The demographic transition is a phenomenon which has been experienced unequally across the developed and undeveloped world. Europe in particular is undergoing a significant period in terms of demographic change demonstrated by low fertility rates and rapidly ageing populations. Apart from the obvious and perhaps tongue-in-cheek answer which is simply to increase fertility rates, this is unlikely and would be ineffective in the near term. Alternatively, it has been suggested that Europe may counter the effects of its ageing populations by allowing more immigration, a fresh supply of workers to stimulate the economy and prevent an inevitable population decline. This paper will address the current demographic situation in Europe and the amount of immigration necessary to sustain current demographics. Additionally, we will address historical and expected trends in terms of the supply of immigration, and discuss some of the expected long term economic and demographic impacts?
Trends - The challenges of population ageing and demographic decline have
not been experienced equally throughout Europe. In France and England TFR's
registered approximatly1.7 (replacement is 2.1), however Germany Italy and
Russia have exceptionally low fertility rates of just 1.3. A recent UN survey
outlined several different scenarios for future European demographics as
well as the amount of annual immigration necessary to counter the effects
of population decline, "…demographic changes will profoundly affect
society and the economy, and will require adjustments that remain inadequately
appreciated and assessed." UN June 2000 The survey estimates that without
any new immigration, the overall population size will decline significantly
for many European countries, an estimated 57 million to 41 million in Italy,
and 147 million to around 121 million in Russia by the year 2050. The study
was broken down into five scenarios, but for the purposes of this paper
we will focus on three: immigration necessary to maintain overall population
size, annual immigration necessary to maintain the current workforce, and
finally the amount necessary to maintain the old-age dependency ratio. For
the EU as a whole, they would need to allow 47 million immigrants over the
next 50 years or 949 thousand annually to maintain overall population size.
This is largely because of an extreme case in Italy, which needs 18.5 million
immigrants to maintain the current working age population by 2050, and 2.26
million annually to maintain the support ratio. Similarly in Germany, the
UN estimate that over 24 million immigrants will maintain the working age
population and 3.5 million immigrants annually will be necessary to maintain
their current dependency ratio. That is more that 15 times the current rate
of immigration, and while numbers are staggering, there is still uncertainty
as to whether opening the borders is politically, socially, and perhaps
most importantly economically feasible. Immigrant stocks in the host country
would increase dramatically which will add to existing pressure on European
social welfare systems. Additionally, this begs the question, will Italy,
France, and Germany loose their national identity, do immigrants assimilate,
do they contribute to crime or delinquency? Questions which all help to
politicize an otherwise rational debate. In the US, UK and France, the necessary
level of future immigration to prevent population decline is relatively
small as compared to the past. On the other hand, Germany, Italy, Japan,
and Russia will require a much higher levels of immigration to help offset
or at least reduce the risk of an over-burdensome support ratio and a general
decline in economic productivity. But where will immigrants come from?
Supply of Immigration - For historical and geographical reasons, the largest
supply of migrants are expected to come from Central Europe and Africa.
Increased migration from Eastern Europe may be expected as the EU expands
to 27 members and attempt to reunite a Europe divided politically and economically
during the Cold war. Europe's colonial history coupled with its proximity
to Northern Africa makes France, Germany, and Spain, very attractive destination
counties in terms of their welfare benefits, language assimilation, and
overall increased economic opportunity. For this reason it is essential
to understand drivers of immigration by looking at historical trends of
mass migration, in this case from Europe to the United States in the late
19th century. Hatton and Williamson (2002) find that the biggest contributors
to mass migration are the decreasing cost of passage, the increase of family
resources or income, and the relative attractiveness of the destination
country in terms of wages and other social conditions. Historically in the
United States, the accumulation of previous migrants and a lagged migration
rate have a large positive influence on current and future migration patterns,
which may be attributed in large part to channels of migration and established
migration roots and networks. The authors note that there are many similarities
between Europe pre-industrialized Europe and modern-day Africa and historical
movements may be effective in determining future immigration trends from
Africa.
