How immigration fuels countries' economic growth  

Expat news
  • workers at office
Published on 2024-05-27 at 10:00 by Asaël Häzaq
Despite tighter reforms in global powers, immigration remains a vital engine for growth. This is the conclusion of the latest report from the Organisation for Economic Co-operation and Development (OECD) on the issue. Let's break it down.

Immigration: An indispensable growth factor for major economies

Published on May 2nd, the OECD's Economic Outlook 2024 report is cautious yet highlights a return to growth. Although modest, growth remains steady: +3.1% in 2023. The same figure is expected this year. The OECD forecasts a slight increase in global GDP in 2025 (3.2%). These figures are considered relatively high given the geopolitical context.

The report highlights significant "immigration flows" in several OECD countries in 2023. This was notably the case in Australia, Canada (both countries have since taken measures to restrict the number of new immigrants), the United States, Spain, and the United Kingdom. Despite Brexit and a range of measures to toughen immigration conditions, the UK continues to attract foreign workers.

Immigration remains a sensitive issue in many states that aim to tighten controls while recognizing their reliance on foreign workers. The OECD report notes the direct impact of these workers on growth. In the UK, foreign labor contributed to just over one percentage point of growth. It's +1.5 points for Australia, Canada, Spain, and Sweden (despite Sweden's stricter immigration policy). The figures rise to nearly 3.5 points of growth in Ireland and 3.7 points in Portugal. These levels far exceed those observed during the 2010-2019 period. While the impact of foreign labor is less significant in France (nearly 0.5 points), it remains a "benefit," as indicated by the Economic Analysis Council (CAE) in 2021. The organization, which is part of the executive branch, has been advocating for greater investment in skilled immigration to boost growth.

Foreign workers to fill labor shortages 

These figures should be considered alongside significant labor shortages in 2021-2023. The United States, Canada, Japan, and eurozone countries were particularly affected by these shortages. In the US, 1.5 to 2% of businesses reported recruitment difficulties during this period. While this percentage might seem low, it represents 9 to 12 million unfilled jobs in 2021-2023. At the peak of the crisis (end of 2022), nearly 2% of Canadian businesses faced recruitment difficulties. The figure exceeds 2.5% for the eurozone. Although it has gradually decreased since 2023, it remains quite high (around 1.6%). The decline is more pronounced in the US (1%) and especially in Canada, which falls below the 0% mark.

However, companies in Japan continue to struggle with recruitment. The figure has been on the rise since the health crisis and exceeded 1.5% at the beginning of 2024. Japan faces the dual challenges of demographics and migration. Yet, the country prefers a slow approach to immigration (notably through reforming work permits and creating new work visas).

Immigration policies: Divergent visions among states 

During his re-election campaign, Joe Biden has been associating growth with immigration. Speaking on May 1st at a fundraising event for his campaign, he asserted that immigration fosters the economic development of the United States. He attributed the difficulties of China, Russia, India, and Japan to their "xenophobia."  

But his remarks came as a surprise, especially for Japan, a long-term ally of the US. While Prime Minister Kishida was lavishly welcomed in Washington in early April, he is now equated with the adversaries of the US. The country reacted on May 3rd, labeling Biden's comments as "regrettable". The White House spokesperson tried to smooth things over, citing the historic alliance between the two countries, but to no avail. Japan defended itself against accusations of xenophobia and justified its migration policy.

Was it a blunder? Biden had been working to strengthen ties not only with Japan but also with India to counter China's expansion in the Pacific. Power dynamics remain crucial amid significant geopolitical instability. Global growth reveals deep disparities between regions.

The US shows robust economic health (+2.5% growth in 2023). India's +6.6% growth is enough to make many European economies envious as the eurozone stagnates. Germany, the heavyweight, struggles with just +0.2% growth projected this year. The country emerged from 2023, marked by recession (-0.3% growth). To revive growth, Germany has embarked on immigration reform. Its challenge: attract and retain foreign talent.

What are the impacts for immigration plans? 

Immigration is indispensable for countries. But what migration policy should be adopted? While all powers agree on prioritizing economic immigration, their methods diverge. Observers are closely watching Canada, a land known for its open immigration policy (though subject to specific criteria, such as the points-based permit). What will be the impact of the cap on the number of foreign nationals decided by the Ministry of Immigration?

The world's attention also turns to the UK, where Prime Minister Sunak intends to welcome wealthy investors and highly skilled foreign professionals with open arms—but only them. His recent measures (taken in April and May) make moving abroad plans even more challenging. Meanwhile, we should not ignore emigration hotspots. Italy, Croatia, and Eastern European countries are losing residents and failing to attract foreign professionals due to inadequate immigration policies. However, the pressing demographic challenge might push these states to rethink their migration policies.