Is immigration the saviour of the welfare state? Some sceptical comments on the Irish case
The first two threats have, to some extent, been nullified by, first of all, a refutation of at least some of the aspects of the globalisation thesis (for a review see Bruff 2005; see also Hay 2006; Swank 2002): it has become more widely accepted that as long as countries with generous, universal welfare states are economically successful then the pressures to implement cuts will not be too great (though policy-makers are more likely to believe the globalisation thesis – see Hay and Rosamond 2002). Secondly, leading on from this, there have emerged in the past 15 years several examples of European countries breaking the vicious circle of rising welfare costs and falling taxation revenues, reversing in the process a long-established trend to higher unemployment and stagnating or lower labour market participation – see for example the Dutch, Danish and Irish ‘miracles’ (Auer 2000; Green-Pedersen et al. 2001; Nolan et al. 2000).
In contrast, demographic pressures appear to be non-negotiable: there has been and will continue to be for decades to come an inexorable ageing of European societies, as rising life expectancy and medical breakthroughs increase the numbers of the elderly. This has coincided with a significant downturn in the birth rate since the end of the baby boom in the 1960s, to the extent that most European countries are now well below the replacement rate of 2.1 children needed for a population to remain stable. Indeed, in some countries, such as Germany, the population will begin to fall in the near future and the working-age population has already begun to fall. The result is that the dependency ratio, which divides the number of those below 16 and above 64 by the number of working age, is steadily increasing, and given, in addition to pension payments, the rising health costs associated with increasing age, it is not hard to see why the challenge of demographic pressures has become such an urgent issue for European policy-makers.
Hence the increasing emphasis on immigration. Broadly, immigrants can be saviours of the welfare state in three distinct ways. One, they tend to be of working age. Two, they tend to be younger and more likely to be without children than the indigenous population. Three, they fill labour and/or skills shortages in industries that the indigenous population wish not to work in – for example, labouring – or do not have the skills to work in – for example, software engineering. Therefore, in several ways immigrants can prevent the dependency ratio from deteriorating further as the population ages: they enable tax revenues to be higher, the relative lack of children means that welfare costs are not much higher, through filling labour and/or skills shortages they enable industries to keep a check on wage inflation, and their employment benefits the economy as a whole through the multiplier effect, thus bringing more people into the labour market.
It is easy to see why the political costs associated with immigration, such as a potential rise in racist sentiment and the fall-out from any displacement of indigenous workers by immigrants, can be overridden by a desire to capture the economic gains. For example, the EU designated 2006 the Year of Mobility, and the EU’s labour market will be completely open to workers from all member states by 2011 at the latest. In addition, many countries are increasing tailoring their migration policies to economic needs, with at the high end fast-track programmes and points systems to entice skilled migrants and at the low end a possible revival of ‘guest worker’ programmes being discussed (see the interview with Martin Ruhs in the “The political economy of migration/mobility in the EU” theme of the “How many paths to Florenc?” project).
Nevertheless, such an approach to immigration must be carefully managed to prevent immigration from becoming a threat to the viability to the future of welfare states. Below, this article will use the example of the Republic of Ireland, seen by many as a model of how to progress from a poor, agrarian economy to a rich, knowledge-based economy, to illustrate this possibility. I argue that it does not take much for the utilisation of immigration for the purposes of filling labour and skills shortages to become a dependence on immigration. The revenue and welfare cost benefits of immigration become much less certain when this happens, because future migration flows are impossible to predict, especially due to the rise of the EU labour market and also the declining cost of travelling.
