Costs related to refugee reception
3.4 Impact on net transfers of a simulated increase of the employment rate
It clearly emerges from the preceding analysis that employment is an important factor for the net contribution of individuals to public finances. In order to explore this relationship further, it is possible to compare the main results with a hypothetical situation where the employment rate is higher. The idea is to run a simple accounting simulation where aggregate net transfers per capita are computed for the population between 20 and 64 if the share of people in employment is changed (as well as the corresponding share of people not in employment) in a purely static context. A per capita total for all ages together can then also be computed. The simulation Chart 12
Differences in net transfers by detailed country groups, for individuals between 20 and 65 years old
(differences compared to the global average for Belgium, in € per year per person, unless otherwise stated)
By detailed country groups By employment rate and by detailed country groups and education levels
Differences in net transfers for 20-64 compared to Belgium as whole (bottom scale)
Share of high educated in the 20-64 population, excluding missings (top scale)
EU candidate countries Maghreb Near and Middle East Other European countries Other Africa Other Asia EU13 (Other EU28) South and Central America Oceania / Far East EU14 North America Natives
–6000 –2000 2000 6000 10000 14000 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 %
20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %
–10000 –5000 0 5000 10000 15000 20000
Low education
Employment rate
Differences in net transfers compared to Belgium
Medium education High education
Without information on education
Sources : CBSS Datawarehouse, NBB calculations.
1 Each dot is representing country group, combined with a level of education.
corresponds to an increase in the employment rate for non‑natives by 50 % of the employment gap between natives and non‑natives, estimated at 21 % in our database (that is, the differences between the employment rate of 70 % for natives and 49 % for non‑natives). This would be an increase of +11 percentage points for non‑natives on average (the simulation is made for the three main groups of non‑natives, EU14, EU13 and non‑EU, and then aggregated). If an alternative simulation were to be run where the full gap between natives and non‑natives is closed, the resulting impact on net transfers would simply be twice that recorded hereafter.
If non‑natives between 20 and 64 years old had an employment rate closer to natives, the (per capita) net transfers from individuals to the government would be significantly higher for Belgium as a whole. The biggest increase would be recorded for people born in EU14 countries. The contribution of the non‑EU group would also be higher, but not as high. With an increase in employment rate of the same intensity in the two groups, the impact is higher for the group of EU14 origin because the contribution of individuals in employment is highest in that group (and also because the difference between the contribution of people in employment and out of employment is greatest). For the group of new Member States (EU13), the increase would be smaller because their employment rate is already the highest among non‑natives.
The results for all age groups taken together suggest that natives would then on average contribute only marginally more than the average for Belgium. This is because average net transfers for Belgium as a whole would increase while the per capita contribution of natives would remain unchanged. Although very simplified, this illustration shows how policies aiming for a higher employment rate can positively affect the public finance position of the economy. The relationships between public policies and socio‑professional participation are further explored in chapter 5 of Part II of the report, with a focus on the foreign‑born population. And the interactions between employment, public finances, economic activity, welfare, etc. are investigated using a general equilibrium model in Part III.
Table 6
Increases in net transfers compared to the baseline for 2016 with a scenario of static increase of the employment rate
(in euro per capita per year, 2016, unless otherwise stated)
p.m.
Employment rate p.m.
Population shares in
20‑64
(in %) Observed
(in %)
Required increase to close 50 % of the gap compared
to natives (pp)
Simulated impact on net transfers if the employment rate for non‑natives is increased by 50% of
the gap compared to natives
Aged 20‑64 Total
Belgium (all residents) 66 +2 +621 +366 100
Natives 1 70 − − − 79
Non‑natives 49 +11 +2 167 +1 622 21
EU14 48 +11 +2 794 +1 751 6
EU13 (other EU28) 61 +4 + 535 + 441 3
Non‑EU 46 +12 +2 291 +1 866 12
Sources : CBSS Datawarehouse, NBB calculations.
1 Including the second generation.
4. Conclusion
In line with the literature, the static analysis conducted for 2016 in this part of the report indicates that the estimated per capita net contribution from first‑generation migrants to public finances is lower than the average, whereas the net contribution of the second generation is higher than the average and higher than the net contribution of natives. Differences in per capita contributions are to a large extent attributable to differences in transfers paid by individuals : comparably less taxes and social security contributions are paid by non‑natives. This is a direct result of differences in employment rates between the groups. But lower average wages for people born outside Belgium also play a role. Differences from transfers received are smaller and can be traced back to the average social situation of different groups of the population. Again, access to the labour market plays an important role in these differences as employed people show similar level of transfers received irrespective of their (broad) origin.
The analysis of net transfers also provides some interesting insight into differences between different groups of first‑generation migrants. It is shown that people born outside the EU present lower per capita net contributions than those born in the EU, a situation that can be related to their lower employment rate, even though other factors such as the average wage also plays a role.
A focus on the group of recently arrived non‑natives, defined as migrants who arrived in Belgium in the last five years or less indicates that, as an aggregate, their per capita net contribution is higher than the average for Belgium, but not as high as natives. By broad groups of country of origin, it appears that individuals born in EU countries and recently settled in Belgium present net transfers largely above the national average. The group of non‑EU origin migrants presents relatively lower contributions than the average for Belgium and the other groups, as well as a much lower employment rate.
Considering more specifically the children of first‑generation migrants (the second generation), it appears that their net average contribution to public finances is higher than that of the first generation. It is also higher than that of natives of native origin, but this finding clearly reflects differences in age structures between the sub‑groups.
The second generation is on average younger than the native population of native background. Assessed over the active lifetime (20 to 64 years old), the per capita contribution of second‑generation migrants remains higher than the first generation’s, but lower than that for natives. As these results are (partly) related to differences in employment rates, raising the employment rate for immigrants (and their children) is key to enhancing their contribution to public finances. The next part of the report (Part II) investigates further these specific labour market issues
Although this analysis is a rather unique addition to the understanding of the contributions of different population groups to Belgium’s public finances, it is also important to acknowledge that the static approach presented in this part of the report faces some crucial limitations. Not only is it is based on a number of simplifying assumptions for the construction of the transfers, mainly for the transfers paid to government, but more importantly, the static nature of the exercise conceals several channels through which immigration contributes indirectly and dynamically to the global welfare of the economy, and as a result to public finances as well. The Part III of the report seeks to illustrate these other indirect channels.