany. Source Caro / Ponizak
A potential win-win situation: immigrants in Germany. Source Caro / Ponizak
  • Why it matters

    Why it matters

    Without immigration, Germany will face a labor shortage and aging population, denting economic growth and hurting state finances.

  • Facts

    Facts

    • Germany is now the most popular destination for migrants worldwide after the United States.
    • The 6.6 million non-Germans in Germany contributed to a welfare surplus of €22 billion in 2012.
    • Without more immigrants, the German population will shrink by 20 million by 2060.
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    Audio

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Mehmet Tanriverdi’s story is the typical German dream. He came to Germany from Turkey when he was 18 and founded not one, but two companies here. His own translation firm financed his degree in electrical engineering.

Now, at 52, he is prospering with two companies: Translate4you, which employs 70 freelancers, and Meta Bearings Distribution in Gießen, which supplies rolling contact and ball bearings for the automotive industry.

“When you’re founding a company, it doesn’t make a difference whether you’re an immigrant or not,” he said in perfect German. “My name didn’t matter.”

Germany is now the second-most popular destination for migrants worldwide after the United States.

Mr. Tanriverdi now has a German passport. He is married to a Greek woman, who is a teacher. Their sons are both studying, one industrial engineering in Germany, the other one at a medical school in Bulgaria. “We are Europeans,” Mr. Tanriverdi said, proudly.

It has only been 15 years since conservative politicians such as Roland Koch in Hesse and Jürgen Rüttgers in North Rhine-Westfalia rallied voters by fueling fears of immigration. Today, Germany has changed beyond recognition.

The country is now the second-most popular destination for migrants worldwide after the United States. It is also coming to terms with a role that is familiar for other industrialized states but had been rejected here for a long time: That of a destination country for immigrants.

“Integration isn’t a one-way street,” Chancellor Angela Merkel said last week, referring to a German society that has to be more open and welcoming.

Recently two studies with surprising results were released. First, the OECD reported that the increase in foreigners coming to Germany was higher than in any other European country.

Preliminary figures put the number of people permanently moving to Germany at 465,000 in 2013 – twice as much as 2007. The German share in permanent European migration has risen from less than 9 percent to 35 percent since 2007.

Immigrants immigration Source OECD 2012

Second, the Bertelsmann Foundation and the economic research institute ZEW showed that foreigners living in Germany pay considerably more into state coffers than they receive in social security benefits.

The 6.6 million people without a German passport brought the social security system a surplus of €22 billion ($27.3 billion) in 2012 alone. Every foreign resident on average pays €3,300 more in taxes and social security contributions than they receive in public transfers, the study concluded.

The study also found that 56 percent of all new arrivals have a job, 36 percent of which require high-level qualifications. Even less-educated immigrants are employed more frequently than those born in Germany with a similar education level.

This could be related to German asylum laws. They make sure that people who come to live here permanently do so less and less for humanitarian reasons but increasingly to be reunited with their families or because they have been offered a job.

In both these cases, new immigrants to Germany will have a support network and source of income which means they will be less reliant on the state.

These studies have given politicians and economists an early Christmas present: Germany might have found a way to counter the risks of the “demographic change,” the increasing aging of society.

Germany definitely needs more people.

 

Southern European immigrants 1960 Sz Photo
In the 1960s, thousands of immigrants from southern Europe reached Germany through Munich, looking to be part of the German economic miracle. Source: SZ Photo

 

The first post-war German chancellor built up a retirement system in which the younger, employed generation pays for retirees to enjoy their old age.

His belief was that “People will always have children,” but this has proved not be too true.

In Germany, the ratio of births relative to the population size is lower than in most other industrialized nations; only Japan fares even worse. A German woman has an average of 1.38 children.

By 2060, the German population will shrink by 20 million, according to forecasts by the Federal Statistics Office. Even assuming a yearly net immigration of 200,000 people, it will still contract by 12 million to just under 70 million by then. Only the number of pensioners will grow, both in absolute and relative terms.

The German labor force currently comprises 50 million people. But this number is bound to plummet and the statistics office estimates it will hit 40 million by 2030.

In 2010, for every 100 persons between 20 and 65 years old Germany counted 34 people above 65 years of age. This is called the “old-age dependency ratio” and shows how many people of working age share the financial burden of providing for the old in retirement. By  2060, this ratio is expected to change to 67 old persons for every 100 working-aged people.

This demographic shift will increase the pressure on German budgets.

Popular Germany-01 immigration

Age-dependent spending on pensions, health and nursing in particular are expected to rise. Revenues, on the other hand, will grow more slowly in comparison. Without any policy changes, the government would be spending considerably more than it collects in the long term.

Germany’s current workforce generated almost €1.2 trillion in wages and salaries this year. Thanks to a progressive income tax, an aggregate wage increase of 1 percent causes an almost 2 percent rise in income tax revenues.

Rising salaries also mean more consumption – which prompts an increase in value-added tax. Those two taxes alone account for almost two thirds of all state revenues. As the workforce ages and retires, these two revenue streams shrink.

An aging society directly affects an economy’s capacity to grow. “The aging does not only reduce the number of employees, but also the number of entrepreneurs,” said Hans-Werner Sinn, head of the Ifo economics research institute in Munich. New companies that create jobs are usually founded by younger people.

 

Kirsten Krumrey is a Handelsblatt editor in Düsseldorf. Jens Münchrath leads Handelsblatt’s coverage of economics and monetary policy. Axel Schrinner writes about tax and finance policy for Handelsblatt. Peter Thelen is a political correspondent in Berlin, focusing on social security systems and the job market. To contact the authors: krumrey@handelsblatt.com; muenchrath@handelsblatt.com; schrinner@handelsblatt.com; thelen@handelsblatt.com

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