Immigration and the welfare state: a minimal impact
In recent weeks, we have witnessed an intense debate in the media, especially in the newspaper ARA, regarding the fiscal contribution of immigration to the welfare state. However, a significant part of this debate has been built on partial or outright biased interpretations of a phenomenon that is, by definition, complex. In this column, I would like to return to the empirical evidence and briefly explain what the most recent studies analyzing the Spanish case tell us.
To begin, I want to mention a common finding in studies that estimate the fiscal effect of immigration in different contexts: the net fiscal impact depends both on the welfare system of the receiving country and on the characteristics of the immigrants arriving. The migrant population itself can have positive fiscal effects in one country and neutral or negative effects in another, simply because tax structures, social policies, and conditions of access to the labor market are not the same. Therefore, extrapolating results from one country to another and drawing conclusions is, at the very least, risky.
So what does the evidence tell us about Spain? The two most recent studies analyzing the fiscal impact of immigration (theInternational Migration Outlook 2021 from the OECD and an article by Carlo Fiorio and others from 2024These studies all point in the same direction: the total fiscal impact of immigration is small and often close to zero. For the period 2006-2018, the OECD estimates that the fiscal balance of immigrants in Spain (including not only welfare state spending but also general public goods such as defense and debt service) is -0.15% of GDP, a figure significantly lower than that estimated for the native population (-5.2%). This slight negative impact of immigrants is due to the years of the economic crisis, since the net fiscal contribution of immigrants was positive in 2006 and 2007, negative between 2008 and 2015, and positive again between 2016 and 2018. Meanwhile, Fio001 et al. examine the impact of immigration on the Spanish welfare state. The authors show that, although immigrants contribute less than native-born citizens, they also use public services much less, resulting in a net positive outcome.
Furthermore, these studies debunk a common misconception in public debate: that the foreign population uses public services more than native-born citizens. In fact, both studies agree that the key to the fiscal balance lies not so much in the use of services as in labor force participation. In Spain, where structural unemployment rates are high, the lower labor force participation of some migrant groups reduces their potential tax revenue. When people work, they pay more taxes, in direct proportion to the time worked and their salary level, and when they do not, their contributions fall, just as with native-born citizens. This is the key to the fiscal balance, and not a supposed "overspending" on social services, which the data shows is lower than that of native-born citizens in key areas such as health, education, and pensions.
It is also important to consider the composition of immigration in Spain. Migrants arriving are, on average, younger than the native-born population. And this has direct implications for fiscal sustainability: a young population that can contribute for many years before accessing benefits generates a net positive effect on public finances in the medium term. In a country with a very rapid aging population, like Spain, this factor is especially relevant. To summarize, immigration is neither an automatic fiscal lifeline nor a burden on the system; rather, it has a small overall impact and, above all, is highly sensitive to the conditions of access to the labor market. The best way to harness the fiscal potential of immigration is not to restrict access to public services, but to improve job placement opportunities, reduce segmentation, and facilitate the full economic participation of newcomers. Perhaps it's less striking than the headlines circulating these days, but this is what the research shows us: when the debate moves away from perceptions and closer to evidence, the picture is much more nuanced and, above all, much more useful for making informed decisions.
