EU Science Hub

Improving labour market integration for migrants is essential for reaping the fiscal benefits of migration

Non-EU migrants could generate considerable fiscal gains for their host countries.
Non-EU migrants could generate considerable fiscal gains for their host countries.
Nov 09 2020

Policies targeted at increasing the labour market participation of non-EU migrants could generate large fiscal gains for the host countries.

Understanding the impact of migration on the public resources as well as the consequences of different policy options is important for ensuring the sustainability of the European welfare systems.

In a multi-disciplinary exercise combining fiscal modelling with demographic projections, JRC scientists compared the net fiscal contributions of migrants and native-born citizens, and estimated their evolution in the next 20 years.

The study confirms that there are large differences in the tax contributions by native-born citizens, EU migrants and non-EU migrants, and projects that in the future the contributions by the three groups will evolve in very different directions.

Native-born citizens projected to become net beneficiaries of social expenditure

At the moment, native-born citizens provide a higher net fiscal contribution to the government budgets than non-EU migrants.

This is a consequence of a higher average income, better labour market integration and lower unemployment among the natives.

However, this situation is bound to change in the future.

The report estimates that as the European population grows older and the needs for old age related resources increase, native-born citizens will become net beneficiaries of public expenditure by 2035.

The scientists calculated that native-born citizens would become bigger net beneficiaries of public expenditure than non-EU migrants, even if no measures are taken to facilitate labour market access by non-EU migrants.

EU migrants will continue to be big net contributors to government budgets

At the moment, the average fiscal contribution of an EU migrant is at the same level with a native-born citizen.

This means that on average, EU migrants pay more tax to their host governments than they receive in benefits.

The EU-migrant population is young and productive and their labour market integration and performance is similar to that of the native-born.

This is why EU migrants will continue to provide a large net contribution to the public budgets of their host counties, even without changes to fiscal policies.

If no measures are taken to improve the labour market integration of non-EU migrants, EU migrants will in the future be the only group providing a positive net contribution to government budgets.

Better labour market opportunities for non-EU migrants would lead to large fiscal gains

The study suggests that EU countries should offer better labour market opportunities to non-EU migrants in order to make the EU welfare system sustainable in the future.

At the moment, the level of fiscal contribution of non-EU migrants is below that of native-born residents.

Non-EU migrants tend to work in professions where they earn lower wages and fall into unemployment more easily than native-born citizens.

The scientists calculated that if the non-EU migrants were to have the same level of participation in the labour market as native-born citizens and EU migrants, they could generate considerable fiscal gains for their host countries.

This would help offset the burden created by the increasing pension costs generated by the ageing native population.

EU action to improve integration of migrants

The integration and inclusion of migrants is crucial to ensure that newcomers can reach their full potential when they come to Europe. This requires efforts from all sides – individuals, communities, businesses and policy-makers.

The responsibility for implementing integration policies lies primarily with the Member States. However, the EU has a variety of measures to support the Member States in their efforts to promote integration.

A new Action Plan on integration and inclusion will be presented in November. It will provide strategic guidance and set out concrete actions – including financial support – to foster the integration and inclusion of migrants in Europe.

Projected net fiscal contributions by immigrant status, EU baseline scenario 2015-2035
Projected net fiscal contributions by immigrant status, EU baseline scenario 2015-2035

©EC, 2020 - JRC elaboration with CEPAM-MIC on EU SILC-DATA