Can labour migration solve the problem?

A much-cited report from the United Nations Population Division argued that Germany would require 3.6 million immigrants per year between 2000 and 2050 to retain current dependency rates.

But few commentators accept that this scale of immigration would be desirable, or even necessary. Instead, most German and OECD governments have considered that the first line of attack lies in reforms influencing domestic labour supply. These can take four major forms:

Encouraging higher participation rates, through welfare and social programmes that encourage people to (re-)enter the labour market. This includes providing better possibilities for mothers to work.
Encouraging later retirement, partly through improving the employment perspectives for older workers. - Education and training to ensure the labour force has the relevant qualifications to meet future labour demand and ensure innovation.
Encouraging better match of workers to jobs through promoting regional mobility, and providing incentives for unemployed people to take up jobs they would not otherwise have chosen.

However, there are limits to how far these reforms can meet labour demand. First, there is no certainty that such measures will have the intended impact on people´s employment decisions. For example, welfare and social policies and education reforms can at most change incentive structures – there is no guarantee that people will change their behaviour in the desired way. Second, most measures will involve a time lag before they take effect. Education reforms, for example, will only have an affect over 5-10 years. This is therefore no solution for immediate and pressing shortages. Third, some skills such as language, knowledge of foreign markets or cutting edge technologies used elsewhere may by definition only be provided by workers from abroad. Fourth, and importantly, attempts at projecting future shortages are unreliable. Many of the factors influencing future shortages, such as rapid technological change, are impossible to predict. This makes it very difficult for policy-makers to plan supply-side measures in detail, or to design policies for the medium to long-term.

By contrast, labour migration is a fairly rapid and efficient instrument for meeting shortages. Sectoral and occupational based recruitment programmes, or points systems , reliable and swift way of recruiting the needed labour. But there are of course drawbacks to relying on migration to fill labour gaps. Labour migration is likely to continue to raise public concerns, and will therefore be more politically controversial than many other policies to influence labour supply. One of the concerns often voiced about labour migration is that it may lead to competition with domestic workers for scarce jobs. Hopefully this brief has made it clear why this argument fundamentally misses the point: the right sort of immigration contributes substantially to economic growth and job creation. A second concern is that immigration can undermine socio-cultural cohesion, especially where migrants have problems integrating into the host society. While these concerns need to be taken seriously, problems with integration are less likely to occur where immigrants are well qualified and have good career prospects.

German policy makers are likely to opt for a combination of different reforms to address future labour gaps. Indeed, measures to promote better qualified workforce, to expand the participation rate and lengthen the working age, will probably remain the priority for any German government. But where these are insufficient, serious thought will need to be given to what sorts of migration programmes can help meet labour gaps, in a way that addresses public concerns about the impact of immigration. Labour migration is likely to emerge as an important means of retaining economic prosperity and sustaining social and welfare services in Germany.

CommentaryVolker Roßocha, German Trade Union Confederation, Section for Migration Policy

German companies recruit more than 300,000 mainly unskilled workers from abroad each year. The largest section of these work for only a few weeks or months as seasonal farm labourers or in restaurants and cafes. Foreign workers from overseas-based companies also come to Germany to carry out industry related services or dismantle whole factories which can then be sold abroad. The number of people involved in this type of work alone amounts to some 100,000 every year.

An immigration policy that focuses exclusively on current labour market needs is too short-sighted. It is also questionable whether such an approach can be justified in light of the 5 million unemployed in Germany. The present labour market situation is indeed characterised by "mismatch". To be sure, one element of this is that the skills and qualifications required by employers do not match those that currently exist in the labour force. But an additional problem has been the short-sightedness of managerial decisions. Gaining immediate benefits has often been given too high priority and, for example, the tendency to fill positions on a temporary basis has exacerbated already high unemployment among older and less-qualified workers. Moreover, recruiting foreign workers to meet immediate and pressing shortages implies that recruitment programmes can quickly lose their relevance. This was clearly illustrated by the programme set up to encourage the recruitment of qualified foreign workers in the IT sector. In this particular case there was an unanticipated crisis which led to demand for employees being drastically reduced. At the same time, Germany was not particularly attractive for qualified foreign workers because of the various restrictions on rights imposed in the framework of such a temporary programme.

An immigration policy that takes into account longer-term labour market trends can contribute to easing the effects of demographic change. The introduction of a Canadian style points system, which encourages the immigration of well qualified individuals along with their families, would be a positive step. Measures in line with this Canadian model have not yet been introduced, however, as a result of opposition from the Christian Democratic Union and Christian Social Union. Nonetheless, it is important to pursue this path further. The approach must also be part of a package of measures that expand domestic labour force participation. These measures could include: age and family friendly jobs, extension of crèches and all-day school, as well as more effective qualification and integration initiatives. A precondition for the implementation of socially and economically beneficial immigration is, and remains, the realisation of a political and social strategy to counter prejudice and exclusion as well as to promote acceptance and openness.

The opinion expressed here is of the author alone and does not necessarily correspond to that of the Policy Brief.

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