How immigrants can help fuel growth even in times of crisis

New studies show importance of immigrants in the US and EU economic growth
By WPPilot (Own work) [CC BY 4.0 (], via Wikimedia Commons

This month world finance leaders huddled in Washington under the banner of IMF-World Bank Spring meetings.  Two challenges that were at the top of the discussion agenda for the meetings were the sluggish global economic recovery and the epic humanitarian catastrophe of migration with more than 60 million people currently struggling to survive after forced displacements.

Despite a range of measures adopted by the major Western economies, the world economic outlook remains tepid. Even record low oil prices and a glut of energy production have not fueled growth to desired levels.

The current IMF World Economic Outlook titled “Too Slow for Too Long puts the baseline projection for global growth in 2016 at a modest 3.2 percent – a 0.2 percentage point downward revision from the January 2016 update.

Although some economic recovery is projected  in 2017, uncertainty and weaker growth hang as risks because of vulnerabilities around the world such as the conflicts in Syria, Iraq and Libya; the breakdown of states on the African continent; and, ISILor Daesh terror. All in all, the world economic forecast is  relatively gloomy.

Yet in the midst of the gloomy economic predictions, a new analysis, “The Refugee Surge in Europe:  Economic Challenges,” provide a ray of hope.

The analysis reveals that over time migrants could actually help European economies stimulate their GDP growth.  After studying the data and the various dimensions of the refugee crisis in Europe, the authors of the analysis conclude that while the sudden surge in the number of migrants and asylum seekers strain economies, they also offer opportunities, especially with the arrival of skilled and talented people.

In the short term, the IMF analysis estimates that, “on a GDP-weighted basis, average budgetary expenses for asylum seekers in EU countries could increase by 0.05 and 0.1 percent of GDP in 2015 and 2016, respectively, compared to 2014.”

This increase in budgetary expense will be felt as follows by the nations expected to shoulder the burden for the increases in spending: Austria (at 0.08 and 0.23 percent of GDP); Finland (at 0.04 and 0.28 percent of GDP),; Sweden (at 0.2 and 0.7 percent of GDP); and ,Germany (at 0.12 and 0.27 percent of GDP).

These are substantial increases. But, in the long term, the authors of the analysis observe that “The net fiscal impact of migrants is mostly driven by their success in the labor market.”  They proceed to observe, “Immigration tends to be associated with a small overall positive contribution to the public finances, but the range of estimates is wide.”

These findings for the European Union countries correlate with those from around the globe.  Recent experiences of the countries with immigration shows that the success of immigrants depends on a number of variables such s the economic size, regional outlook, productivity, labor market, security challenges, and the extent of socio-economic integration of refugees.

As noted, the experience of the European nations has been a highly varied one.

Germany, for example, with an aging population will need millions of new workers to sustain its high economic growth rate and already has a higher share of foreign born population in the workforce than the United Kingdom.  Immigrants already make a substantial contribution to the German economy and will do more so in the future.

By contrast, France has struggled to integrate immigrants into the workforce. This condition will no doubt become even more problematic due to the recent terrorist events in France.

As one looks around the world, countries such as Canada and New Zealand have been relatively successful with coexistence between host populations and immigrants, despite ongoing international security challenges in the form violent extremism.

The United States, however, provides the best example of how a country that offers favorable conditions to highly skilled and educated immigrants, benefits economically.

A recent study by the National Foundation for American Policy revealed that  immigrants have started more than half (44 of 87) of America’s newest startup companies valued at $1 billion dollars or more, and are key members of management or product development teams in over 70 percent of these companies. Indians were the largest groups in new billion dollar startups with a count of 14 out of the 87 startups.

The performance of the US in terms of leveraging the immigration population and contributions to the economy can be attributed to a number of factors including:  the diversity of the American economy; policies of the Obama administration and favorable governmental regulations; and, a focus on entrepreneurs, innovators and specialists in an array of scientific and technological fields.

The IMF’s “Refugees in Europe” and the National Foundation for American Policy studies disclose that migrants can be a source for economic growth and development rather than a drag on the economy.  This will not happen by accident, however. National leaders will have to ensure that the right policies and practices are in place to produce positive outcomes from immigration.  Therein lies the rub.

BusinessEconomyGlobalizationImmigrationOpinionU.S.Washington D.C.

Frank Islam is an entrepreneur, investor and thought leader. His work and writings can be reached at
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