Immigrants can be perceived as a threat to public finances because of the social benefits they receive. But this is to forget that they also contribute to it, through the taxes and dues they pay. Lionel Ragot, scientific advisor at the CEPII and professor of economics at the University of Paris Nanterre, explains to us, answering questions from Isabelle Bensidoun, economist and assistant to the director of the CEPII, why immigrants are neither a burden nor a godsend. for public finances.
We sometimes hear that immigrants are attracted by the generosity of our social protection system. Is that the case ?
First of all, it should be emphasized that the flows of immigrants to France are, in proportion to its resident population, among the weakest in developed countries. With an immigration rate of 0.4% in 2018, our country welcomes proportionately half as many immigrants as Germany and even three times as many as Sweden. We are therefore far from the massive and uncontrolled flows that would break into French territory every year, attracted by a higher standard of living and generous social protection.
Then, it turns out that the immigrant population has experienced, like that of the natives, an improvement in the levels of qualification over the last forty years, with a consequent drop in the weight of the poorly qualified (diploma below the baccalaureate) and an increase in the weight of moderately and highly qualified, to the point that the share of highly qualified (diploma superior or equal to bac+3) among immigrants (21.7%) is in 2020 slightly higher than that of natives (20.1%).
The segment of the population most likely to call on social assistance has therefore been greatly reduced. However, it is no less true that while the proportion of low-skilled people has fallen sharply for both populations, it has remained at a significantly higher level in the immigrant population (57.3% versus 48.9% in 2020).
But if immigrants are on average less qualified than natives, this implies that they benefit more from social benefits and contribute less to public revenue. Therefore, this should widen the public deficit, right?
The level of qualification is indeed one of the important characteristics, with age, to determine the net contribution of an individual to public finances, namely the difference between all the contributions that he pays in the form of compulsory levies to the public authorities (income tax, VAT, social contributions, CSG, etc.) and all the benefits it derives from them (social benefits, expenditure on education, health, retirement pensions, etc.).
A low-skilled individual (FQ in Chart 1 below), whether native or immigrant, has a positive net contribution, but significantly lower than that of a high-skilled individual (HQ in Chart 1) during his working life (between 20 and 60 years old). Subsequently, once retirement has arrived, the net contribution becomes negative (as when one is young) for both categories of individuals.
Public opinion is very aware of these differences linked to the level of qualification and since it bears in mind that immigrants are on average less qualified than natives, it concludes that the immigrant population as a whole weighs on public finances.
But if, between the ages of 20 and 60, an immigrant on average actually pays less compulsory contributions and receives more various public benefits than a native, this does not mean that the impact on public finances of immigrants taken as a whole is worse than that of natives. It all depends on the age structure of the two populations.
However, compared to natives, immigrants are concentrated at the working ages, between 20 and 60 (Chart 2), i.e. at ages when the net contribution is positive, even if it is lower than that of natives. This favorable age structure effect largely offsets the unfavorable qualification structure.
Our last study on French data thus highlights a generally negative net contribution of immigrants to the budget between 1979 and 2011, but of very low magnitude, within a range of plus or minus 0.5% of GDP. As a result, throughout this period, immigration in France never determined the extent and the evolution of the primary budget balance. It should be noted that this budgetary neutrality of immigrants is not specific to France, it is found for most OECD countries.
Should we deduce from this demographic specificity of the immigrant population that it could constitute a solution to the aging of the French population, in particular for the financing of pensions?
By instantly rejuvenating the French population, a more ambitious migration policy (with an unchanged age structure of migration flows) would indeed have positive effects on the accounts of the old-age insurance and those of the health insurance (the most affected by demographic ageing).
A highly qualified individual having a significantly higher net budgetary contribution, we then understand the recommendations for a more selective migration policy (in favor of the most qualified).
However, a more ambitious migration policy is not the solution to demographic ageing. It can reduce the tax burden as we have just seen, but it can in no way thwart this aging process.
Because to keep the dependency ratio constant (the ratio of those over 65 to those aged 16-64), the population would have to double every 40 years via migratory flows, which would lead in 2050 to a share of immigrants in the population by more than 50% (compared to 10% in 2020). Indeed, if an additional flow of younger immigrants does indeed produce the desired effect initially on the dependency ratio, these immigrants also end up aging, which would require even greater migratory flows thereafter for this ratio to n not increase.
This article is published as part of the CEPII series “The International Economy in Campaign” a CEPII–The Conversation partnership.
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