The economic contribution of foreign population to Munich and its region

Author: Kurt Vogler-Ludwig

Publisher: Study on behalf of the Referats für Arbeit und Wirtschaft der Landeshauptstadt München

Year: 2002

Language: German

Summary: Munich is not only one of the German cities with the highest share of foreigners but also the city with the lowest unemployment rates and by far the city with the highest per capita income. These relations show that the link between migration, employment and economic growth cannot be explained by simple arguments.

Makro-effects: Model calculations for Germany and other economies show that immigration leads to higher growth and higher employment in the long-run. Unemployment and wage levels are hardly affected by immigration, even if there are negative effects in the sort-run. Positive growth effects emerge if integration of the labour force is successful. Immigrants create their own work places and income if they are only given a chance. The Munich economy is an excellent example of that.

Polarised immigration: At the end of the year 2000 282.000 foreign people were living in Munich. The share of foreigners tripled to 23 % since the nineteen sixties. There were 115.500 workers among the foreigners. More than half of them were employed by the service industries, the hotel and catering, cleaning and health care sectors in particular. In contrast to the "Gastarbeiter" period the immigration waves of the nineteen nineties brought less working people to the city. In parallel, globalisation created increasing demand for specialists from abroad. The skills profile of immigration polarised. It can be assumed that this profile exactly matched with the changes in labour demand on the Munich labour market, and was associated with positive allocation and growth effects.

Foreigners take the adjustment burden: Foreign workers could not participate at the employment growth in Munich during the nineteen nineties. While dependent employment of German workers increased by 6.8 %, it decreased by 9.8 % for foreigners. Workers in manufacturing and construction were affected in particular. The foreign population took a substantial part of the adjustment burden arising from sectoral transition of the labour market.

Balanced effects on public budet of the City of Munich: In the year 2000 foreigners contributed with € 255m to the tax revenues of the City of Munich (13 % of total tax revenues), while receiving € 272m through transfers and public services. Considering the positive growth effects of foreign employment, the minor tax deficit seems to be invested properly.

Serious education and training deficits: While immigration is an import of human capital saving education and training expenditure to the host country, the problems arise with the second and third generation of immigrants. Young foreigners have substantial education and training deficits which were increasing during the past. This appears as a substantial problem for future skills supply as the share of young foreign people among the population is high.

Perspectives: All forecasts expect continuing net immigration to Germany during the current decade. For the City of Munich net immigration will be around 10,000 to 15,000 persons annually. The share of foreign workers will increase from 14.7 to 16 %.

Policy options: The policy on foreigners will not face a new immigration wave during the next ten years. By contrast, the trends of globalising economic relations and the emergence of a multicultural society will determine political action. More than ever, policy have to develop multidimensional concepts to solve the variety of problems. These concepts will have to consider the following points:

  • With view on globalisation, it will have to sharpen the international profile of the City of Munich.
  • With view on the uncertainties of international migration, it will have to control migration flows.
  • With view on the skills gap, it will have to promote education and training of young foreigners.


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