Refugee Crisis? The influx Godsend for EU Economies

The continent is rapidly ageing and, unless it takes lessons from the US in welcoming immigration, its growth will suffer

AT a dinner organised by a European think-tank during a conference in Milan, I was seated between a German policy wonk and a Polish economist. When I suggested to the German that the sudden influx of Syrian and African refugees was actually a lifeline thrown to a drowning Europe, especially Germany, he readily concurred. But the Pole, who overheard my comment, disagreed and railed against the dilution of culture and the migration’s economic and social costs. This somewhat surprised me because if there is anything that economists agree upon nowadays, it is that a youthful population is a prime requisite for sustained economic growth.

Time has been against Europe for a while. The continent is rapidly ageing. Like Japan, Europe too has entered the stage of very low demographic growth since the turn of the century and faces significant population decline during the first half of the 21st century. Its 0-15 years age group is already shrinking. It now faces declining working age populations, and, without immigration, the prospect of shrinking domestic labour forces.

In the near future, the majority of European Union member states will experience more deaths than births. And by 2050, the median age in EU will rise to 48 years. The size of the working age population (15-64 age group in 2005: 317 million) will start to decline after 2015, falling to 302 million in 2025 and to 261 million in 2050. In contrast to this, the United States will experience sustained population growth until 2050 and most likely throughout the 21st century. From now to 2050, the US will actually add over 80 million people and will have a population of about 450 million.

In Europe, it is estimated that by 2050, the number of people over 60 will have doubled to about 40% of the total population or 60% of the working age population. Its economic leaders Germany and France will have 41% and 38% people respectively above the age of 60 in 2050. Spain will probably be the worst off with 44%. Contrastingly, the US will have just about 20% in this cohort. Between 2000 and 2050, census data suggests, the 15-64 age group in the US is expected to grow 42%.

The important lesson for Europe from America is that it has largely remained unperturbed by the changes brought about by immigration. The American population almost quadrupled during the 20th century – at a growth rate of about 1.3% a year – from around 76 million in 1900 to 281 million in 2000. It reached the 200 million mark in 1968, and the 300 million mark on October 17, 2006. Population growth is fastest among minorities as a whole, and, according to Census Bureau estimates for 2012, 50.4% of American children under the age of 1 belonged to minority groups. By 2050, non-whites will be in majority in the US and there is expected to be little diminution in its world status and power.

Germany’s astuteness

The problem is even more acute in the “new Europe” of former Soviet Bloc countries. Here, due to a combination of low birthrates and migration to within the EU, huge drops are registering in population figures. In 1990 Bulgaria had about nine million citizens, making it slightly bigger than Sweden and Austria. Today, after its entry into the European Union, its population is 7.2 million, making it much smaller than Sweden or Austria. Projections indicate that it will lose 12% of its population by 2030 and 28% by 2050. Romania is expected to lose 22% of its population by 2050, followed by Ukraine (down 22%), Moldova (20%), Bosnia and Herzegovina (19%), Latvia (19%), Lithuania (17%), Serbia (17%), Croatia (16%) and Hungary (16%).

In 2005, the population of Europe was estimated to be 731 million, according to the United Nations, which was slightly more than one-ninth of the world’s population. A century ago, Europe had nearly a quarter of the world’s population. According to UN population projection, Europe’s population may fall to about 7% of world population by 2050, or about 653 million people.

It is this realisation that made the Germans, particularly Chancellor Angela Merkel, so readily accept to take in as many as a million refugees from Syria, Libya and elsewhere in Africa. It hopes that the refugees will augment the labour force and expand the market. The Germans have been deriving the advantages of migration from the early post-war years when a huge shortage of working age males forced it to seek Turkish migrant workers, then quaintly called “gastarbeiters” or “guest workers”. They were initially meant to be there for a short period, but now the gastarbeiters are an integral and essential part of the German economic machine that still largely powers Europe.

Old prejudices

The shortage of working age people in Europe, which begins in just a few years from now, will cost Europe dearly because of its unwillingness, rooted in old prejudices, to alter its immigration policies to attract better skilled workers and highly educated technology professionals. It would seem that some nations in “old Europe” like France and UK are not only reluctant to draw immigrants from Africa and Asia, but have reservations about immigrants from “new Europe”. Europe clearly needs to emulate the US in this regard. However, even if it does so, it is doubtful that Europe will ever acquire the cachet of the US to draw scientific and technological talent. A few years ago, the German government, in a bid to attract IT professionals from India, announced a migration-friendly policy. But there were few takers.

It is unlikely that Europe will hold much attraction to many other than those seeking the menial jobs immigrant communities in Europe are largely confined to. Europe has also largely showed itself to be incapable of re-inventing itself like the US into a politically correct and more egalitarian union, where people are “judged not by the colour of their skin but by the content of their character”.

How then could Europe compete with the US’s enormous soft power and aspiration value? Fareed Zakaria best described the crisis in the Euro zone:

“Europe’s core problem is a lack of growth. Italy’s economy has not grown for an entire decade. No debt restructuring will work if it stays stagnant for another decade. The fact is that Western economies – with high wages, generous middle-class subsidies and complex regulations and taxes – have become sclerotic. Now they face pressures from three fronts: demography (an aging population), technology (which has allowed companies to do much more with fewer people) and globalization (which has allowed manufacturing and services to locate across the world).” –Scroll.in

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