It should be stated that I am assuming that the maintenance of European welfare states continues to be a policy aim. This may appear at odds with contemporary developments, with cutbacks and incremental privatisation taking place in several countries. Moreover, opinion polls suggest that younger generations expect to need to provide for themselves to a greater extent than older generations have needed to. Nevertheless, I make my assumption for three reasons: one, the literature on this issue clearly believes in European-style (i.e. generous and comprehensive) welfare states and thus needs to be engaged with (for example, see Esping-Andersen 2002); two, the popular legitimacy of the welfare state across different countries will make it difficult for it to be dismantled or substantially diminished; three, the desirability of maintaining the welfare state remains central to political discourse and rhetoric – witness the continued emphasis on the European social model. Some will probably contest this assumption, and the reasons given, but from my perspective it is more likely that European political economies will mutate in the coming years and decades rather than be transformed (see Bruff 2007b). Therefore, immigration and the welfare state will become increasingly intertwined as policy-makers seek to utilise the former in order to prop up the latter. This is the case whether the link is articulated explicitly in political discourse or not.
Ireland’s economic miracle and immigration
Ireland’s economy experienced remarkable economic growth throughout the 1990s (more than 6% per annum), on a par with or exceeding the performance of the East Asian ‘tigers’, and even in the 2000s the lower rate of expansion has been and continues to be substantially above the EU average (Schweiger and Wickham 2005). In addition, unemployment fell from more than 15% in 1993 to less than 5% by the end of the decade (Smith 2005), and has remained at that level ever since. Coinciding with the boom has been the reversal of a centuries-old trend: emigration. Since the end of the 1990s more than 50,000 people per year have been migrating to Ireland, giving a net inflow of 30,000 per annum (Ruhs 2005). Furthermore, “[a]lthough the number of Irish return migrants has increased almost continuously since 1987 (peaking at 27,000 in 2002), their relative share in total immigration fell from about 65 per cent in the late 1980s to just under 50 per cent in the late 1990s and to 37 per cent during 2002-2004” (ibid., p.8) – a proportion which has fallen further since the enlargement of the European Union, which triggered a huge influx of workers from mostly Poland but also other accession countries such as Lithuania and Slovakia.
One distinctive aspect of the migration cohorts is the skill level. Not only are the returning Irish highly skilled but so are the non-Irish migrants (Minns forthcoming) – indeed, a significantly greater proportion possess a degree (or equivalent) than the Irish population (Mac Cormaic 2006). This has enabled all sectors of the Irish economy, many of which were suffering from labour and/or skills shortages by the late 1990s due to the rapid economic growth, to continue expanding. The use of immigration as a tool of economic strategy has been prevalent since this time. For example, the ten new EU member states from 1 May 2004 onwards were allowed full access to the Irish labour market, even though Ireland could have followed countries such as Germany and not fully opened its doors until 2011 (Ruhs 2005. The government’s expectations of how this could be managed to the advantage of the Irish economy was demonstrated in late 2003, when it began encouraging employers to prioritise workers from the new EU countries when recruiting from abroad. The government made it clear that it expected most low-skill shortages to be filled from with the EU labour market, thus avoiding the costly process of granting work visas.
In tandem to this, the fast-track work visa and authorisation programmes, which were introduced in 2000 in response to labour and skill shortages in high-skill economic sectors, will become the backbone of a “skilled and highly skilled migrant worker programme” (Ruhs 2005, p.16). The Irish government, quoting an Enterprise Strategy Group Report of July 2004, believes that “there will be an ongoing requirement for significant immigration levels, particularly of people with higher qualifications” (Department of Justice, Equality and Law Reform 2005, p.61), which means that this means of entering Ireland could become more important in the future. This is not to say that no migrants from within the EU are highly skilled; rather, the government does not expect, in contrast to its view on low-skill migration, to source all of the required labour from the EU.
The need for skilled immigration commands a consensus of opinion from all sides of the political debate, and can be summed up by the estimate of an expert group that Ireland requires a net annual immigration of 20,000 to 30,000, or 1%-1.5% of the Irish workforce, predominantly skilled migrants over the next decade (Expert Group on Future Skills Needs and Forfás 2005). An example of why this is the case is the Irish software industry. Ireland is the largest exporter of software in the world (Hoffman 2005), and the software sector is more important not only for the broader Information and Communication Technology (ICT) sector but also the economy as a whole than in other countries (Ó Riain 2004) (Haynes et al. (2005: 22) report that in 2000 “[v]alue added in the ICT sector accounted for 11.6% of Ireland’s GDP, compared with an EU average of 5.1%”).
