Contrary to common perceptions, immigrants to Switzerland are net contributors to the country’s tax coffers rather than a drain, according to a recent international study. This owes much to the robust Swiss economy, say experts.
The research, carried out by the Organisation for Economic Co-operation and Development (OECD), showed that the fiscal impact of immigration is almost neutral in most cases, with Luxembourg and Switzerland proving to be positive exceptions.
The 2013 International Migration Outlook estimated that migrants boosted Swiss tax coffers by CHF6.5 billion ($6.85 billion), equivalent to 1.9 per cent of the country’s Gross Domestic Product. Only Luxembourg recorded a better result, with two per cent.
These two countries also recorded the highest immigration rates in 2011.
“If you look broadly at the picture of immigration to Switzerland, you can pretty much call it a success story,” said Thomas Liebig, an OECD migration specialist and one of the study’s authors. “It has a lot of labour-related migration, which helps explain the favourable fiscal impact.”
Etienne Piguet, geography professor at the University of Neuchâtel, agrees.
“Switzerland’s economic migration policy has focused on attracting highly qualified workers from outside the EU as well as the best people from the EU, thanks to its dynamic work market,” he told swissinfo.ch. “This is what has happened so far, so it’s not surprising that these migrants are net contributors to the economy and state budget.”
According to Liebig, recent immigrants, in particular from the European Union, are very well integrated into the labour market and contribute far more in terms of taxes and social security contributions than they are taking out of the system.
“Foreign-born households receive more social benefits than native-born households, but at the same time they pay taxes that more than compensate,” he added. “Immigrants also contribute to the funding of state duties such as public administration, defence, infrastructure and so forth.”
This line of thought seemingly contradicts the theories of some politicians who defend restrictive immigration policies, notably the rightwing Swiss People’s Party, which claims that foreigners draw far more social benefits than the Swiss and negatively impact social security.
For Piguet, though, there is a strong consensus that immigration has had a favourable impact on the Swiss economy.
“Immigration from the European Union or of highly qualified workers has been approved a number of times in recent years by voters,” he said. “It’s the debate about asylum and migration from outside Europe that fuels any idea that migrants cost the collectivity.”
For the geography professor, the OECD report effectively confirms the official government line that immigrants have a positive impact on the country’s economy.
“If there are cracks in the consensus now, it’s because of non-monetary effects such as housing and transport shortages,” he pointed out.
Effects of free movement
According to the government, official statistics show that the free movement accord with the EU had contributed to the country’s extended economic growth, which was well above the international average. A recent study by the State Secretariat for Economic Affairs shows that salaries have also generally not suffered.
Responding to public opinion, however, the federal authorities do admit there are problems – related to housing, for example – which it hopes can be handled without official intervention. The government also recently activated a safeguard clause temporarily implementing immigration quotas for citizens arriving from the EU.
The OECD study looked at, for example, what current immigrants pay in terms of taxes, social security and value-added tax, and what they get out of the system, such as transfers as well as health and education expenditures.
“What is interesting in Switzerland’s case is that the positive impact is very robust,” said Liebig. “In many other countries, because the impact is close to zero, if you include or exclude some items in the total, it can turn a positive outcome into a negative one.”
So should the Swiss model be exported to other countries? And can it? Piguet answers negatively, stating that the success of immigration to Switzerland has less to do with official policy per se and more to do with the requirements of a strong economy.
“Switzerland has had some extraordinary luck, albeit with a little help from its policies, since the implementation of the free movement accord with the EU, with its flourishing economy being reinforced by immigration,” he said. “But to have that kind of success, you have conditions that are hard to replicate elsewhere.”
The consensus surrounding immigration policies has cracked somewhat in recent years despite economic success, with Swiss citizens expected to vote on two separate ballots demanding limitations on the number of migrants arriving in the country – one from the People’s Party and the other backed by the environmental organisation Ecopop.
Piguet says that while the backers of both ballots are oversimplifying the issues related to immigration, they cannot be ignored and are worthy of debate, notably because economic growth has fueled immigration in recent years.
“In the end it’s more a question of managing growth rather than immigration,” he said. “We can no longer just state that because the economy benefits from immigration we should pursue this policy, mainly because there is the issue of sharing the benefits of that growth.”