Immigration boosts growth says private-sector

19th June 2007, Comments 0 comments

19 June 2007, MADRID - Government and private-sector economists agree that immigrants, who now represent 10 percent of Spain's population, have played a decisive role in boosting growth and productivity in the Iberian nation.

19 June 2007

MADRID - Government and private-sector economists agree that immigrants, who now represent 10 percent of Spain's population, have played a decisive role in boosting growth and productivity in the Iberian nation.

Although the research departments of the leading organizations disagree on what immigration has contributed to economic growth, all of them say that without foreign workers the increase in the gross domestic product, or GDP, would have been substantially lower.

The economic office of the prime minister said half the GDP growth in the past five years was attributable to immigration, while the Bank of Spain puts the figure at 25 percent.

What is clear is that Spain began the transition to democracy 30 years ago with a deep economic crisis and some 150,000 immigrants, while today the economy is growing at more than 4 percent and the number of foreigners exceeds the 4 million level.

Immigration has not been the only factor behind the improvement in the economy, as different organizations - the Bank of Spain, the Economy Ministry, the Labor Ministry - and the research departments at Spain's biggest financial institutions note, but it has contributed extensively to the boom.

In this regard, the Bank of Spain said in its latest annual report that immigrants had contributed "notably" to the growth in per capita income in recent years.

The central bank's governor, Miguel Angel Fernandez Ordonez, recently said immigration had helped keep inflation in check.

In the short term, immigration boosts domestic consumption and investment, employment and savings - which is higher among immigrants than citizens of the receiving country - and contains labor costs because the new arrivals get lower wages, which can help bolster economic competitiveness.

The labor market has benefitted from immigration to the extent that, according to the Bank of Spain, the arrival of foreigners accounts fully for the increase in the working-age cohort as a proportion of the entire population.

To all of this must be added the child-care jobs taken by immigrants, employment usually not held by citizens, allowing Spanish women to enter the labor force and increasing productivity.

Deputy Prime Minister Pedro Solbes said recently that immigrants "not only perform work directly but generate alternatives indirectly" for others in the economy, adding that the new arrivals spurred greater productivity, consumption and investment.

Although the positive effects of immigration on the economy are clear, many observers have spoken out against the massive influx of foreigners, arguing that the arrival of large numbers of people threatens the pension system and public finances.

For the Bank of Spain, foreign workers do not change the problems posed by an aging population in the long term, given that the danger that the pension system might start piling up deficits between 2020 and 2025 persists, with or without their contributions.

The central bank also noted that remittances had a negative effect on Spain's balance of payments.

These negative factors are far outweighed by the economic benefits of immigration, and different studies have concluded that between 4 million and 7 million more foreigners will be needed by 2020 to maintain the current economic growth rate.

[Copyright EFE with Expatica]

Subject: Spanish news

 

0 Comments To This Article