Immigrants have become increasingly important to the software industry since the dotcom crash of 2001-3. In addition to those who left the industry at this time and have never returned, it seems many Irish students do not want to study the subjects deemed necessary for entry into industries such as software. Courses more likely to guarantee stable, secure employment, such as management and nursing, have become more popular relative to computer science and electronic engineering degrees. For instance, a Dublin City University survey found that half the numbers entered computer courses at university level in 2005 as compared to 2000 (Donnelly 2006). Therefore, it is not surprising that the Careers & IT section of the Tech Central website (www.techcentral.ie), which provides daily updates about the Irish IT industry (of which software is a crucial part), reported in November 2004 that:
one in two Irish IT directors are [already] concerned about a deficit in suitably trained professionals. This compares to just two per cent in the UK and eight per cent in Germany…[last year] 88 per cent of Irish managers said that they were not worried about an Irish IT skills shortage.
Given that employment in the software industry fell by 25% in the 2001-3 period, from 31,500 to 24,000, before rising slowly in 2004 (from the Enterprise Ireland website, at www.enterprise-ireland.com), the swift re-emergence of the shortage of suitable workers indicates the extent to which immigration is necessary for the industry to continue expanding.
In addition, it does not take much for economic necessity to become economic dependence. This is particularly pertinent in the Irish case, where some estimates for employment in the software industry by 2010 are as high as 50,000 (O’Brien 2006), but is certainly applicable to any country wishing to use the Irish experience as a model to emulate. Of course, such dependence may not prove problematic should the immigration continue to provide Ireland with what it needs. On the other hand, the fact that Ireland did not become a country of net immigration until 1996, and given that the number of immigrants from Eastern Europe post-enlargement was hugely under-estimated (see Martin Ruhs interview), demonstrates not only how well-established trends can be reversed but also how unpredictable migration flows can be. The next section of this paper will examine not the implications of a future economic slowdown for immigration flows – I have made this point elsewhere (see my articles in the “political economy of migration” theme) – but the sheer impossibility of planning for future immigration flows. Immigration flows should be seen not as predictable but as dynamic and unstable. The life stories of individual migrants are undetected by official statistics, yet they are at the heart of the problems associated with economic dependence on immigration.
Contingent career choices
This section will focus on the four migrants from CEE countries interviewed for the Trinity College Dublin project on migrants in the Dublin labour market that is discussed in the footnote. Broadly, the opinions expressed by the CEE interviewees were not out of step with those expressed by non-CEE interviewees, apart from, mainly, the extent to which the two of the CEE interviewees expressed their satisfaction with life in Ireland. While some of the non-CEE interviewees also expressed positive opinions about Ireland, these statements tended to be more qualified. Nevertheless, even the two CEE interviewees upheld their right to leave Ireland should circumstances in their life change – therefore, the career and location choices of these migrants should always be seen as contingent and not permanent.
At least part of the reason for this contingency is the nature of the software industry. Despite the fact that the intangible nature of knowledge-based human capital makes it possible for each employee to construct a personalised CV containing unique attributes, in practice different companies are looking for similar things. Furthermore, the speed at which technology develops in the sector has resulted in industry requirements driving standards of professional qualification rather than national associations (Iredale 2001). Thus there is little exclusivity across different countries due to the absence of national regulations and procedures, which, combined with the dominance of the English language, further entrenches the inclusivity of the skills requirement. Therefore, it is possible for migrants to work in similar positions across the globe (Aneesh 2006; Khadria 2001). However, this is not the full explanation: to achieve this we need to let the migrants speak.
