Implications of Migrants’ Educational Attainment for Government Budgets

Fanny Kluge , Max Planck Institute for Demographic Research
Tobias C. Vogt, MPI for Demographic Research
Elke Loichinger, Federal Institute for Population Research (BiB)

The freedom of movement for individuals within its member states is a core principle of the EU as laid out in the Maastricht Treaty in 1992. According to Eurostat, roughly 900.00 EU citizens immigrated to a different member state in 2017. Migration typically occurs from economically weaker member states to the more prosperous countries. In most cases, well-educated young individuals migrate after finishing their education and seek employment in countries where they find higher wages and returns to their educational investment. The receiving countries gain skilled individuals without educational investment that immediately contribute to government revenues when they start working. With PAYGO-pension or other welfare systems for the elderly, intergenerational transfer arrangements suffer from the outmigration of working aged contributors while receiving countries benefit. This development accelerates differential aging within the European Union, reinforcing the fiscal consequences of population aging in older EU member countries. The lack of a transfer and social union results in the situation that gains and losses are distributed unequally across countries. With data on public transfers by educational attainment we want to estimate the implications for public transfer flows in sending and receiving countries and estimate the differences by educational attainment level of migrants. Net present values for young migrants are positive for all educational levels but of course the higher the educational level the higher the gains. We can gain important insights on the importance of education and the relative magnitudes. In our outlook, we discuss potential compensation strategies for transfers between EU countries.

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 Presented in Session 78. Flash Session Migration and Migrants