Migration to Austria. Cost/Benefit Considerations and Social Transfer Issues

Between 1989 and 1996, Austria recorded an influx of some 340,000 migrants, altogether a lower number than the flow of refugees after World War II but slightly higher than the migration of guest workers in the late 1960s and early 1970s. The latter had been viewed in a positive light by most of the politicians and people, and the wave of refugees after the war had triggered no discussion at all about possible integration problems and negative effects on social budgets from their competition with Austrian nationals on the labor market. The recent wave, on the other hand, has given rise to concerns that migrants could constitute undue competition for Austrians on the labor market and aggravate the shortage of cheap housing. The latest Monthly WIFO Report quotes a comprehensive study performed by the WIFO, investigating the impact of migration on the economy with a view to developing a solid scientific foundation for the government policy on migration. Drawing on the findings of research on the migration issue, the discussion on the subject, currently conducted at a highly charged emotional level, could be put on a higher level of objectivity – an essential prerequisite for democratic decision-making processes. A cost/benefit comparison of migration in macroeconomic terms focuses on monetary effects which can be measured on the market, but does not take into account a range of factors which, while determining the material welfare of a society, are not organized through the market. The evaluation is based on very narrow economic criteria: the effect of migration on economic growth, per capita income development and income distribution, inflation, technological progress, productivity, balance of payments and the labor market. The impact on economic growth is not unequivocally clear, as there are typically winners and losers of the growth process which in turn engenders conflicts of interest. Some production areas, and their associated labor force, profit from migration, while other sectors or activities get to feel the squeeze. In areas where migrants compete directly with nationals, the larger supply of labor will be detrimental to the income of Austrian workers, mostly unskilled workers or, generally, individuals who are only marginally integrated in internal labor markets. Individuals holding highly qualified jobs, or capital owners (such as landlords), on the other hand, will not be exposed to much competition from migrants, and will therefore profit from migration in terms of their income and relative position to unskilled workers and secondary labor. In the case of full employment, the redistribution effect will be rather insignificant provided that the trade unions insist on a solidarious wage policy. In phases or regions with idle capacities, on the other hand, a high concentration of migrants may meet with resistance unless social policies are instituted to counteract the relative pauperization of unskilled workers and the unemployed vis-à-vis those better off. The study also examines whether migration relieves or burdens the social safety net or is neutral in terms of costs and benefits. This issue has been agitating politicians as much as scientists now that the well-established social welfare systems in the Western industrialized countries are threatened by a financial crisis as the combined result of several factors. Finding an answer to this issue depends not just on the scope of migration and the typical characteristics of migrants at a given time, but even more on the dynamics in terms of time. Accordingly, the calculation of the income/expenditure structure at a given time is supplemented by a fundamental discussion with regard to computing fiscal effects of migration on the social welfare system.