Free movement of persons (4) Labor migration to Switzerland

Since the introduction of the Freedom of Movement Agreement (AFMP) with the EU/EFTA in 2002, Switzerland’s population has grown by 1.5 million people. Two-thirds of immigrants were covered by the AFMP, and this immigration was largely determined by economic demand. Our overview research revolves around this labor migration (Labor migration to Switzerland: A classification of current findings. – IWP) – asylum migration, on the other hand, is not central.

Economic theory states that labor market-driven immigration can increase economic output and productivity. Immigration goes beyond the economy and also affects the state and society. For example, employees often come accompanied by family members. New immigrants participate in financing the welfare state and public infrastructure. At the same time, they claim benefits from the welfare state, use public infrastructure and in some places contribute to overpopulation. These effects are only partially taken into account by employees and employers when recruiting staff abroad.

It stands to reason that the benefits of immigration for recruiting businesses and recruiting immigrants outweigh the costs. However, it remains to be seen whether this also applies to the state and society as a whole. However, the answer to this question is central to an assessment of the current immigration regime in Switzerland. In this overview study, the IWP collects and classifies the current literature on the subject of labor migration. Where there are research gaps, the IWP addresses these within the context of this review study and future research.

findings

1. The free movement of people increases value creation in Switzerland, but is accompanied by a small increase in individual prosperity.

Swiss GDP per capita has increased by 23% since 2000, adjusted for inflation. This puts Switzerland in the middle of the European field. Other countries, such as Germany, achieved similarly high GDP per capita growth, with significantly lower immigration over the same period. According to studies, only a small portion of GDP per capita growth in the 2000s can be attributed to immigration. Immigration contributed on average 0.09 to 0.15 percentage points to annual GDP per capita growth. However, the estimates are surrounded by a lot of uncertainty. No studies currently exist for the period after 2013. GDP is insufficient as a prosperity indicator. For example, although immigration-related construction activities increase GDP, negative impacts on the landscape, environmental externalities, infrastructure quality and quality of life are not recorded by GDP.

2. The high level of immigration brings many skilled workers to Switzerland, but has not eliminated the shortage of skilled workers.

The number of companies having difficulty recruiting staff is at the highest level since measurements began in 2004. Immigrant workers, in turn, create demand for workers. Research shows that for every job created for an immigrant skilled worker in an export-oriented company, 0.6 to 1.4 jobs are created in the local industry. Family reunification is numerically significant: 40% of the foreign population who have entered the country since 2002 and remain in 2017 have arrived as part of family reunification. In contrast to labor-motivated immigration, skilled workers are not specifically recruited in the context of family reunification.

3. Immigration currently alleviates the structural problems of the AHV, but is not a permanent solution.

For Swiss people, there are 4 retirees for every 10 people of working age. For foreigners, this ratio is currently 10 to 1 due to the relatively low average age of immigrants. However, this is a snapshot, as immigrants will increasingly reach retirement age in the future. Over the life cycle, most people receive more benefits from the AHV than they contributed to its financing: EU/EFTA citizens receive 1.76 francs per franc in wage contributions, other immigrants receive 2 francs and Swiss citizens receive 1.83 francs in pension. Given current premium rates, the long-term financing of the AHV is dependent on increasing net immigration – which is contrary to sustainability. Only then will the current favorable ratio between workers and retirees continue to exist in the future.

Research gaps

1. Crowding effects

To what extent immigration contributes to the overcrowding of state infrastructure (public transport, roads, school buildings) or causes its expansion, or the relationship between the additional costs and tax revenues caused by immigrants, is unknown today. Overpopulation effects can also occur outside the state infrastructure (housing shortage, increase in living space, decreasing self-sufficiency in electricity and food, negative effects on the local environment). The associated (non-)monetary costs are difficult to quantify today.

2. Magnetic effects

The magnet effect refers to the attraction that a country with a generous social system has for immigrants. Empirical studies indicate the existence of the magnetic effect in some countries, including Switzerland. However, the magnetic effect has not yet been sufficiently investigated in Switzerland.

3. Impact of migration on political culture

As the share of foreigners increases, the share of the population entitled to vote decreases. Moreover, turnout among first- and second-generation naturalized citizens is relatively low. The consequences for the direct democratic system have also hardly been investigated.

4. Operating systems

It is currently unknown what the overall immigration balance will be when the effects on the economy, as well as the costs and benefits for government and society, are taken into account. In the event that the costs exceed the benefits, the question arises as to what reforms can bring the economy’s needs for workers more in line with social requirements.

Blog posts in the series: Free movement of persons

Klaus F. Zimmermann (GLO, 2023): Free movement of people at risk in the EU. Is mobility, the growth engine, stuttering?

Norbert Berthold (JMU, 2024): Internal market, euro and migration. Europe needs more mobility, not less!

David Stadelmann (UBT, 2024): Free movement of people with immigration taxes?

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