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'Immigration is the only solution' to labor shortage – in Europe and US

People stand in front of a projection on the construction site of the Berliner Schloss - Humboldtforum in Berlin, Germany, November 4, 2019. On November 9th Germany will mark the 30th anniversary of the fall of the Berlin Wall (Berliner Mauer) in 1989. REUTERS/Fabrizio Bensch

An aging population, fewer people wanting to do low-skill work, declining birthrates.

Sound familiar?

Demographers have been warning for years about an impending labor crisis in the United States as baby boomers exit the workforce. Not only will millions more workers be necessary to fill those open positions, tens of thousands more will be needed to help take care of those baby boomers into their golden years.

It’s something Germany has been dealing with for decades, and is in particular focus as it marks 30 years since the fall of the Berlin Wall. Since the 1970s, then West Germany and today a united Germany have been welcoming immigrants to help fill labor shortages and take on jobs many native-born Germans do not want. More recently, at the height of the refugee crisis, immigration became the fuel that kept the German economy humming.

“Without immigration, especially from EU countries, the labor market would have been even tighter, leading to labor cost explosions, higher costs for firms and higher prices,” economist Marius Clemens of the German Institute for Economic Research told Yahoo Finance.

2018 study he helped write found that immigration to Germany between 2011 and 2016 boosted GDP growth by an average of 0.2% every year. That’s largely because immigrants coming to Germany expressly wanted to work, and spend, in their new home -- immediately boosting demand and helping juice the economy.

Couple that with a decline in the number of working-age native-born Germans, as baby boomers age out of the workforce, and Clemens says immigration is the only solution.

“The German native working-age population is shrinking, but with immigration, Germany’s working-age population and labor force has increased in the last years,” he said. “The working-age population will reduce between 4 and 6 million people in Germany if no migration occurs.”

Lessons for the United States

That carries through to the United States as well. Researchers at Citigroup and Oxford University recently found that the U.S. economy would have grown at a 15% slower rate between 1990 and 2014 without immigration. A 2016 study by the University of Pennsylvania’s Wharton School found productivity grew “significantly faster” in states with a large number of foreign-born workers. Immigrants also make up a “disproportionate share of workers in the fields most closely tied with innovation,” Wharton researchers found.

A banner depicting a manipulated image of German Chancellor Angela Merkel is carried by a protester during a demonstration initiated by the Alternative for Germany (AfD) party against what they call the uncontrolled immigration and asylum abuse in Erfurt, central Germany, Wednesday, Nov. 18, 2015. (AP Photo/Jens Meyer)

They even built a simulation that shows increasing deportations will reduce U.S. economic growth, while boosting legal immigration would send the GDP skyrocketing.

“The largest positive impact on employment and GDP would come from increasing the net flow of immigrants,” the Wharton School researchers wrote.

But that’s predicated on immigrants being at least somewhat educated or prepared to be trained in new roles.

Germany has made a willingness to learn a key condition of allowing immigrants into the country in recent years. As the Washington Post detailed last spring, Germany’s long history of apprenticeship training gives immigrants the ability to work and train for new fields. Companies desperate for factory and vocational workers take the immigrants into training programs, with a guarantee most will be able to stay for at least 5 years, even if their refugee application is rejected.

Researchers at Germany’s Federal Office for Migration and Refugees found earlier this year that employment rates for recent refugees increased exponentially over time as they became more integrated into society and learned the language.

Long-term consequences

President Trump has been taking steps to reduce legal and illegal immigration to the United States, including restricting visas for asylum seekers.

In April, he called the wave of immigrants along the southern border a “colossal surge,” that was “overwhelming our immigration system.”

“We can’t take you anymore. Our country is full,” Trump said.

But by restricting legal immigration, and limiting refugee admissions, he could be stifling future economic growth long after he’s out of office.

“In the near future, we will become increasingly dependent on immigration and racial minorities— particularly young first- and second-generation Hispanic and Asian-Americans—to infuse growth and vitality into our population and our economy,” writes Brookings Institution demographer William Frey.

His analysis of Census data finds the U.S. population growth rate is at its lowest since 1937, as Americans have fewer children and wait longer to have them. Coupled with an aging workforce, it means employers may have difficulty finding enough skilled employees to fill jobs.

“This leaves immigration as an ever-more-important contributor to national population growth,” Frey writes.

It’s something most mainstream economists and migration scholars agree on.

“Cutting immigration will hobble economic growth,” writes Oxford’s Ian Goldin, one of the co-authors of that Citigroup study on migration, in the Financial Times. “Further controls on immigration will only slow growth, exacerbate inequality, undermine social cohesion and lead to a vicious cycle of further controls on migrants. The race to the bottom by politicians to show how tough they are on immigration will hurt us all.”

“Because of the demographic change in many industrialized countries, the global competition for highly qualified people will be stronger,” German economist Clemens said. “Countries with a migration-friendly societal climate and policy clearly have an advantage.”

Read more:

New research: The U.S. economy will need more immigrants soon

Three state attorneys general challenge Trump on immigrant benefits

Why the immigration issue 'will not go away' for Americans

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