Our four CEE interviewees are: Pavel, 36, Czech, who has worked in the Irish software industry for several years; Dragos, 41, Romanian, who has worked in the Irish software industry for several years; Ferenc, 38, Hungarian, who worked in the Irish software industry for several years before leaving Ireland in 2004; Tibor, 34, Hungarian, who has worked in the Irish software industry for several years. All four have children of varying ages, all are married to a woman of the same nationality, all marriages except Ferenc’s took place before the migratory movement, all work or have worked in jobs which combine/combined technical expertise with ‘soft’ skills, be it team leadership or communication with other employees and/or clients. Finally, and significantly, Ferenc returned to Hungary in 2004 and Pavel, at the time of the interview in September 2005, considered it likely he would return to the Czech Republic in 2006 or 2007. On the other hand, Dragos and Tibor love living in Ireland, although they still referred to the possibility of leaving Ireland should circumstances change.
To illustrate the contrasts between Ferenc and Pavel and Dragos and Tibor, there were differing opinions on Ireland itself and the level of satisfaction with living in Ireland. Pavel and Dragos provided illuminating comments, and what is interesting is that despite this difference both had been in Ireland for a similar length of time and had both worked for a number of years with the same company:
[I]t is actually very difficult to integrate into Irish society. Irish people consider themselves as very friendly, but it’s very difficult to get under their skins – to be part of society (Pavel).
Our friends here in Ireland are Irish: I don’t have any Romanian friends in Dublin. And I am not – well, we were not – trying to find friends only because they were Romanians. So we have a couple of families that we visit and we know...but our friends are Irish (Dragos).
Indeed, Dragos made a point of emphasising that he had not conformed to the immigrant stereotype of establishing friendships with people of the same nationality. In contrast, establishing friendships with Irish people proved impossible for Pavel due to what he believed was the superficial friendliness of the Irish. A logical consequence of these differences was the inverse relationship between satisfaction with Ireland and the opinion on the home country. For example:
[W]e would be closer to our families (in the Czech Republic), because especially with our children growing and our parents getting older, we are feeling that we are kind of stealing something from both sides. Our children don’t have grandparents…that’s another reason…We had the date – it was this summer! We passed this one…It was not our case that we made our fortune over here, and we are very limited by the job or our income, which means that we are now considering that it should happen soon [i.e. once Pavel is able to get a good job in the Czech Republic]. So it should happen next year (Pavel).
Yes, we quickly realised that Ireland is a much better place to live. Not only financially…but the quality of life…the way that you can spend time with your family; the way people communicate with each other; the way they understand each other; the way they pay attention to each other: it’s absolutely a different culture to what we have in Hungary. In Hungary people are still tense. The fall of communism was a huge change: a lot of people – my parents’ generation – simply couldn’t adjust. Even my generation, which was caught in the middle of growing up, are always tense; always in a hurry; always have to do something, mostly just to provide enough money to live…The fact that I can take the kids to this coast, the parks, to playgrounds – a lot of interesting and funny places...I sometimes feel that I am starting to turn to be Irish – partly because I find the weather acceptable here!...sometimes I feel myself closer to…this Anglo-Saxon culture (Tibor).
For the first two years I had my post at the university back in Romania reserved: so when I came here I came very relaxed, because I didn’t burn all of the bridges back home. The deal with my family was: let’s go and give it a try, and if we like it we’ll stay and if we don’t like it we’ll come back the following day. I have a daughter: she was 10 when we arrived in Ireland. But it seems that we really liked what we’ve got here, so we have now been in Ireland for 5 years…Life in Romania in the 1990s was difficult – even if the communist regime [had fallen], those years were very mixed. More than that, all of my friends from university – all of the computer-related friends – emigrated during the first years of the 1990s. They emigrated to Canada. I have more friends in Toronto than I have back in Romania. All of my friends are in Toronto…I hope that things will improve in Romania. I have my family there: my mother, my father. I am the only child, and initially I said that I might stay there to take care of them when they would be old. All those years in Romania were worse than worst – everything had seemed to go from bad to worse: no improvement from not [just] a strictly material point of view. The whole society was torn apart by the change. What was initially a much respected social position degraded immediately. I never felt rewarded for my efforts by anything (Dragos).
