The aim of this paper is to examine the economic impact of migration, with a particular focus on how the effective integration of migrants into the labour market and society can boost economic growth. While the media often focuses more on refugees, most of the media coverage, i.e. y. Two thirds of all migrants in the world are people migrating from one country to another for economic reasons. Migrant labour accounts for almost 10% of global GDP. They boost the economy through innovation, entrepreneurship and hard work. However, to achieve this, successful integration is crucial, as it determines whether first-generation migrants will be able to settle in a country and reach their full potential.
Economic impacts of migration
In the face of increased migration flows, many European countries are reassessing their migration policies to balance security and public concerns. Nevertheless, most countries see migrants as an important factor for long-term economic stability. In Germany, for example, a shortage of skilled workers means that the country needs to attract around 1.5 million immigrants each year to maintain its labour force levels.
Analyses assessing the economic impact of migration have mainly focused on labour market or fiscal effects. These studies tend to be based on neoclassical models, where migrants are treated only as workers or consumers of public services, focusing on one-off shocks and adjustment periods, and defining narrow impacts. This approach ignores or downplays several broader economic impacts of migration, especially those related to skilled migrants.
Migration can affect trade and foreign investment between host and origin countries. Migrants reduce trade conflicts by sharing their knowledge of international markets, which helps to better align the interests of buyers and sellers. Diaspora networks also build trust and enforce contracts. In addition, migrants create demand for goods from their country of origin, which has an impact on trade depending on the size of their community. Skilled migrants are particularly important as they offer business insights, social connections and professional networks. This support helps local investors to explore opportunities in migrants’ home markets and assists multinational companies to manage investments abroad.
Economic impacts of migration in Lithuania
Migration in Lithuania has also increased significantly in recent years. For example, in 2021, 42.5 thousand people immigrated to Lithuania. people, doubling to 87,400 in 2022. The majority of foreigners immigrating to Lithuania in 2022 were citizens of Ukraine (65.8%), Belarus (22.3%) and Russia (3.3%). Many of the people coming to Lithuania are fleeing the war in Ukraine or authoritarian regimes in Russia and Belarus. The fourth largest diaspora of foreigners in Lithuania is Uzbeks, and the fifth is Tajiks.
Lithuania has been experiencing a shortage of skilled labour for some time. Migrants fill these gaps, not only in shortage occupations but also in unskilled jobs. Jobs that Lithuanians are reluctant to take on, such as carriage services, are increasingly done by foreigners. Due to the geopolitical situation and the rapid integration process, Belarusians and Ukrainians now account for the largest share of migrants in the labour market, followed by people from distant countries such as Uzbekistan, Kyrgyzstan and Tajikistan.
This solution to labour market shortages by using foreign workers is a well-established practice worldwide. It also facilitates rapid integration into a new country when migrants arrive with a clear idea of their job prospects. This approach is particularly useful for Lithuania, which has identified various sectors in its 2023 occupational shortage list that could easily be filled by migrants, such as industrial workers, machinists, forestry workers and textile workers. However, labour law should not lose its importance when thinking about foreign arrivals. Jobs with the longest hours and lowest pay should not be dominated by migrants alone, as this could allow employers to exploit the situation and maintain inferior working conditions. Migrants are already less likely to voice their concerns and seek solutions to problems because of their vulnerable position in society.
The contribution of Ukrainians to the Lithuanian market in recent years is the best documented compared to other migrant groups. Most Ukrainians work in the manufacturing, construction, transport and warehousing, accommodation and food services sectors. From the beginning of the war in Ukraine until the end of 2022, Ukrainians contributed €40 million to the Lithuanian national budget. The successful integration of Ukrainians could become a model for other migrant groups.
Economic effects of migration in Germany
Germany is a good example of how to integrate migrants effectively and exploit their economic potential. Historically, Germany has been very open to migrants, first attracting Eastern Europeans, followed by Middle Easterners in 2016 and Ukrainians in 2022. Each wave of migration has had different motivations, but has generally been viewed positively (in 2018, around 60% of native Germans supported the continued admission of refugees), especially given Germany’s shrinking population and growing need for skilled workers.
