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Dejuvenation is not solved by immigration. Photo credit: Micheile Henderson
Amsterdam

The first study to calculate the real cost of immigration

Many Western countries have opened their borders without calculating the long-term effects of immigration. While it is touted to be a clever response to labour shortages, comprehensive and detailed analyses of the benefits and costs of immigration with country-of-origin comparisons have been sorely lacking.

Published: June 24, 2021, 11:04 am

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    In fact, most host countries would never dare to analyse the real costs because it is not deemed politically correct to distinguish between the worth of different cultures. Citizens are simply left to discover reality for themselves.

    Some general studies of immigrants’ contributions have concluded that young immigrants are net contributors to the economy, but they are often restricted to those coming specifically to work in the host country, and do not include students or asylum seekers.

    A typical example of such an undertaking is a 2014 OECD study.

    Researchers in the Netherlands studied official data from Statistics Netherlands and looked at outcomes over the long term, with results tabulated according to reasons for immigration, and by country of origin.

    In the study “The Borderless Welfare State” Jan van de Beek, Hans Roodenburg, Joop Hartog and Gerrit Kreffer, from the Amsterdam School of Economics, wanted to answer two questions:

    1) What are the fiscal costs and benefits of immigration by migration motive and by region of origin?
    2) To what extent can immigration provide a solution to the ageing population in the Netherlands?

    The authors studied detailed information from 2016 provided by Statistics Netherlands of 17 million Dutch residents, including about two million people with a first-generation migration background and almost two million people with a second-generation migration background. Of the 17 million Dutch inhabitants at the end of 2019, 13 percent were born abroad (first generation) and 11 percent were the off-spring of immigrants (second generation).

    In their in-depth analyses they found that the rapid pace of immigration into the Netherlands has greatly increased the Dutch population, but not the sustainability of the Dutch welfare state. Huge differences were noted by region of origin. On average, Western immigrants make a positive contribution of €25 000 while non-western immigrants have been a drain on public finances, costing at least €275 000 each. Asylum seekers are even more expensive, costing €475 000 per immigrant.

    Currently, per capita expenditures on immigrants are significantly higher than on Dutch inhabitants in terms of education, social security and social benefits. Also, immigrants pay fewer taxes resulting in a much lower net fiscal contribution. And the authors calculated the total cost of immigration for the next two decades if policy remains unchanged.

    By 2060 the higher birth-rates of immigrants and continued immigration will make them about 23 percent of the population.

    Immigration from Japan, North America, Oceania, the British Isles, Scandinavia, and Switzerland, in particular, has had a positive fiscal impact, averaging €200,000 per immigrant. Immigration from Central and Eastern EU-member states costs about €50 000 and immigrants from the former Yugoslavia and the former Soviet Union cost much more at €150 000.

    But it is immigration from non-Western regions which is hugely unfavourable for Dutch public finances. This applies especially to the areas of origin Caribbean, West-Asia, Turkey and North, Central and West Africa with net costs ranging from €200 000 to €400 000 per immigrant.

    Immigrants from Morocco, the Horn of Africa and Sudan clocked up a net cost of €550 000 to €600 000 per immigrant. Notably, the average Dutch citizen remains “budget-neutral” in the span of a lifetime.

    Clearly, the highest net costs are incurred from asylum migration from Africa. Since it also implies family re-unification, it has a considerable negative impact on the combined net contribution.

    Dunedin data showed that 20 percent of Dutch citizens need 80 percent of the financial support. Importing masses of low-skilled Africans to a welfare state only increases the number of the needy.

    While 40 percent of citizens get the remaining 20 percent, the top 40 percent contribute the most and receive nothing in return.

    For second-generation immigrants, the data showed that only a limited number of countries and regions are favourable. On a scale of 100 percent integration, some immigrants are even more successful than the native Dutch. These are mainly the Scandinavian countries and Switzerland (110 percent), Japan (128 percent), China (115 percent) with South Korea, Hong Kong, Taiwan and Singapore scoring 104 percent.

    Thus, first-generation migrants produce second generations who either also cost a lot, or at best are budget neutral. Therefore, immigration changes nothing “for the better” as those in favour of open borders often claim. Certainly, on average the second generation in many respects performs better than the first, but this does not offset the costs of the first generation.

    A higher level of education on average implies a higher net contribution. High school performance scores correlated with a higher net contribution to Dutch state coffers, shown by the Dutch CITO tests which are administered at age 12. The CITO exam is an independent assessment of final year Dutch primary school pupils. It has also been an excellent predictor of later educational success.

    This suggests that selecting first-generation immigrants would be the best way to guarantee positive results for the host country’s treasury.

    There are considerable differences in CITO scores between different cultures: The CITO scores and the educational level of the second generation are strongly related to the educational level of the first generation. Therefore, the educational attainment of the first generation affects the net contribution of the second generation.

    It is evident from these findings that the Netherlands will not get richer through immigration. Solving dejuvenation by immigration resembles a Ponzi scheme at most because it does not provide a stable solution to population ageing. The underlying problems of low fertility and dejuvenation are not resolved since on average, the fertility of contributing immigrants is below the replacement level as well, because immigrants from most countries in the Americas, Europe and Eastern Asia already have low fertility rates.

    At best immigration will turn contributing citizens into minorities in their own countries with the costs for healthcare and state pensions rising rapidly.

    The authors pointed out that, given current costs and the projections for future immigration 2020-2040, the total cost of immigration will continue to increase, by an extra €600 billion. Cutting these costs would mean a drastic and fundamental policy change, sooner rather than later.

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