Recent German Migration Laws: A Contribution to Fiscal Sustainability

Abstract

The German government recently made a large number of changes to migration legislation, in relation to asylum seekers and refugees who have immigrated since 2015. While the impact of some reforms may be socio–political, most of them also have fiscal implications. This study uses generational accounting to analyse the effects of these legislative changes on the German fiscal system. The results show that these reforms will likely have overall positive effects on future German public finances; they also highlight the importance of successful integration in general and the positive financial contributions accruing from the immigration of relatively young and skilled workers.

ACKNOWLEDGEMENTS

I am grateful to Dan Hough and the late Wade Jacoby, the editors of this journal, as well as to the anonymous referees, for their insightful comments and suggestions. I am also grateful for the help and guidance of my colleagues at the Research Centre for Generational Contracts, especially David Gutmann and Fabian Peters.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author(s).

Notes

1 The laws introduced are revisions of existing statutes such as the Act on the Residence (Gesetz über den Aufenthalt, die Erwerbstätigkeit und die Integration von Ausländern im Bundesgebiet). Official English translations for law names often do not exist, and so for the current study the author translated the German titles into English.

2 In this context ‘tolerated’ means that they are either under subsidiary protection or granted prohibition of extradition and deportation.

3 The Central Register of Foreign Nationals database contains data on all foreigners residing in Germany for at least three months. It has about 26 million personal records (Federal Office of Administration 2019).

4 For a detailed description of the method used and a critical reflection on it, see, Feist and Raffelhüschen (2000), Williamson and Rhodes (2010), and Manthei and Raffelhüschen (2018). For a comparison to another regularly applied method of measuring fiscal sustainability—namely, the OECD method—see Benz and Fetzer (2006).

5 A long-term fixing of the fiscal status quo is explicitly assumed. Regarding the correlation between short-term surplus adjustments and government debt, see for example Greiner, Koeller, and Semmler (2006) and Potrafke and Reischmann (2015).

6 None of the three schemes is fully a pay-as-you-go system, as they all have liquidity reserves. The SPV also has a demographic reserve (Pflegevorsorgefond) to diminish demographic effects, which is considered in the following calculations in the form of an additional states asset.

7 Usually (for example, Manthei and Raffelhüschen [2018]), IPL are given as a percentage of GDP. In this paper, however, they are given in billions of euros, to make it easier for the reader to see the magnitude of the effects.

8 In 2018, these surpluses amounted to 7.25% of the GDP (Deutsche Bundesbank 2019).

9 See, for example, den Haan et al. (2017), Felbermayr, Fuest, and Wollmershäuser (2017), Blanchard (2019), Feld, Reuter, and Yeter (2020), and Jacoby (2020).

10 Of course, an immediate adjustment of all taxes and transfers is not very realistic, as political processes take time and demand sufficient popularity among voters. Nonetheless, this indicator represents the enormous challenges of fiscal policy (Benz and Fetzer 2006).

11 In addition to the National Accounts from which many figures are derived, numerous smaller data sources include Eurostat, GRV, GKV, and SPV, among others.

12 In the reference year 2018, the average age of immigrants in Germany was 30.5 years, while the average age of nationals was 44.3 years (Federal Statistical Office of Germany 2019d).

13 The SOEP survey provides individual and household-level micro-statistics. The EVS provides household data on, for instance, all payments made by each household, and yields representative information on almost the full German population (Federal Statistical Office of Germany 2019b).

14 For example, in September 2008, the interest rate was 4.25%, in 2004 at 2.00%, and in April 2001 4.75% (Deutsche Bundesbank 2020).

15 Like net immigration, this long-term emigration average applies as a fixed value to the rest of the projection period.

16 The number of people actually compelled to leave the country is usually lower than the number of rejected asylum applications, but no reliable trend data are available. Thus, in the current study, both numbers are treated as equal and this could lead to a slight overestimation of the effect.

17 The total of 16,000 in the first half of 2019 indicates that the number could be around 30,000 for all of 2019 (German Federal Office for Migration and Refugees 2019a).

18 In the 2018 reference year, Germany’s explicit public debt was EUR 2,063 billion (Federal Statistical Office of Germany 2019c), while the implicit debts calculated with generational accounting added to EUR 5,004 billion.

19 This finding can be deduced from a comparison of the FEPA and post-law reforms scenarios, even if the number of emigrants is slightly different. The ORA and TEEA scenario results show that altered migration has significantly smaller effects than do SP changes.

20 The variance across the sensitivity analysis results was slightly higher for the NTCA than for the IPL.

Additional information

Notes on contributors

Gerrit Manthei

Gerrit Manthei is a Research Associate at the Research Centre for Generational Contracts and an Academic Lecturer at the Institute for Public Finance and Social Policy at Albert-Ludwig University in Freiburg, Germany.