Migration has become a prominent political topic, often discussed for its potential fiscal impact but rarely supported by robust data. At the recent WeLaR webinar, we had the opportunity to explore the latest studies on how immigration affects public finances.
The webinar, organised by WeLaR partner ZEW on December 9, 2024, brought together 25 participants who explored various fiscal aspects of migration, including both direct and indirect contributions to state budgets, as well as differences between migrant groups and natives, such as age, education level, and country of origin.
Giacomo Boffi (Leiden University) presented a study he conducted with Eduard Suari-Andreu and Olaf van Vliet as part of the TransEuroWorkS project, which examines trends in the net fiscal positions (NFPs) of natives, intra-EU migrants, and extra-EU migrants from 2007 to 2018. The study found that all three groups had negative NFPs, but migrants showed a better recovery post-crisis compared to natives. Intra-EU migrants consistently made positive contributions to NFPs, while the contributions of extra-EU migrants were more mixed. Age (particularly prime working age) and education were key factors driving NFP differences. However, education had a minimal impact on extra-EU migrants, most probably due to challenges in recognising their qualifications.
Michael Christl (Joint Research Centre – EC and Universidad Loyola Andalucía) presented a study he co-authored with Hend Sallam, “Do Migrants Pay Their Way? A Net Fiscal Analysis for Germany.” The study aimed to determine whether migrants in Germany contribute positively or negatively to public finances, considering direct and indirect taxes as well as in-kind benefits like health and education. The authors were also interested in differences between natives, first-generation, and second-generation migrants. They found that migrants generally have a favourable net fiscal impact, with second-generation migrants contributing more positively than first-generation migrants, who, in turn, contribute more than natives. Demographic characteristics, especially age structure, play a significant role in fiscal contributions, with natives and second-generation migrants contributing more than first-generation migrants when individual characteristics are taken into account.
Holger Stichnoth (ZEW) presented the findings of the WeLaR paper, “The Fiscal Contribution of Immigrants in Germany”, co-authored with Alexandre Gnaedinger and Mats Le Floch. The study examines NFC of different migrant groups and natives to public finances in Germany in 2018. The authors found that, in 2018, the average NFC was positive for Germans and EU nationals, but negative for non-EU nationals. While the total NFC from all migrants (in billions of euros) is small relative to the overall budget and GDP, the study also found that NFC increases with education levels.
Dominik Sachs (University of St. Gallen) presented a paper co-authored with Mark Colas that investigates whether low-skilled immigrants are a fiscal burden on the U.S. budget, as is widely believed. The study examined the indirect fiscal effects, specifically how low-skilled immigration impacts native wages and labour supply. They found that the indirect fiscal benefits of low-skilled immigration are significant and positive, ranging from $770 to $2,100 annually per immigrant. These indirect benefits may outweigh the previously documented negative direct fiscal effects, challenging the common perception of low-skilled immigration as a fiscal burden.
