How foreigners could save the welfare state

Importing educated immigrants is a money maker for Denmark, new economic research shows


Following years of strident debate about whether immigration will be the death of DenmarkÂ’s welfare system, the irony is that certain immigrants could soon be seen as its saviours.

Facts presented in a just-released research study show that highly educated immigrants – whether they come from developed ‘Western’ countries or under-developed ‘non-Western’ ones – are putting far more money into the state’s coffers than they are taking out.

The Centre for Economic and Business Research (CEBR) study Â– which is co-funded by Microsoft and Dansk Industri (DI), an association representing more than 10,000 Danish companies – is the first of its kind to measure DenmarkÂ’s net profit from highly educated foreign workers.

Its conclusions are drawn from data from 3,500 highly-educated foreigners who were working in Denmark in 2009. A highly-educated foreigner was defined as someone with an advanced degree – a doctor, lawyer, PhD, MA, or MBA, for example.

The average highly-educated foreigner (not to be confused with ‘highly-skilled foreigners’, a term that specifically refers to those enjoying three-year tax breaks) who comes to Denmark with a partner and children, stays for eight years and puts an extra 1.9 million kroner into the state’s coffers – even after using the schools, hospitals, and other social benefits – the study concluded.

By contrast, the average highly-educated foreigner who comes to Denmark without children stays for six years and leaves the state with an extra 900,000 kroner in its treasure chest.

The researchers compared how highly educated ‘non-Western’ immigrants stacked up against their ‘Western’ counterparts in purely economic terms; they found that where the immigrants come from makes little difference. More significant are their areas of expertise.

While all highly-educated immigrants are more ‘profitable’ for the state than Danes, according to the study, immigrants with advanced degrees in the humanities contributed less than those with advanced degrees in the sciences. Foreign technical experts, like engineers and architects, fell somewhere in the middle.

Furthermore, the average newborn Danish baby will end up costing the state more than he or she contributes in cold hard kroner, while a highly-educated Dane who goes to school, works, and retires in Denmark is still less profitable for the state than a highly-educated foreigner who arrives already educated and leaves before retirement, according to the study.

Highly-educated foreigners use public childcare and health services at approximately one-third the rate of Danes, and they are also just one-third as likely as Danes to be involved in a crime or to use the criminal courts system.

At the same time, the study found, highly-educated foreigners pay significantly more in taxes each year than the average Dane does; the highly-educated ‘non-Western’ immigrants paid roughly 16 percent more than the average Dane, while the ‘Western’ ones paid roughly 32 percent more.

The study also showed that highly-educated foreigners were less likely than Danes to draw on public welfare benefits.

Besides paying higher taxes while using fewer public services, highly-educated foreigners also have a disproportionate effect on business growth at the firms they work for. Studies from 2010 and 2011 cited by CEBR have shown that Danish firms that hire foreign experts see higher rates of growth than firms that only have Danish experts on staff.

Jan Rose Skaksen, an economics professor from Copenhagen Business School, and one of the CEBR studyÂ’s authors, told Berlingske newspaper that the data surprised even him.

“It has now been demonstrated – and I am in fact really amazed – how large a profit the highly educated [foreigners] yield,” Skaksen said.

DIÂ’s CEO Karsten Dybvad hoped the study would motivate the government to look closer at the visa rules.

“Our need for highly-educated immigrants isn’t going to shrink in the future. How attractive we can be to them as a country has become a measure of our global competitiveness,” Dybvad said. “The government would do well to consider the rules quickly.”

Read the CEBR study (in Danish) here.

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