As mentioned earlier, rise in income in Africa will give potential migrants
both the means to immigrate and a strong incentive for doing so. Therefore,
one would expect the accumulative effect on immigration as migrant stock
abroad increases, which may not be offset by increased industrialization
and economic growth in African countries. The widening of the standard of
living gap and the greatest incentive, coupled with a small increase in
income (but not a significant enough to close in the gap) will be a major
driver in the future. Demographically, most migrants are young (historically
75% were between 16-40 to the US), single, and unskilled. These factors
are most important in determining the cost of the move and at maximizing
the potential benefit from migration. This may be exacerbated by the growing
number of young-working age people in Africa who will probably not have
much increasing opportunity at home, and will have the most to benefit from
migration. Additionally, immigration patters may be highly sensitive to
changes in African economy, political or social unrest, famine or other
natural disasters which have historically been huge drivers of immigration.
It is difficult to anticipate the economic impact of a large inflow of unskilled
or semi-skilled workers in economies which are undergoing a significant
transition process to the Euro, have high levels of unemployment, and have
fairly generous welfare states. While migration is necessary to supplement
a demographic decline in some countries, the demand for migrants is not
Euro wide, so it is difficult make sure new immigrant labor get to the right
countries and the right industries to maximize the benefit for migrants
and the host country. One shouldn't expect the same 'flood' of immigrants
characterized by mass migration because the US and Europe will not open
up borders freely, however the fundamental drivers of migration are likely
to be the same.
Demographic Effects - Because immigration is viewed as necessary by European
nations, and because there is no shortage of legal and illegal immigrants
from the developing world, the question arises: what will happen to European
demographics? Eli Berman and Zaur Rzakhanov (2000) provide an analysis of
historical immigration trends to Israel and expected trends in fertility
rates. Migration is viewed as an investment in human capital which is disproportionately
realized by the second generation and is based on the theory of inter-generation
altruism. Migrating families tend to have more children, "there is
a positive correlation between fertility rates and the decision to migrate..
" (Berman and Rzakhanov 2000) The two biggest effects are the treatment
effect and assimilation, and those who self-select and plan to have high
fertility. The study focused on migration of Jews from the Soviet Union
which presumably had a very high cost of migration, and compared fertility
rates to those who immigrated following the collapse of the U.S.S.R. and
had considerably lower costs of migration.
Their analysis suggests that high cost immigrants tend to have between .78
and .85 more children than low cost migrants, and do not assimilate in terms
of TFR's to the host population. Admittedly, the different groups may have
had differences in income, education, and customs (particularly contraception),
however these were not deemed significant enough to explain such a wide
gap. Study suggests that fertility rates of migrants is impacted in large
part by the cost of migration, (high vs. low cost) in terms of self-selection
and the availability of treatment. Studies indicate that intergeneration
altruism has an important impact both on immigration and on fertility rates,
yet overtime immigrants are expected to assimilate. The difference may be
offset by young immigrants who incur higher costs, may be less educated,
and are likely to have more children, verses those with lower migration
costs. Costs of migration may be reduced as mentioned earlier by reduction
in cost of passage, access to social networks, and increase in personal
income which all suggest that future generations will incur lower costs
of immigration, and are more likely to assimilate by having lower fertility
rates.
Should Europe Allow More Immigration? The economic literature suggests that
immigration is an essential part of alleviating pressure caused by ageing
populations. Ideally host countries will be able to off-set declines in
the working population, maintain or increase productivity, and be able to
support their elderly. The challenges however are significant both in terms
of assimilation economically, politically, but perhaps most importantly
socially by adjusting, accepting, and celebrating a diverse multiethnic
society. While the drivers of migration are unlikely to change in the near
future, attitudes may, and as European labor markets and welfare stretched
to extremes, they may find the answer. Should Europe Allow More Immigration,
do they really have a choice?
Berman, Eli; Rzakhanov, Zaur (2000), "Fertility, Migration, and Altruism",
National Bureau of Economic Research Working Paper: 7545 February
2000
Hatton, Timothy J.; Williamson, Jeffrey G. (2002), "Out of Africa?
Using the Past to Project African Emigration Pressure in the Future",
Review of International Economics v10, n3 (August 2002): 556-573
Population Council/ United Nations (2000), "The UN Population Division
on Replacement Migration", Population and Development Review,
June 2000, vol. 26, no. 2, p 413-418