An interesting supplement to the above statements comes from Ferenc, who pointed out what happened after the dotcom crash:
While in Ireland I married a fellow Hungarian, who also worked for [a large multinational corporation]. She stayed with [them] until late 2003, when she was given 6 months’ notice to leave. She now works for [the same company] in Hungary. I moved back shortly after my wife…After 2000 the job opportunities began to dry up, forcing many to leave [the multinational corporation he worked for in Ireland before the dotcom crash]. About half of them moved to the US because they could more easily apply for an internal job while in Ireland than people outside the company (Ferenc).
Thus like Pavel, Ferenc ended up seeing his future as back in the home country for family reasons. Unlike Dragos and Tibor, they did not desire to remain in Ireland, and merely disappointing rather than disastrous individual economic circumstances were often the catalyst (in Pavel’s case, simple dissatisfaction with the income he was earning – it proved low enough to make the move back to the Czech Republic, even with a possible lower standard of living, worthwhile). Interestingly, like those in Ferenc’s quote who left Ireland for the US, Dragos and Tibor would consider leaving Ireland should economic conditions deteriorate:
I feel that we could settle down here, but since we cannot afford to buy a house here – we live in a rented apartment – it doesn’t give me the feeling that we are settled down here. It’s somehow temporary; it feels temporary…If the Irish economy would turn to be much more difficult and I couldn’t find a job, I would first of all consider a move to Australia or New Zealand if possible before moving anywhere else – back to Hungary even…If I could actually buy a small house here, I could easily settle down here…We actually finished the house we built in Hungary, so we now have a nice 5 bed house, with a big enough garden…but if even if we sold that it wouldn’t be enough for the deposit here (Tibor).
I am not now in any desperate [need] to move there [to the US]. I would move probably in the same conditions as anyone from here, or you, would move to another country. If you find a good job it would not be to escape from Ireland – no, Ireland is my home, my country, I feel excellent here. I don’t have too many reasons to run out of Ireland; in fact I don’t have any reason to run out. As you moved from Manchester to here, I would move from Dublin to Chicago or whatever (Dragos).
Therefore, even among the CEE migrants positive about Ireland – and Tibor was overwhelmingly positive (at one point proclaiming Ireland to be ‘a great country’) – their settlement in Ireland was conditional. Having already made the move from their home country, and given the transferable skills that they have, they are not deterred from possibly trying another country should economic circumstances change. This can in part be related to their negative and sometimes scathing opinions about their home countries (even though both have family in Hungary and Romania respectively). There was a great desire not to live in the way they had done in the 1990s, which clearly had a significant influence on their willingness to move away from Ireland should this be deemed necessary. Moreover, Tibor was, in a similar manner to Ferenc and Pavel, frustrated at the high house prices which have been a characteristic of Ireland for several years. The difference is that it was enough for Pavel and Ferenc to give up on Ireland, but the fact remains that there is a potential trigger for leaving Ireland within Tibor’s narrative. Indeed, the return to Hungary has provided Ferenc with even more reason to remain in Hungary:
I never dreamed going back would be so easy, but Dublin’s cost of living helped (Ferenc).
Discussion and concluding comments
It is hoped that the previous section demonstrated the range of factors which make the migrant’s stay in the destination country contingent on individual and also economic circumstances. These life stories are undetected by statistics on migratory movements and also by policy discourse, which in effect assumes that immigrants with similar backgrounds will act in similar ways. This may be true to an extent, but it is far from certain. Because of this, relying on immigration to guarantee the future viability of the welfare state is a risky option, especially when one considers the fact that policy options to increase the size of and/or the productivity of the workforce exist. This is not to say that immigration will be unnecessary or undesirable; rather, that immigration’s current status as the potential saviour of European welfare states is misleading both in itself, because immigrants often do not act in the way that is expected of them, and also in comparison with other policy options.
It is therefore the contention of this paper that immigration can help guarantee the future viability of European welfare states when it is no more than a supplement to other policies. If immigration becomes central to welfare strategies then the inherent unpredictability of migratory movements – especially the highly skilled, who are the most sought after immigrant ‘type’ – could cause significant problems in the future. This is especially the case in industries, such as the Irish software industry, which to some extent depend on a continuous inflow of immigrants to Ireland (see the paper on I.T. migrants working in Ireland in the “political economy of migration” theme). The policy challenge is thus, in the first instance, to focus on endogenous rather than exogenous improvements in the workforce.
