What will happen to Japan if immigration policies continue? Is it true that accepting foreigners will affect economic growth? (Nikkan SPA 2024/12/18) casts a shadow over future immigration policies from the perspective of economic growth. (This blog post, “Accepting immigrants and social security,” was based on the same article, but was posted mainly from the perspective of social security.)
As the country faces a declining birthrate, an aging population, and a worsening labor shortage, many countries are considering accepting immigrants as a means of economic growth. Japan is also accepting more foreign workers with the aim of replenishing its labor force and revitalizing local economies. However, there are both positive and negative opinions about whether accepting immigrants actually leads to economic growth. In this article, we will consider the economic impact of accepting immigrants from both perspectives.
1.Positive opinions that accepting immigrants leads to economic growth
(1) Resolving labor shortages and improving productivity
Developed countries are facing a declining birthrate and an aging population, with the productive-age population (15-64 years old) in particular declining. In Japan’s case, serious labor shortages are a problem in the labor market across various industries, and labor shortages are a constraint on economic growth, particularly in nursing care, construction, agriculture, and the service industry. By accepting immigrants, it is possible to supply labor to these fields and prevent economic activity from stagnating.
For example, it has been reported that accepting Syrian refugees has contributed to economic growth in Germany. Their employment in low-wage and unskilled labor has maintained and expanded the production activities of domestic companies, ultimately contributing to GDP growth. This shows that there is a direct effect on resolving labor shortages and improving industrial productivity.
(2) Expansion of the consumer market
An increase in immigration leads to an increase in the domestic population and an expansion of the consumer market. An increase in the population leads to increased demand for food, clothing, shelter, entertainment, education, medical care, and other necessities, which can lead to increased sales and profits for companies. Young immigrants in particular are long-term consumers who underpin economic growth.
In the United States, immigrants have created new markets and contributed to the expansion of the housing and automobile markets. There are also many examples of immigrants starting businesses and revitalizing local economies. For example, many IT companies in Silicon Valley were founded by immigrants and have created innovation.
(3) Promoting innovation and entrepreneurship
Immigrants from diverse cultures and backgrounds bring new perspectives, technologies, and business models to the country. The fusion of different cultures can foster innovation and create new industries and markets.
A survey in the United States has revealed that many of the founders of startup companies are immigrants, and that immigrant-founded companies are making a significant contribution to the development of new technologies and job creation. This shows that immigrants are not just a part of the labor force, but also contribute to revitalizing the economy as a whole.
(4) Increasing tax revenue and stabilizing social security
An increase in the productive population means an increase in taxpayers. If immigrants enter the labor market and tax revenues such as income tax and consumption tax increase, it will lead to the maintenance of the social security system and the improvement of public services. In particular, in a country like Japan, where the population is aging, securing financial resources for pensions and medical expenses is an important issue. Young immigrant workers have the potential to support the social security system in the long term.
2.Negative opinions that accepting immigrants does not lead to economic growth
(1) Increasing competition in the labor market and falling wages
Accepting immigrants will intensify competition with domestic workers, which could lead to lower wages and fewer employment opportunities, especially in the areas of low-wage and simple labor. This could lead to domestic workers, who are already economically unstable, being pushed into an even more difficult situation.
In the United States and the United Kingdom, the influx of immigrants has led to lower wages in some areas and increased dissatisfaction among local workers. There is a risk that immigrants will be used as cheap labor, especially in low-skill labor markets, and that this will lead to a deterioration in working conditions.
(2) Increase in Social Security Burden
Some immigrants do not contribute enough tax revenue because they work at low wages, while others use public services such as health care and welfare, which can put a strain on the social security system and lead to an increase in the budget deficit and a decline in the quality of services.
In particular, if a large number of immigrants are accepted in a short period of time, there are concerns that social infrastructure will not be able to keep up, and public services such as education, medical care, and housing will be strained.
(3) Social conflict and deterioration of public safety
Differences in culture, religion, and values can cause friction between immigrants and local residents. In particular, economic inequality and cultural divides can lead to social divisions and increased xenophobia.
In France and Germany, conflicts between immigrant communities and local residents have become social issues, and there is a risk that they could lead to a deterioration in public safety and become a breeding ground for terrorism. This could lead to increased social unrest rather than economic growth, which could have a negative impact on economic activity.
(4) Mismatch in skills and qualifications
If immigrants do not have the skills and qualifications required in the domestic labor market, a mismatch will occur in the labor market. Particularly in highly skilled professional occupations, differences in language and qualification systems can be an obstacle, and there are many cases where immigrants are unable to demonstrate their true abilities and end up in non-regular or low-wage employment.
3.Conclusion
Whether or not accepting immigrants contributes to economic growth depends largely on a country’s acceptance system and policies. The economic benefits, such as resolving labor shortages and promoting innovation, are clear, but challenges such as social friction and a worsening labor market cannot be ignored. What is important is to design and implement immigration policies not simply to replenish the labor force, but as a comprehensive strategy aimed at stability and harmony in society as a whole.
By promoting the development of appropriate education and vocational training, social integration programs, and legal systems, it is necessary to maximize the economic benefits of accepting immigrants and minimize the risks.