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Since the Arab Spring, a pro-democracy movement that spread in the Middle East from around 2010, there has been a sharp influx of refugees and immigrants into Europe. In response to the immigration crisis of the past few years, the European Union (EU) has taken the lead in asking member states to share the burden of accepting refugees, but there are mixed opinions, including an intensifying opposition movement, and confusion is occurring in various countries.

One of the reasons cited by many people who are opposed to accepting refugees is that "refugees and immigrants will take jobs and wages will fall." This is probably a common image that is held by many people.

However, economic research has shown that this is not necessarily the case. A report released by the International Monetary Fund (IMF) at the World Economic Forum Annual Meeting (Davos Conference) in January 2016 also showed that refugees entering the EU are likely to have the effect of boosting economic growth in the short term, and that there is little evidence that refugees take jobs and lower wages (※ 1). The issues of refugees and immigrants are complex and require comprehensive discussion from various perspectives, but this time I would like to discuss "immigration" to developed countries from the perspective of economics.

So, how does accepting immigrants affect the economy? Let us look at the results of empirical research, focusing on three areas: the labor market, finances, and economic growth.

*1 The Wall Street Journal, Japanese edition, January 21, 2016

The first thing to look at is the impact on the labor market. 2 There are points, 1 The first point is that even if we accept immigrants, This means that on average, wages for working people will not fall that much. 2 Points teeth, IT New and growing industries such as the Second, immigration plays an important role. So why is the decline in wages, which many people fear, not happening very often? Let's consider these two points together to see why.

The key word here is "segregation of the labor market." A recent trend among immigrants is that many of them are relatively highly educated. This trend is particularly evident in immigrants from China and India to the United States, who tend to work in STEM (Science, Technology, Engineering, Mathematics)-related professions and are active in IT companies and the financial industry. In workplaces and growth industries where these types of people find employment, even if labor demand increases, domestic workers alone may not be able to secure the necessary number of workers. If immigrants fill the labor shortage, they will not be competing with domestic workers.

On the other hand, if immigrants take up jobs in occupations or industrial production sites that domestic people are not particularly keen on, they will not compete with domestic workers. Since more people will be working in places where there was a labor shortage despite there being demand to begin with, it is unlikely that a large number of domestic workers will lose their jobs, and there will be little impact on wages.

This means that an increase in immigrant workers in these industries will have little impact on the wages of domestic workers in other occupations.

Note: Data is from around 2000.
Source: OECD “Database on Immigrants in OECD Countries (DIOC)”.
Source: Ministry of Economy, Trade and Industry, "White Paper on International Trade 2008," Chapter 2, Section 1, Figure 2-1-21, "Proportion of university graduates by time of immigration"

Next, there is the impact on finances. In developed countries that have accepted immigrants, it has been pointed out that immigration can have a negative impact on finances. The argument is that immigrants pay low taxes but incur large social security costs such as for medical care and welfare, which increases the financial burden on the country as a whole. However, empirical research has shown that this argument may not necessarily be correct.

The immigrants imagined in this argument are mainly people with low education. It is true that such people pay low taxes. However, some research has shown that there is no significant difference in social security spending when comparing low-income immigrants with low-income domestic workers. In other words, the rise in social security spending can be explained by the influence of "low income" rather than "immigrant status." It is true that many long-time immigrants are elderly and have low educational backgrounds, and if the proportion of such people is high, it is conceivable that this would increase the financial burden. However, the nature of immigrants has changed in recent years, with the number of highly educated immigrants increasing, so this impact is thought to be decreasing.

There are also those who hope that immigrants will have a beneficial effect on finances. With the declining birthrate and aging population, maintaining the pension system is a major issue. To maintain the system, a young workforce is needed to pay insurance premiums, and there are growing expectations that immigrants will play a part in this. In particular, highly educated immigrants pay large amounts of tax, and there are hopes that they will help maintain the system. However, when viewed nationwide, the amount is not enough to support pensions, and the current situation is that it cannot be said to be a panacea for solving pension problems.

Finally, let's look at the impact on economic growth. There are two key points here. First, immigration increases the productive-age population between 15 and 64 years old, and is therefore thought to contribute to economic growth. The other point is the idea that immigration can promote foreign direct investment.

As the population ages and the birthrate declines, the working population will certainly decrease. Furthermore, as the elderly begin to use up their savings to make ends meet, domestic savings will decrease. Investment is essential for sustainable economic growth, but reduced savings means less money available for investment. From an economic perspective, a declining birthrate and an aging population reduces both the "people" and "money" needed for production.

In this situation, the idea of attracting both people and money from abroad is being discussed. In other words, this would involve accepting immigrants as "people" to supplement the labor force, and encouraging the inflow of direct investment from overseas to supplement "money."

However, research has shown that accepting a large number of immigrants may actually reduce foreign direct investment in the short term. In addition, the expansion of immigration and the attraction of foreign direct investment are usually handled by different government agencies, and policies are formulated separately. If there is interaction between the two, the two policies may clash, so it remains unclear whether they will lead to economic growth.

Japan does not currently accept immigrants, but it has established a "points system for highly skilled foreigners" such as university professors, lawyers, and researchers, which provides preferential immigration treatment to such foreigners. If people to whom this system applies are called skilled workers, then accepting such skilled workers is not only beneficial from the perspective of the labor market, but has also been pointed out as having the potential to promote foreign direct investment, which could lead to economic growth.

One thing to note is that the studies we have just looked at use data on immigrants who entered gradually, so we cannot know whether they apply to special situations such as the current situation in Europe, where a large number of immigrants suddenly enter the country. The impact of sudden immigration is a topic for future research.

Furthermore, immigration is a very sensitive issue. From an economic perspective, as we have seen, there are many positive analytical results. However, this does not necessarily mean that immigration is recommended or rejected. Immigration has impacts from various aspects, including cultural and security issues. It is necessary to discuss and judge the issue comprehensively, taking these issues into account.

(remarks)
1. Data from 1950 to 2012 are based on the Ministry of Internal Affairs and Communications' "Population Census Report" and "Annual Population Estimates Report," and the Ministry of Health, Labor and Welfare's "Vital Statistics."
2. The high, medium and low variant estimates are based on the National Institute of Population and Social Security Research’s “Japan’s Future Population Projections (January 2012 estimate).”
3. The birth rate recovery case is estimated using the 2012 population by gender and age as the base population, with the total fertility rate estimated to rise to 2.07 in 2030 and then remain at that level thereafter.
Source: Cabinet Office, "Demographic Trends (Medium- to Long-Term, Macro Perspective Analysis ③)"
February 14, 2014

(Interviewed on November 4, 2016)

(Published in 2016)