Germany Chases a Fix for Its $35 Billion Immigration Problem

(Bloomberg) -- Germany has an immigration problem, but it might not be what right-wing extremists think it is. Rather than too many foreigners in the country, economists fret there won’t be enough.

With baby boomers retiring and not enough young people joining the labor market, the country needs at least 400,000 people coming to work in Germany every year to maintain its competitiveness, according to the IAB Institute for Employment Research. A shortage of skilled workers means businesses won’t be able to produce as much as they could, holding back the economy by about 30 billion euros ($35 billion) a year, research by the Cologne Institute for Economic Research shows.

Germany Chases a Fix for Its $35 Billion Immigration Problem

It’s a delicate issue for Chancellor Angela Merkel. Her open-door policy to refugees -- more than 1 million asylum seekers came to the country since 2015 -- helped foment social tensions and facilitated the emergence of the right-wing Alternative for Germany party. That puts pressure on her to respond to these concerns, while also helping businesses clamoring for more talent.

“It can take up to six months before employees from non-EU countries get their visa,” said Michael Bueltmann, who runs the German operations of digital mapping company HERE Technologies. “This has a negative impact” on recruitment and complicates planning. The company employs 1,200 people in Germany, including programmers from Bangladesh and the Middle East, who lack certainty about their residency prospects.

To address these concerns, Interior Minister Horst Seehofer, who recently referred to migration as “the mother of all problems,” is finalizing a law aimed at helping skilled workers come to Germany, while also controlling the influx of low-skilled people who might take advantage of the country’s generous welfare system.

The refugee situation and immigration may be linked in the legislation, with the SPD -- Merkel’s junior coalition partner -- calling for refugees to be able to switch out of asylum status if they find a job. The so-called “lane change” proposal has been rejected by Merkel, setting up a potential showdown.

The final immigration bill is to be presented this fall, and critics are already concerned it won’t go far enough.

“The planned legislation is a first step, but not what Germany really needs,” said Wido Geis, a senior economist at the Cologne Institute. “A truly modernized German immigration law would need a restructured administration” that centralizes approval processes rather than relies on local authorities.

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