Careening towards extinction: Why developed economies cannot survive without immigrants

On another note, immigration appears to have helped mitigate the effects of the COVID-19 pandemic on Western economies. In November 2022, Jerome Powell, Chair of the Federal Reserve System, gave a speech claiming that the staffing gap in the U.S. economy would amount to 1.5 million job openings. As he argued, coronavirus had killed some 400,000 able-bodied people and undermined the health of hundreds of thousands more. Because of the coronavirus restrictions, the influx of migrants into the country had also fallen. However, only a few months later, Powell's fears were dispelled, as the U.S. labor market almost completely recovered.

Nobel Prize-winning economist Paul Krugman cites immigration as the primary factor in the rapid recovery: “Recent immigrants are overwhelmingly working-age adults; according to census data, 79% of foreign-born residents who arrived after 2010 are between the ages of 18 and 64, compared with only 61% for the population at large. So the immigration surge has probably been a significant contributor to the economy’s ability to continue rapid job growth without runaway inflation.”

That's in the short term, but what about the long run? Krugman continues:

“There the case for increased immigration is even stronger. If we define working age as running from 18 to 64, the overall U.S. old-age dependency ratio — calculated from the same census data — is 27.5%. For foreign-born residents who arrived after 2010, the ratio is only 5.8%. New immigrants pay into the system, but they won’t be drawing much in the way of benefits for many years to come. So the resurgence of immigration is, from an economic point of view, a good thing all around. And a rational political system, one that wasn’t being misled by false claims about immigration and crime, would welcome a sustained immigration revival.”

A similar trend could be seen in the EU, where the number of available jobs, which had surged after the pandemic in 2022, considerably dropped as immigration rose by 117%.

Cutting red tape as a way to add refugees to the workforce

Internal migrants in Europe find work more successfully than natives and show a higher employment rate. By contrast, newcomers from outside the EU are less involved in the work process and occupy mostly low-skilled positions. This happens because many of them are refugees, and therefore have worse starting positions. In Germany, for instance, a refugee's chances of finding a job during the first year of stay are close to zero, as they are not even allowed to work until their paperwork has been processed. In Finland, only 22% of refugees secure employment even after 10 years of stay. In Sweden, it takes refugees about 20 years to integrate into the economy to the same degree as other migrants.

The problem is not just the abundance of red tape, but also high refugee benefits. Thus, according to the Center for Migration Studies, refugees (primarily men) found work faster when their benefits were cut. This explains why France, Italy, Germany, and other European countries have decided to cut state benefits to those fleeing their home countries: it is being done in order to encourage them to find employment in the country of refuge.

In the U.S., the level of socio-economic security for newcomers is lower and the incentives to work are correspondingly greater. As a result, refugees catch up with other immigrants in employment rates after only two years, during which nearly 60% of them find jobs. Overall, 77.5% of America's migrants are employed, compared to 66.1% of natives. In Europe, the opposite is true: only 63% of immigrants work, while the employment rate among natives is 77%. However, the picture varies internally within the EU. In Croatia, for one, where migrants receive unusually low support by European standards, about 80% of all foreigners are employed, compared to 70% of locals.