In terms of numbers, it is becoming clear that those countries with extensive policies supporting existing and aspiring parents – such as generous parental leave entitlements – also enjoy higher birth rates. In some of these countries, especially in Scandinavia, this has manifested itself in high labour market participation, i.e. social and labour market policy work hand in hand. So while it may seem costly to strengthen the rights of parents and increase the level of benefits that they receive (and also the duration of time that they are entitled to them), the consequence is continued labour market participation. Therefore, should countries have a participation rate of below 75% (Ireland is well below this level), then the notion that there is a labour shortage is simply a convenient excuse for using immigrants instead of embarking on the more costly, but more sustainable, path of encouraging greater labour market participation.
This does not mean simply pushing as many people into the labour market as possible; it also means ensuring that the workforce is suitably trained and qualified. Examples were given above of the Irish education system facilitating a move away from computer science. In addition to this, up to 20% of the workforce is functionally illiterate in terms of numeracy and literacy (Wickham and Boucher 2004) and lifelong learning is well below other, and particularly Swedish, levels (Enterprise Strategy Group 2005), as is childcare provision. There is clearly room for improvement, but at the moment there is no urgency due to the continued strong, but fragile, economic performance. 
To conclude, a country’s policies on immigration does not just indicate its attitude towards, for example, refugees and asylum seekers. Once a step backwards is taken and the wider picture surveyed, it can be seen that a country’s policies on immigration are also strongly linked to the type of economy and society that it wants. For instance, West Germany’s ‘need’ for migration in the 1960s and 1970s told us just as much about the cultural values upholding the desire for women to remain at home while men earned the income as it did about the strength of the economy (Naumann 2005).
Thus if a society wishes for some of its members to remain outside the labour market, or is unable to increase labour market participation up to high levels, then it should be expected that in an ageing continent we will see policy-makers utilising immigration as a means to maintaining welfare states. Pushing as many people into the labour market as possible is no panacea (for a discussion of the ‘adult worker’ model, see Lewis and Giullari 2005), but the consequences of falling short of high labour market participation must be immigration and the unpredictability that this brings. If we think back to the highly conditional sense of citizenship that even Tibor possessed, then it can be seen how an endogenous rather than exogenous solution to demographic issues is ultimately preferable, if only because it gives national governments more control over the management of the welfare state in the 21st century. The question, therefore, is whether national policy-makers are able to make this change, for in many countries it requires a substantial modification of the labour market and welfare state for it to happen.
France recently reached this level again, but this was after a prolonged period below 2.1 children
 Some of the text utilises interview data generated by the “Transnational migrants and the Dublin labour market” project run by the Institute of International Integration Studies and the Employment Research Centre at Trinity College Dublin, Ireland, between 2002 and 2006. In 2005 27 semi-structured qualitative interviews in Dublin were conducted with 32 people, 25 of whom were migrants (the rest being human resource managers and policy-makers). Of these, 15 were from non-EU countries (of which 8 were Indian), 7 from the EU15 countries, 3 from the EU10 countries which joined in 2004, and 4 from CEE countries. 19 of the interviewees were men and 6 were women – broadly reflecting the gender composition of the workforce – and the age range was 23-41 years old, with the majority clustered in the 27-36 age bracket. Pseudonyms are used in order to mask the identity of the given interviewee.
 In other words, increasing the retirement age, as many have countries have done or have proposed to do, is not enough on its own, and in any case it seems that the political costs of extending it beyond 67 or 68 are too high. Other options are thus more important in the wider scheme of things.
 Since the first draft of this article was written, there has been a significant economic slowdown. Economic growth in Ireland is in 2008 expected to be the lowest for 15 years. Curiously, while falling house prices, the global credit crunch and a contracting construction industry are clearly important factors, the expected lower levels of immigration have not been commented upon (see also Bruff 2007a).Bibliography
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