Economic data show that Germany has been successful in integrating many newcomers into the labour market. Since 2010, the country’s unemployment rate has shown a downward trajectory, and this trend has continued despite rising migrant flows. To further address the need for skilled workers, new rules came into force in 2024 to make it easier for foreigners to enter Germany. Under the new Opportunity Card, based on a points-based system, skilled workers from outside the EU can look for jobs in Germany, based on qualifications, work experience, links to Germany and personal factors such as age.
Demographic change will make Germany increasingly dependent on immigration to maintain its skilled workforce and economic stability. Immigrants already play an important role: in 2019, almost one in six skilled workers in Germany was foreign-born, and one in twenty has arrived since 2007. Among university graduates aged between 25 and 34, around a quarter are immigrants. These figures underline the growing contribution of immigrants to the labour market, and reinforce the view that migrants have many potential benefits for strengthening and developing European economies.
Future perspectives and recommendations
As ageing populations in many European countries continue to reduce the size of the native workforce, demand for skilled immigrants will continue to grow. Countries such as Germany and Lithuania will increasingly seek to attract foreign talent to sustain economic growth. Governments are likely to continue to refine immigration policies to attract skilled migrants while balancing political and social concerns. These policies may include simplified visa procedures, improved integration support for immigrants, and targeted people-attraction efforts. Retaining skilled migrants will become a priority and countries will invest in creating favourable living and working conditions, including quality education, healthcare and social services. By focusing on these areas, European countries will be able to better harness the economic potential of migration, ensuring sustainable growth and stability in the future.
Photo: Unsplash I Jason Goodman
List of References
- Exploring migration causes: why people migrate | Topics | European Parliament. (2020, 7 January). Topics | European Parliament. https://www.europarl.europa.eu/topics/en/article/20200624STO81906/exploring-migration-causes-why-people-migrate#:~:text=Migration%20can%20be%20voluntary%20or%20involuntary%20and%20can,the%20reason%20they%20move%20to%20a%20particular%20country
- Rizvi, O. (2024, February 5). What is the economic impact of migration on Europe? Euronews. https://www.euronews.com/business/2024/01/22/the-economic-impact-of-migration-on-europe
- Khamidov, E. T. U. (2022). Impact of High-Skilled Migration on the Economy. Laboratorium Wiedzy Artur Borcuch. Volume 29, 102.
- International migration – Official Statistics Portal. (n.d.). https://osp.stat.gov.lt/lietuvos-gyventojai-2023/gyventoju-migracija/tarptautine-migracija
- Foreigners arriving in Lithuania stay longer in our country – Migration Department. (n.d.). Migration Department. https://www.%C5%
- Mačiulskytė, V. (2024, July 12). Lithuanians no longer want to do these jobs: employers complain that they can’t bring in more foreigners. tv3.lt. https://www. tv3.lt/naujiena/verslas/lietuviai-siu-darbu-dirbti-nebenori-darbdaviai-skundziasi-kad-uzsienieciu-negali-atsivezti-daugiau-n1350438
- The list of shortage occupations for 2023 is approved. (2022, 21 November). Employment Service. https://uzt.lt/naujienos/8/patvirtintas-trukstamu-profesiju-sarasas-2023-metams:117
- Ukrainians working in Lithuania paid €40 million last year. €40 million in taxes . (2023, Sausio 25). Lietuvos Respublikos Socialinės Apsaugos Ir Darbo Ministerija. https://socmin.lrv.lt/lt/naujienos/lietuvoje-dirbantys-ukrainieciai-pernai-sumokejo-40-mln-euru-mokesciu/
- Welle, D. (2018, September 17). Germans upbeat about immigration, study finds. dw.com. https://www.dw.com/en/germans-upbeat-about-immigration-study-finds/a-45519655
- Author, B. (2021, June 16). How has Germany’s economy been affected by the recent surge in immigration? – Liberty Street Economics . Liberty Street Economics. https://libertystreeteconomics.newyorkfed.org/2019/05/how-has-germanys-economy-been-affected-by-the-recent-surge-in-immigration/
