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The economic impact of migration on Europe

The recent surge in migration because of war, authoritarianism and instability means the displaced are seeking shelter as migrants, refugees or asylum seekers and creating a varying impact on the socioeconomic landscape of Europe and its states.

As some states fail to deliver security and safety to their citizens, a large number of people from those countries look to migrate to areas best suited to their social and economic interest. The displaced are seeking shelter as migrants, refugees or asylum seekers and are having a varying impact on the socioeconomic landscape of the European states. 

The migrants are seen by some to be overwhelming the exchequers of those European states which are not able to incorporate these new arrivals financially, resulting in short term tax burdens through high social costs and low employment rates. However, conversely, an argument can be put forward that the migrants are able to contribute constructively to fiscal benefits by entering the labour market and contributing to the public finances of such countries that are able to build capital structures in order to accommodate the increased labour supply.

How many have come to Europe?

According to official reports, almost 3.5 million people migrated to the EU in 2022 as refugees with asylum status. Around 4.2 million Ukrainians in 2023 received temporary protection in the EU, according to the European Council. Since the Russian invasion of Ukraine, more than four million Ukrainians have been given temporary protection in European states.

Maintaining their yearly record, the Syrians and Afghans continue to be the largest groups of asylum-seekers in the EU, with around 100,000 applications submitted in 2023, according to the European Union Agency for Asylum.

A total of 213,896 migrants reached Europe in 2022, according to the International Organisation for Migration. Migrants from several African countries such as Algeria and Libya have also been reported as looking for protection within Europe. 

Every European country has a different approach towards the massive displacement. 

After annual net migration hit a record of 745,000 in 2022, the British government announced plans to cut the number of migrants. Recently, France had a heated debate over the bill that apparently toughened the rules for the migrants. 

Germany, too, is seeking to revise its migration policy after it received the largest numbers of asylum application in 2023 and despite benefiting from the migrants in the labour sector. 

Italy has seen a surge in seaborne migrants and is now planning to build two centres in Albania to host up to 36,000 migrants per year. Spain will also need to have a rethink about the contours of its migration policy after receiving a record of 13,000 migrants because of political turmoil in Africa. 

Which countries need the most immigrants?

With the influx of so many migrants at the doorstep, many European countries are re-evaluating their migration policy to consider the political pressure and potential conflicts within their own people. However, when it comes to talking about increasing the output of fiscal domain, most European countries see the migrants as immigrants who have the ability to lift the economic stability of the country in the long term.

In the case of Germany, for example, the dwindling condition of the economy has led to the IMF prediction referring to Germany as the worst-performing major economy of 2023. The lack of skilled workers has led to experts estimating the country will need 1.5 million immigrants each year to maintain its labour force. Unlike most of other states, Germany has kept its policies flexible in order to attract the foreign labour.

What are the benefits?

With the fear of immigrants perceived by some as a threat to social cohesion and national identity, a paradigm shift has occurred in the past decade perceiving immigrants as assets to national labour markets and the welfare system, boosting the economic development.

The inclusion of migrants in sectors such as healthcare, construction, agriculture and logistics can lead to profiting output reducing the economic strain and distress. The migrants have the potential to contribute in the public finances in the form of taxes and reciprocating the benefits that they receive.

What are the challenges?

According to the Frontex report, the number of illegal border crossings at the EU’s external borders in 2023 reached approximately 380,000. This influx has led to cross border crimes such as document fraud, human trafficking, and the smuggling of illegal goods and weapons.

Programmes of integrating migrants such as cultural orientation programmes and language training sessions can be a strain on government budgets as the cost is initially carried by the host country.

The increase in migration can result in the high demand for the housing in the construction sector leading to higher property prices and rents. This cause and effect will not only influence the life of the migrant but will also have grave repercussions on the local residents.

In Europe, all the EU member states are characterised by a high degree of economic benefits, rule of law and political stability. In contrast, the populations of other countries around the world face some degree of authoritarianism and instability, leading them to opt for migration. 

These imbalances explain why Europe is, and will continue to be, a major destination for migrants, even in times of dormant economic growth.