Migration, labor and the welfare state
The great economist Milton Friedman, a proponent of migration, once said that you can have either open borders or a welfare state, but you cannot have both. Immigrants can be accepted in large numbers as long as they work and are self-sustaining. If they are not, they become premature recipients of welfare, without ever having contributed, writes Prince Michael of Liechtenstein.
How does that translate to the present situation in Europe? To answer that, we first have to distinguish between immigration to Europe and migration within the borders of the European Union.
People coming from outside the European Union can either be refugees who were forced to leave their country – such as those from Syria – or they could simply be looking for a better life. The majority want to improve their lot through hard work, although some do come intending to misuse the welfare system.
The already staggeringly large number of people migrating to Europe continues to increase. This offers opportunities, but Europe must ease its overbearing regulatory system in such a way that these people can be put to work. They should also only benefit from government welfare after having sufficiently contributed (with the exception of the genuinely disabled). If these conditions are not met, the already financially shaky welfare system will quickly become overburdened, collapsing even faster than many already expect.
But there is also the issue of migration within Europe. Countries with elaborate welfare systems, such as the United Kingdom and Germany, complain that people from other parts of the EU move in and become entitled to welfare without having properly contributed. The UK, especially, is now considering putting limits on migration. That would severely undermine European principles.
These problems will not be solved within the framework of Europe’s oversized public welfare systems. The only credible solution would include individual private insurances, along the lines of the Swiss model. Under such an arrangement, insured people pay in contributions, which are usually subsidized by their employers.
This would allow all European societies to benefit from the advantages of migration. If the UK complains about Central Europeans on their welfare system, it should not be forgotten how much the British economy has profited from the skill, diligence and hard work of immigrants from the region, especially Poles.
In any case, many of Europe’s overstretched welfare systems will not be able to deliver on their commitments due to demographic decline, insufficient growth or populist policies.
As William Niskanen, one of Ronald Reagan’s advisors, once said: “Build a wall around the welfare state, not around the country.”