“Migrants are to blame for everything. They receive too much social assistance, work little, do not want to integrate into society, and create hotbeds of social tension” – the worse the situation on the German labor market, the more popular such views become in society. However, the image of a foreigner living off the native population has little to do with reality, according to experts at the private German Research Institute for the Study of Labor Market Prospects (IZA). “We conducted a detailed study and compared the amount of tax and other payments made by migrants to the German budget with the amounts they receive as social transfers, including indirect ones. The results clearly show that foreigners contribute significantly more funds to the budget than they receive from it,” says IZA specialist Holger Bonin.
According to the IZA study, on average, each foreigner residing in Germany annually pays €7,400 to the country's budget and receives only €5,500. For Germans, these figures are €10,500 and €7,800 respectively. Thus, Germans get back about 73% of the amounts they paid into the budget in taxes and fees, while for foreigners the return rate is only slightly higher – 75%. “Our study debunks the main myth surrounding migration,” continues Holger Bonin. “The data clearly show that foreigners are not a subsidized social group; on the contrary, they are a solid pillar of our economy. Perhaps not as strong as Germans themselves, but at least the second most important. Without the money that foreigners working in Germany contribute to the German economy, both the pension system and the healthcare system would collapse.”
Across Different Statistical Categories
The main problem with the statistical accounting of migrants' contribution to the German economy lies in the ban on dual citizenship. In practice, this leads to the fact that successfully integrated immigrants from third world countries prefer to renounce their original citizenship in favor of German. Today, for every seven million foreigners living in Germany, there are eight million people who acquired German citizenship at an adult age. Those who acquire citizenship immediately fall into the statistical category "Germans," which significantly tarnishes the image of a foreigner living in Germany, according to IZA.
But even such statistics allow us to analyze the payments to the budget and the social transfers received back for German citizens and for foreigners. The structure of these payments differs significantly. For example, the amount of income tax paid by the average German is twice that of the average migrant, and a German pays four times more in property taxes. This is explained by the fact that most often migrants do not own property and their salaries are significantly below the national average.
Foreigners living in Germany also receive unemployment benefits much more often than Germans (according to the Federal Employment Agency, the unemployment rate among foreigners is 23%, twice the national average) and can count on state subsidies for language courses. On the other hand, migrants receive significantly less compensation for items such as health insurance, subsidies for higher education, or pension insurance (50%, 35%, and 30% respectively of the amounts received by Germans). They also pay more for daycare and receive less funding for caring for elderly family members.
Migrants at the Top, Migrants at the Bottom
Paradoxically, most foreigners are found among two social groups – low-skilled workers and members of the boards of directors of the country's largest companies. Every fourth member of the boards of directors of German corporations included in the top thirty of the DAX index is not a German citizen. Over the past two years, the internationalization process has accelerated – foreigners accounted for 42% of all new appointments to the boards of directors of corporations from the DAX-30 list.
The lack of a significant number of foreigners in the middle sector of the German economy is explained by the tightening of rules regulating labor migration, which has been ongoing for several years. First of all, the tightening affects those who are able to occupy middle niches in the labor market, such as programmers. “Just a few years ago, coming to work in Germany was a piece of cake for a programmer,” says Dmitry Titov, system administrator at the Frankfurt office of Gillette. “In fact, everyone who applied for a work visa got it immediately. And this applied to people from any country in the world, not only from Russia, but also from Bulgaria, Croatia, India, China. Now everything has become much more complicated.”
The new rules, introduced last year by the Office for Foreigners, require any company wishing to hire a foreigner to provide evidence that there are no German candidates for the position. The only exception is for positions with an annual salary exceeding €84,000, which is rare even for Germans themselves. That is why today foreigners are actively filling two polar niches in the labor market – either low-paid jobs that do not interest Germans, or the highest-paid positions that are not subject to the restrictions of migration legislation.
According to Martin Wansleben, CEO of the German Chamber of Commerce and Industry, such restrictions do more harm than good to the economy. 'The threshold of 84,000 euros is too high; it closes the door to the country for thousands of young promising specialists whose salaries at the beginning of their careers are usually significantly lower than the legal limit,' Wansleben said in an interview with the German magazine Capital. According to the economist, the salary threshold that allows companies to invite foreign specialists without additional permission from the migration office should be lowered to at least 60,000, or preferably 40,000 euros per year.
IZA experts agree with Wansleben's position. 'The main contribution of migrants to sustaining the German economy is their youth. The average age of Germans entering the labor market is very high, and the number of elderly Germans requiring medical and pension support is growing. Migrants, on the other hand, start working earlier. That is why they are so necessary for the country,' says Holger Bonin.
Foreigners Not Allowed Entry
Meanwhile, legislative restrictions are not the only problem facing foreigners who want to work in Germany. Many sectors of the economy are governed by very conservative unwritten rules, and 'outsiders' are not welcome here. 'I moved to Germany a year ago,' Tim Burton, an unemployed American lawyer, told Expert. 'I used to work at a law firm in London, and a year ago I met my future wife, a German, and moved to Frankfurt.' Tim was sure that in the banking capital of Germany he would easily find a job, but that turned out not to be the case. 'The German legal environment is extremely closed. Even companies that primarily work with English or American firms and have a whole staff of lawyers handling only those deals prefer to hire Germans rather than Americans or Brits. Here it is believed that the best lawyer is not a foreigner who worked many years at an English law firm, but a German professor who taught a course on English law at a German university,' Tim complains. After a year of job searching, he plans to return to London, but is not sure he can now expect his previous salary.
Burton's case is not unique. Many foreigners in Germany face additional difficulties in finding employment, regardless of their field. That is why the share of self-employed entrepreneurs among foreigners is higher than the national average – 5.3% versus 4.5%. On the other hand, foreigners themselves are more willing to hire their own kind – almost all migrant entrepreneurs who hire additional workers prefer their compatriots.
According to IZA calculations, over their lifetimes, foreigners currently in Germany will pay €82 billion more into the national budget than they will receive, even if the volume of social transfers does not decrease in the future. 'Of course, migration policy cannot be measured by money alone,' Holger Bonin sums up, 'but such a surplus will certainly not hurt the German economy.'