Immigration into Europe

Where have workers from the European Union’s newest members moved to? What effect has the influx of immigrants had on wages? Recent research by Goldman Sachs challenges the standard answers to these questions. Although official data are imperfect, immigration to the core group of EU15 countries has increased rapidly in recent years, adding an estimated 8.7m people to their populations. Between 2001 and 2005, relative to the population, these 15 countries experienced net migration of 0.5 per cent per year on average – more than the US and far higher than the rate over the previous 40 years.

But net migration into the larger EU25, which includes newer central and eastern European members, was slightly higher over the period at 8.8m. This suggests the underlying impetus came from workers entering the market from outside Europe, rather than from new EU members.

Indeed, immigrants from outside the EU, or from one of its oldest members, account for the bulk of net immigration to the EU15 between 2001 and 2005. Immigrants to Spain represent two-thirds of the total and many of those came from Morocco, the UK and South America. Accession state migrants have preferred to go to Germany, the UK and Ireland, perhaps because English is widely spoken there. Migrants prefer countries and regions with relatively high incomes and relatively low, or falling, unemployment.

More immigration increases the absolute size of the economy – though its impact is not significant enough to solve the problem of an ageing population. The effect on the per capita wealth of the indigenous population mainly depends on whether their wages are pushed down as a result. Goldman concludes that, overall, this is not the case, but that, since immigrant labour appears to be concentrated in low-skilled jobs, the wages of the lower paid may be depressed. This suggests that, if high rates of immigration are to be sustained, European governments may have to give some thought to redistributing the net gains it delivers more fairly.

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