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Immigration won’t remove ageing problems – IFO

EUROPE – Research presented by the IFO institute has found that though immigration may alleviate the problems of ageing populations, it will not remove them.

“The long-term impact of international migration on national pension systems is largely positive,” said Martin Werding, head of the department of social policy and labour markets at the IFO Institute for Economic Research, in a presentation in London.

“Immigration may thus alleviate the problems of ageing – but, with plausible aggregate numbers, it will never remove them.”

The comments follow a from the Ernst & Young ITEM club earlier this month which said inward migration to the UK as a result of the expansion of the European Union would help to ease pension problems.

Werding said the gains from migration depend on the amount of redistribution between generations – in terms of level of contributions and implicit net taxes in the form of contributions versus future benefits. The gains from migration also depend on the extent of redistribution within each generation involved in national pension systems.

Werding added: “When looked at the other way round, public pension schemes involve a considerable ‘entrance fee’.” This creates a barrier for potential migrants which is “at the highest where migrants would be most needed”.

And it might potential distort the structure of migration itself.

Werding said that other branches of social security and general welfare programmes may effectively “turn over” these results. This would boost the level of international migration and add to the potential distortions in terms of the skills of those who migrate.

IFO is best known for its influential survey of German business confidence.

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