Today both researchers and policy-makers agree that refugees and low-skilled migrants admitted to the European Union constitute a net cost and fiscal burden for the receiving societies. Whereas researchers draw this conclusion from a seemingly neutral accounting exercise – refugees contribute less in taxes than they receive in welfare assistance – politicians eagerly use this economics to justify increasingly restrictive asylum policies. The welfare state, they claim, simply cannot afford to absorb refugees. To be sure, politicians and researchers may judge low-earning and low-skilled labour migrants to be both useful and affordable, but only on the condition that their access to welfare provisions is restricted. Researchers conceive of this as the inherent trade-off between migration and the welfare state, also expressed as the "numbers versus rights trade-off".1 Put simply, a country either has high levels of immigration or it has a sustainable welfare state, but it cannot have both. Or, in a different scenario, it either admits many migrants whose access to the welfare state is restricted, or it admits very few migrants who all receive equal treatment in terms of welfare state access. Of course, given the household budget accounting involved, if a country admits many high-skilled, high-earning migrants, these will, in contrast, impact positively on the public purse.
In this article I will show that this consensual cost-perspective on migration builds on a flawed economic conception. Much of it is due to the heavy imprint of the orthodox "sound finance" doctrine on migration research and policy – the assumption that central governments face a budget constraint and solvency requirement much in same way as households, municipalities or businesses. As economists Huixin Bi and Eric Leeper establish, "like the household, the government must satisfy a budget constraint each period."2 In the Oxford Dictionary of Economics, moreover, the "budget constraint" is described as "[t]he limit to expenditure. For any economic agent, whether an individual, a firm, or a government, expenditure must stay within limits set by the ability to finance it".3 By shifting perspective to instead examine migration through the macroeconomic lens offered by Modern Monetary Theory (MMT), the article will not only demonstrate sound finance's detrimental impact on migration policy and research, including the doctrine's instrumental role in stoking the toxic debate on migration in the EU. It will also show why MMT offers the tools with which both migration research and migration policy could be modernized and put on a realistic footing.
Empirically, I bring these tools to bear on the case of Sweden, the country that, proportionally speaking, has received the most refugees in the EU. The specific focus is placed on the consequences of the large increase in government spending following the refuge reception in 2015. From the perspective of policy-makers' certainty about the fiscal unsustainability of large numbers of refugees and scholarship's assurances concerning refugees' negative fiscal impact, the Swedish situation in 2015 should provide the ultimate worst-case scenario. Sweden, one of the most comprehensive welfare states in the EU, admitted 163,000 asylum seekers in one year, the majority of whom were given permission to stay, which meant that they were incorporated into what orthodox economics already takes to be a bloated welfare state. In other words, all the conditions for a perfect storm were in place. By the same token, so were all the conditions for a perfect natural experiment to test the literature's assertions about fiscal burdens and trade-offs.
Bologna: The SAIS Europe Journal of Global Affairs , 2022. Vol. 25, no 1