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Wednesday, September 23, 2015

Europe's flow of migrants is economic good news - uh, if they let it be good news, that is


BI - Credit Suisse explains why the flood of economic migrants to Europe is a good thing. Quote:

"In the short term, it should add to economic growth," says the note. "The multiplier of public outlays required to house, feed and otherwise provide for asylum seekers is roughly equal to one. Fiscal expenditure could thus add 0.2pp-0.3pp to [euro area] GDP growth next year."

The multiplier is good news as that money would go directly back into the economy instead of the savings accounts of consumers and businesses.

"[A]ll money spent on migrant's basic necessities is likely to fully find its way back into the economy."

The multiplier is greater than one, actually, but whatever.

It's also good news because the EU's continued economic depression is being caused by a glut of saving, exacerbated by misguided cuts in government spending - exactly what you need to do to turn a crash into a decades-long depression. Spending a few tens of billions of euros on good deeds for the landless will provide just a little bit of stimulus, but still enough to make Europe's situation slightly less dire.

But it gets better:

The bigger contribution, however, is in the long-run impact on the labor market of the continent.

Europe's population is getting older, notably in Germany and Italy, increasing the number of retirees that rely on public benefits to live. Since the taxes of the working population help fund these services, the "dependency ratio" of elderly to working age is increasing.

"When it comes to potential GDP growth, European demographics are partly to blame for the subdued outlook," said the note. "The European Commission (EC) estimates growth will average 1.1% over 2015-2023, and this is partly due to the very subdued labor input contribution which the Commission estimates stands at a mere 0.2pp."

Migrants, say the analysts, could be the solution.

"Adding young migrant labor to the aging workforce in Europe pushes up its long-term growth potential," said the analysts. "More than three-quarters of migrants are of working age and thus provide a boost to labor supply in the potential growth estimates."

Based on their analysis, the contribution of labor to potential output growth for the euro area will double from 0.2% to 0.4% annually on average from 2015 to 2023, raising potential output from 1.1% annual growth to 1.3% annual growth.

Suddenly the Europeans will have a young workforce who can pay the taxes needed to fund their generous pensions.

Of course, that doesn't work if you strand them all in concentration camps in a shithole like Orban's Hungary: the migrants need to go where their earnings potential will be highest, like Germany.

And, of course, they need to be treated like human beings with labour rights, not used as pawns to suppress German wages. Which is what the Germans will probably do.

So good for you, Credit Suisse! You've presented the most persuasive argument for Germans taking in a million refugees: it'll make them wealthy. Because that's all that Germans ever care about. We can tell this because despite all the blather about Merkel being a sweetiepie, they've still instituted border controls this week.

Here in Canada, of course, we took in a quarter million European refugees after WWII - that was well over 1% of our population at that time. That included loads of Italians, Yugoslavians, Dutch, Lithuanians and Hungarians in my city, for example - and all of them contributed well to building our country. It worked out quite well for us.

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