Immigration rise may be route to EU growth, study says

EU population ageing to have enormous impact on growth potential, study says

A queue on  Poolbeg Street waiting for the Garda National Immigration Bureau to open on Burgh Quay. “A policy of large planned increases in the amount of immigration into the EU, while also politically challenging, may turn out to be the only way to keep the European economy expanding in the future”

A queue on Poolbeg Street waiting for the Garda National Immigration Bureau to open on Burgh Quay. “A policy of large planned increases in the amount of immigration into the EU, while also politically challenging, may turn out to be the only way to keep the European economy expanding in the future”

 

A major increase in planned immigration into the European Union may be the only way to keep the European economy expanding into the future, according to a joint study by academics in the Economic and Social Research Institute and University College Dublin.

The paper, by ESRI research professor Kieran McQuinn and UCD economics professor Karl Whelan, finds that the pattern of population ageing in Europe will have an enormous impact on its growth potential.

Examining long-term demographic trends in the context of recovery scenarios in the wake of the 2008 crash, the researchers said their findings were “sobering” for those who expect economic growth to settle the euro zone’s problems in the next decade.

“We project real GDP growth of just over half of one per cent over the next decade even if unemployment and investment return to pre-crisis rates by 2020,” they said.

Prof McQuinn said Europe needed a long-term plan for dealing with a pattern of population ageing: “Policy initiatives to delay retirement ages and to encourage labour force participation are undoubtedly part of the solution to the problems posed by ageing. However, these initiatives are likely to be very unpopular politically and may have negative implications for productivity.

“A policy of large planned increases in the amount of immigration into the EU, while also politically challenging, may turn out to be the only way to keep the European economy expanding in the future.”

The research, published today, finds that the working age (15 to 64) population of the euro area has been declining since 2010.

“An average real GDP growth of just over half of one per cent per annum over the next decade is projected even if unemployment and investment return to their pre-crisis rates by 2020,” the paper said.

“The adoption of significant and ambitious labour market as well as product reforms across the euro area would improve GDP growth by just 1 per cent per annum.”

The paper called for a significant joint euro zone-funded capital investment programme to address the large output gap and increase the supply-side potential of the European economy.