"The welfare state will inevitably suffer from free immigration. This may affect the poorest sections of the native population. The government faces a difficult political decision," said Ifo President, Professor of Economics Hans-Werner Sinn. According to him, calculations by experts at the institute he heads show that integrating refugees will cost the German government 21 billion euros this year alone.
"The government must avoid new debt to finance these expenses," warned Professor Sinn. "We should proceed from the current budget. We have no surplus now; the 2016 budget is set at a 'black zero' ('black zero' is what German economists call a deficit-free budget. – Author's note). It would be right if we tightened our belts a little now. Otherwise, this burden will fall on future generations. We must integrate the refugees in any case, even at the cost of a budget deficit, which will have to be made up by raising the retirement age and cutting subsidies: the state will simply be forced to reduce spending."
Professor Sinn has no doubt about the need to integrate refugees: "Many refugees have no education and do not speak German. And while they may somehow master the spoken language, it will be more difficult for them to master the alphabet in the unfamiliar Latin script. Many of them are completely illiterate. For example, among Afghans the illiteracy rate is very high. In Syria, 65% of the population cannot pass even the lowest level PISA test. Among refugees from Syria, there are educated people, but almost half of the refugees living in reception centers in Turkey lack the minimum skills needed to adapt to modern European society. This is one of the difficulties of their integration."
The process of refugees entering the labor market can ease the task, Professor Sinn believes. "Through work, they will learn German faster, and most importantly, they will start earning money, which will at least partially relieve the burden on our welfare state," noted the Ifo president. "Moreover, their employment will prevent the emergence of parallel societies. But there are problems here too. One of them is the increasingly frequent demands to abolish the minimum wage for refugees. The argument is that this would allow them to find jobs faster. But abolishing the minimum wage for refugees would hit the native population and deprive them of jobs."
Taking the opportunity, Professor Sinn commented on Federal Minister of Labor Andrea Nahles, who is planning reforms such as strengthening the labor rights of contract and temporary workers: "Anyone who says such things does not understand the market economy," the Ifo president declared with Roman bluntness. "Frau Nahles is advocating for higher service costs, which will inevitably lead to job losses. The welfare state should not make salary distribution its policy; its task is to conduct appropriate tax and transfer policy (in this context, transfer policy refers to financial aid from the federal budget to state budgets. – Author's note). Simply put, take from the rich and give to the poor."
In conclusion, Hans-Werner Sinn offered another piece of news: "We have limited our forecast to 2016, while the euro and oil prices are relatively low. We have not made calculations for a longer period now. But according to classical estimates of total costs based on the so-called generational balance, it unequivocally turns out that integrating one million refugees will require between 79 and 450 billion euros, depending on how well or poorly their integration program is implemented."