#ZEWPodcast: Labour Market Miracle Through Migration?
#ZEWPodcastZEW Podcast with Katrin Sommerfeld
Long queues at airports. Job advertisements in many shop windows. Companies that can’t complete their work on schedule. The lack of qualified, but also of less qualified workers is a hot social topic currently. Foreign Minister Annalena Baerbock and Labour Minister Hubertus Heil themselves even flew to Brazil in early June to recruit care workers there. But can more migration actually solve these problems? In the latest ZEW podcast episode, Dr. Katrin Sommerfeld, a researcher in ZEW’s “Labour Markets and Social Insurance” Unit, discusses the shortage of labour, migration, and how these two topics intertwine. Furthermore, she illustrates how earlier assumptions have been proven wrong from today’s perspective.
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Take the eastern enlargement of the EU, for one. Originally, the policy was viewed with much criticism. European politicians as well as citizens feared that this approach would lead to falling wages, rising unemployment rates, and an inundation of the social systems. In hindsight, it turned out quite differently, as Sommerfeld explains: “There is relative agreement within labour economics that the German labour market miracle of the last two decades was actually only possible because of immigration from eastern Europe.”
Because of the Eastern enlargements of the EU in 2004 and 2007, as well as the subsequent freedom of movement for workers after seven years, the number of workers doubled from 3 to 6 per cent within a decade. In addition, “Employees from eastern Europe work disproportionately often in occupational fields where there are shortages of skilled workers; that is, occupational fields that have been defined as such by the Federal Employment Agency.”
According to a Danish study, refugees do not push low-skilled Danes out of the labour force. In fact, the opposite tends to happen: “Generally speaking, low-skilled Danish workers take on slightly different jobs that include stronger communication skills as opposed to manual or physical work. These occupations are better paid, meaning that the low-skilled Danish workers have been elevated into slightly better jobs due to the arrival of low-skilled immigrants, thus benefiting from higher wages. The assumption is that the locals have a relative language advantage. Therefore, they can take on the communication-intensive jobs.”
Digitalisation is just as necessary
Despite all these advantages, the euphoria must be dampened. The number of people in the labour force is declining due to demographic change. To maintain the current level, more women would need to seek employment, more part-time workers should begin working full-time, and immigration would need to continue. “But even all of that together will still not be enough,” Sommerfeld states, explaining that there are also other possibilities: “Of course, companies can also change the ways they operate. For example, they could automate and digitalise parts of the production process so that fewer employees are needed.” Suppose a restaurant cannot find any staff to hire; then they could consider introducing a digital ordering system as an alternative. Although that would be expensive, higher wages and loss of revenue would be as well.
