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Why does Germany`s Migrant Population Earn Less than its Native Population?

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A good way to measure how well the migrant population has been integrated into German society is to examine its economic standing relative to the native population. To this end, recent data from the German Federal Statistics Office shed some very important light. But first,

Who is a Migrant?

For the 5th time in a row last year, the population with a migrant background reached a new record high. An individual living in Germany is said to have amigrant background if she or he has a migration history of his or her own (post 1949), is a foreign national born in the Federal Republic or was born as a German citizen to at least a parent who is either an immigrant or was born in Germany as a foreign national. The total population with a migrant background in 2016 was roughly 18.6 million, representing more than 22% of the total population and an increase of about 8.5% from the previous year. The vast majority of these migrants - or nearly 70%, - have a European background. Other regions include Asia (18%) and Africa (4%).   

The economic state of migrants

While the national economy as a whole is doing fairly well, its benefits have not been equally shared by all groups. Annual percentage GDP growth rate in Germany remains far below the 4% level in 2010 but has risen each year since the 2011-2012 slump. Last year, the economy grew just shy of 2% according to the World Bank. Employment rates have also improved significantly since theglobal economic crisis of 2008. The Unemployment rate last year (as a percentage of total labor force) was just 4.3%. In economic parlance, this represents near full employment. Also, average gross monthly income continues to rise. In 2016, German workers took home on average 3,703 euros per month. However, the population with a migrant background earns significantly less than the native population.

Last year, 28.1% of the population with a migrant background earned not more than 900 euros per month compared to 20.7% of the native population. On the contrary, 23.5% of the native population earned 2,000 euros or more per month compared to just 13.1% of the population with a migrant background. Even more striking was the fact that only 15.3% of the native population had no monthly income in 2016 compared to 28.4% of the population with a migrant background. This means that altogether, more than 56% of the population with a migrant background have either no monthly income or earns not more than 900 euros per month compared to just 36% of the native population. The gross overrepresentation of the migrant population in the low or no income category is symptomatic of a host of factors.

Making Sense of the Gap

A host of factors underpins the gross overrepresentation of the migrant population in the low or no income category. The labor force participation rate among the native population is relatively higher than the participation rate among the migrant population (although the gap is quite narrow). The rate ofunemployment for the migrant labor force in 2016  was more than twice the rate of unemployment for the native labor force. This partly explains why more migrants earned no income last year than natives. Furthermore, the population with a migrant background is less likely than the native population to be self-employed or engage in salaried employment. While there are some important advantages of wage employment such as overtime pay and no take-home work, salaried jobs are better paid, more secure and are often accompanied by additional benefits including maternity/ paternity leave than wage employment. The underrepresentation of the population with a migrant background in salaried employment is hence significant not just in terms of income in the narrow sense, but also in terms of job security, health benefits, and the overall welfare migrant families.

Why is the migrant population disproportionately represented in low-paying jobs? A possible explanation may lie in the differences in average human capital accumulation between the two groups; i.e., differences in levels of education and vocational training. The higher educational attainment gap between the two groups is quite small. Thus, 15.2% of the native population have attained aBachelor's degree or higher ( Bachelor's, master's, Diploma and Doctor`s degree) compared to roughly 12.8% of the population with a migrant background. However, Roughly 70% of the native population have a vocational qualification of some sort compared to just 41% of the population with a migrant background. Average differences in earnings between the two groups could, therefore, be explained by their average differences in education and vocational training.

However, differences in education and vocational training alone do not fully explain the income gap. This is illustrated by the fact that migrants with general higher education entrance qualification are at least 2 times more likely to live in poverty than their native counterparts with the same qualification. Those with an entrance qualification for universities of applied sciences are nearly 3 times morelikely to live in poverty than their native counterparts with the same qualification. This suggests that other factors such as occupational crowding or even discrimination may also be at play.  

Why is it important?

The population with a migrant background represents more than 22% of the total population of Germany, many of whom are German citizens with no migration histories of their own. For these people, Germany and German are likely the only country and language they know. At a minimum, their full economic inclusion is important for the simple reason that Germany is their home if not their only home. Full economic integration is also necessary for migrants`social and emotional identification with Germany and to bring out the best in them both for their own development and for the development of the country. For full economic integration to be reached, the creation and proper implementation of policies that address the standing deficiencies in vocational training qualification of migrants and other barriers to their economic inclusion such as discrimination must be prioritized at both national and state levels. Closing the income gap between the two groups is not only important for the sake of equity but also for the sake of economics. Money in the hands of migrants is more likely to be spent since households with migrant members have, on average, more mouths to feed than households without migrant members.

Mohammed Adawulai is a columnist for TopAfric