Labor migration: aid to the West German Economy?
In: Social, Economic and Political Studies of the Middle East. Vol. XVI, S. 7-45
"This chapter aims to discuss some opposing views regarding the impact of labor migration on the West Germany economy. To this end, the phenomenon is analyzed from both micro- and macro-economic points of view. As far as the micro-economic level is concerned, it would appear that mismanagement in a significant number of business firms constitutes a major reason for the heavy influx of foreign labor. Even though full employment exists in Germany, industry still continues to open new plants. Ostensibly, this practice would appear inconsistent with the given situation of full employment. Since the German Government does not assess these firms with the full cost of importing foreign labor, government policy would seem to favor this practice. With respect to macro-economic considerations, the following hypothesis is tested: namely, that it is advantageous for the German economy to employ foreign manpower because such employment (a) increases income, (b) increases wealth, (c) keeps wages and prices relatively stable, (d) helps maintain full employment, (e) aids the balance of payments, and (f) improves infrastructure. Over all, the hypothesis cannot be fully substantiated. Even though the in-migration of foreign manpower may possibly increase Germany's gross national product, it seems questionable whether per capita gross national product will increase. While material wealth will grow due to foreign labor, favorable consequences for human capital seem doubtful. The hoped-for effect that labor migration might stabilize wages and prices and help to maintain full employment cannot be validated. As for the balance of payments, foreign workers may be considered advantageous as long as their remittances can be used as a counterweight to Germany's highly positive balance of trade. However, in light of the new dollar devaluation, the picture may soon change and foreign workers' remittances become a heavy burden. Finally, investments in infrastructure, necessitated by foreign workers, may be regarded as advantageous to the extent that these investments have the effect of increasing wealth. Nevertheless, such advantages can be realized only if foreign workers eventually return to their countries of origin. In conclusion, it would appear that in the long run the disadvantages of labor migration may ultimately outweigh the advantages. This may be particularly true in the event an increasingly large number of workers should permanently remain in Germany." ((en))