The economic impact of immigration in Belgium

The aim of this report is to provide an overview of the economic impact of immigration in Belgium, distinguishing between first- and second-generation immigrants as well as between immigrants with an EU or a non-EU origin. Although the focus of this study is economic, any broad assessment of migration should also take into account other considerations such as human rights and international law, in particular with regard to protection for and reception of refugees.

According to CBSS data[1], in 2016, 69.8 % of the whole Belgian population was native (born in Belgium with both parents born in Belgium), 16.5 % first generation immigrants, and 13.7 % second generation.

The analysis of the impact of immigration on public finances indicates that the net contribution of a working-age individual to public finances at a certain moment in time primarily depends on his/her labour market position: it is positive for people in employment and negative for people not in employment. The age structure of different groups also play a significant role. The net contribution from first-generation immigrants to public finances is on average lower than that from natives. Differences in contributions are to a large extent attributable to differences in transfers paid by individuals: comparably less taxes and social security contributions are paid by immigrants. This is a direct result of differences in employment rates between the groups. But lower average wages for people born outside Belgium also play a role. Based on 2016 data, the net contribution of the children of first-generation immigrants (the second generation) to public finances is on average higher than that of natives, mainly because of their younger age structure. Raising the employment rate among immigrants (and their children) is key to enhance their contribution to public finances. 

Nevertheless, Belgium is among the worst performers in the EU in integrating immigrants into the labour market. In 2019, 61 % of them were employed, which is almost 12 pp lower than for a person born in Belgium. Personal characteristics only explain 18 % of this gap. The second-generation improves its labour market integration and a larger part of the gap with natives can be explained (46 %), education opportunities appear to be their main disadvantage. The migration channel is not neutral for labour market outcomes. People migrating through family reunification or international protection are 30 pp less likely to have a job than labour migrants. Citizenship acquisition, recognition of diplomas and skills, proficiency in host country language(s) and discrimination clearly influence migrants’ integration. The poor performance of Belgium in this area is found to be due to the level of education of immigrants but also to rigidities of the Belgian labour market and the fact that few policies are specifically designed to help immigrants find a job.

 

[1] This database includes all individuals present in the National Register, so that illegal immigrants, asylum seekers, posted workers, temporary or seasonal immigrants are excluded from the analysis.

A theoretical model, calibrated to Belgium, shows that immigration inflows over the last five years had a positive impact on GDP, pushing it up by 3.5 %. The effect is positive for both EU and non-EU origins with a 2 % increase from EU immigration and a 1.5 % rise from non-EU immigrants. Moreover, no detrimental effects of immigration are found for natives in terms of wages, unemployment, participation, net income or welfare. Previously established immigrants, more substitutable by newcomers, are more likely to be negatively affected, something which is confirmed by the academic literature on the subject. The positive aggregate impact of immigration depends on the labour market integration of immigrants. A higher employment rate will be associated to a larger increase in GDP and GDP per capita.