Compassion makes good economic sense

Compassion makes good economic sense

The heart-wrenching photographs of a dead Syrian child washed up on the Turkish shore are fast becoming the symbol of what is framed as Europe’s “migrant problem” or “refugee crisis.” That little boy, however, would have been part of the solution to the continent’s problems, had he been allowed to reach it. The true crisis is that not enough Europeans understand that.

It’s a commonplace that Europe is aging. According to Eurostat projections, here’s how the ratio of people age 65 and older to the total population is going to increase:

By 2050, fully 28 percent of the European Union’s population will have reached retirement age – or more likely approached it, because issues of sheer affordability will surely have forced it to be raised everywhere by then. In Germany, Greece, Portugal, Slovakia and Spain the proportion of potential retirees will approach a third of the population, rising from current levels of 20 percent and below.

According to the European Commission’s 2015 aging report, the dependency ratio of over-65s to the economically active 15-64 age group will increase to 50.1 percent, from 27.8 percent by 2060. That means there will be just two potential workers per retiree, up from almost four. The aging of the population shaves 0.2 percent a year off European economic growth, but it hasn’t become a full-blown crisis yet; that will happen when pension systems grow unsustainable, long after current political leaders have left the stage.

To keep the current ratio of senior citizens to the general population steady, Europe needs its younger population to increase by hundreds of millions more than the current rate over the coming decades.

There’s no way to organically increase the EU’s population so as to get an extra 42 million people by 2020, let alone 257 million by 2060: You can’t force people to make more babies. Increased immigration is therefore Europe’s only salvation from an approaching fiscal disaster. Europe needed that Syrian boy, just as it needs, and should cherish, everyone taking a leaky boat to Lampedusa, or a rusty minibus to Berlin, Lisbon or Madrid. These are almost exclusively young people, sometimes unaccompanied children, who if integrated will pay for – and care for – Europe’s retirees.

Economic activity rates are sometimes lower among Europe’s immigrant populations than among local-born ones. For example, in France, 78 percent of the locally born working-age people and only 68.7 percent of residents born outside the EU have jobs or are self-employed. Activity rates depend on lots of factors, ranging from the difficulty of learning the local language, to the restrictiveness of labor laws and the xenophobia of employers. In Italy, 72 percent of non-EU immigrants and just 67.1 percent of locals are money-earners. For Europe as a whole, all of these influences even out and activity rates are almost the same for those born locally and for non-EU immigrants, at 76.6 percent and 73.5 percent.

People who have the drive and street smarts to travel halfway around the world, with little money and small children in their arms, are going to grab every chance they are given to improve their lot. Countries that lag in productivity should welcome the increased competition in their labor markets, even if that makes some locals unhappy.

Anti-immigrant sentiment is especially high in Eastern European countries. At the same time, some of these are in the gravest danger from aging. Slovakia’s ratio of senior citizens to the general population, for example, is now just 13.9 percent, one of the lowest in the EU; that’s projected to rise to 31 percent by 2050. Hungary’s social system will also struggle to cope, as the proportion of retirees in the population rises from 17.9 percent to 27.5 percent. In these countries, which have seen very little immigration until now, irrational xenophobia helps irresponsible politicians win popularity points. The children of today’s voters, however, are likely to face higher taxes and decreased pension benefits if these countries manage to keep immigrants out.

Until Europe agrees on a common approach to the increased influx of immigrants, countries with the smartest governments, Germany in particular, will pick up most of the newcomers, acquiring better insurance against future problems.

The appalling image of 3-year-old Aylan Kurdi on that Turkish beach may help to shift public opinion. More than 170,000 UK citizens have signed a recent online petition for their government to take in more immigrants, enough to force a parliamentary debate. More than 15,000 Icelanders have signed a letter urging their government to open the gates wider, because “refugees are our future spouses, best friends, or soulmates, the drummer for the band of our children, our next colleague, Miss Iceland in 2022, the carpenter who finally finished the bathroom, the cook in the cafeteria, the fireman, the computer genius, or the television host.” German and Hungarian volunteers have brought toys to Syrian kids and shown them cartoons.

These people may not realize that their compassion makes good economic sense, but it does. Xenophobia doesn’t.

[Bloomberg View]

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