In the past years, Spain has received millions and millions of immigrants. That is more than Italy, France, Belgium and the Netherlands combined. But while other countries like Denmark, Germany and the UK have tried to curb immigration in response to public concerns, Spain's prime Minister has said that welcoming the outsiders is not only a duty, but a step towards guaranteeing the welfare state, and at first sight it may have been right. You see, over the past five years, Spanish GDP growth has been faster than ex-communist countries like even Poland or Romania. And that despite Spain's ultra low fertility rates, which have been one of Europe's lowest for decades. In fact, if it wasn't for immigration, which are the pink bars here, the Spanish population would have started declining for now almost a decade. And ECB researchers have estimated that when it comes to Spain's economic growth, 78% of of GDP per decade from this from this year. So is Spain's prime minister right about immigration? Can rapidly aging countries afford to have a generous welfare state without mass immigration? Or is Spain's economic growth much less impressive than it seems initially? Or are there other major costs that Spain's government is conveniently sweeping under the rug? Like culture clashes, crime waves or housing shortages, which would change Spain's perfect migration story? To properly answer these questions, I enlisted the help of Spanish economist Doctor Alejandro Iribas de la Puerta to help me dive deep into Spain's immigration data to first understand what Spain's immigration surge actually looks like, because for decades, Spain was known as the country that people left, not the one that they moved to. After World War Two some Spaniards fled the fascist Franco regime for political reasons, but most were actually just chasing better work opportunities in France, Germany or Switzerland. And as a consequence, immigrants inside Spain were barely 1% of the Spanish population in the early 1990s. But then have a look at this chart in a single decade, the immigrant share of the population jumped to almost over 11% in 2007. That is the fastest increase ever recorded in an OECD country. The reason was that a gigantic economic boom that generated huge demand for low skilled labor in construction services and agriculture was happening. Now, immigrants in this decade mostly came from Morocco, Ecuador, Romania and China, and many arrived without papers. So the government just kept legalizing them in waves, just to keep pace with the growing stock of illegal immigrants. But then, famously, Spain's property bubble burst in 2008. The crisis hit construction and other immigrant heavy sectors hardest, and therefore unemployment climbed over 20% and stayed there for years. Immigration inflows, of course, declined rapidly. Many immigrants even left, so Spain barely got hit by the 2015 2016 refugee crisis that famously overwhelmed Sweden and Germany. However, as soon as the Spanish economy recovered again, immigration made a massive comeback after a little Covid dipped. And so now the inflow of refugees is even bigger than it was during the height of the first boom in 2007. So what changed? How did Spain become Europe's hottest immigration destination today? Well, it can be explained by three forces. The first force is that Spain's economy finally recovered from the property crisis. So today, Spain's unemployment rate is only about 10%. Yes, that's still very high by most country standards. But for Spain, it's close to almost how low it was ever during Spain's boom in 2006 2007. The second force is immigration friendly government policies that actually were not implemented by Spain's left wing government, but were negotiated within the EU by the previous conservative government. And of these, the most important were actually the Schengen visa exemptions granted to Colombia and to Peru in 2016. And according to Spanish economist Casas Fernandes Huertas Moraga, letting immigrants from these countries enter the EU without a visa. Increased immigration to Spanish speaking Spain by 2 to 3 times. Finally, force number three. These are push factors growing instability in Central America and especially Venezuela, has increased the number of arrivals from these countries, and many of them have used the refugee asylum channel to obtain legal status in Spain.

So now we know what's driving this immigration boom. But is it a success? Well, for that, two factors are crucial skill and skill to see. Much like Europe's controversial 2015 2016 immigration wave. But unlike Ireland, for example, which attracts a lot of highly educated foreigners, Spain's migration wave attracts a lot of low skilled foreigners. And this is important because we know from European research that low skilled immigrants tend to be involved in crime more and tend to contribute less due to the welfare state than highly skilled ones. So, given that the immigrant population in Spain is younger and less educated than the average Spaniard, it's of course not surprising that they are overrepresented in Spanish prisons compared to how many are in the country. But counterintuitively, that doesn't mean that these immigrants are causing crime to go up in Spain. That is, if we purely look at the number of assaults, theft and robberies, then these are trending down with the exception of assaults. But it doesn't take into account that the population of Spain is increasing. If you do that, then the crime rate is actually very similar to 2010, despite the millions of new immigrants. If we take an even longer term perspective, then we can see that the homicide rate in the 1990s used to be much higher than current levels, and has gone down during the same period that immigration exploded in Spain. And this may explain why very few Spaniards today rank crime among their top three concerns. Immigration, on the other hand, is mentioned by roughly 19% of the population, which is substantial, but nothing like the U.S. or U.K. or Italy, where immigration has become a defining electoral issue. So Spain is receiving many, many more immigrants than other countries. And yet immigration is far less of a concern for people in Spain than in other countries. Why? Well, one feasible explanation is that, unlike in Europe's 2016 wave, most immigrants to Spain already share either a language or much of the culture with Spaniards. And as you can see here, only around 20% of immigrants in Spain come from Africa and the Middle East in green and in purple. And that's actually down from about 30% in 2013. Instead, almost 60% of immigrants are from Latin America. That's the orange color. And the rest is from Eastern Europe and from rich countries. This softens the ethnic tensions that you see elsewhere in Europe. And it could also explain why immigration is not as much of a concern as you might expect, given this mass migration experiment. In fact, despite its impressive GDP growth numbers on paper, Spain's economy seems to be a bigger concern slightly for Spaniards than immigration.

So is immigration actually making Spain richer? Because while Spain's total GDP growth numbers look impressive, we should not forget that if you bring in more people, the economy as a whole, of course, grows. What really matters is GDP per person. And as you can see here, if you look at GDP per person, then Spain's growth is still impressive. But it's no longer number one. But still, even per person, growth is not so bad, which is slightly counterintuitive given that it's mostly low skilled immigrants that are coming to Spain. So how could they be good for Spain's economy? Well, first, there is the welfare state that Spain's Prime Minister has mentioned. After all, since Spain is a relatively old country, an influx of young working immigrants should theoretically improve the sustainability of Spain's pension system, at least in the short run. You see, if we look at the welfare state over the course of the life of an average person, then if they are not working, if they're young, they are draining the welfare state because they go to school, for example. But then when they start working, then they are contributing to the welfare state because they pay their taxes, which funds education for the young people, and they pay, of course, their pension contributions. But then when they retire, boom, they again become a net drain on the welfare state in a well-functioning welfare system. Then the contributions are, on average, bigger than what people take from the welfare system. And crucially, these low skilled immigrants coming to Spain are typically already of working age, so they do not take from the welfare state when they're young and they are now contributing to it. So, not surprisingly, currently in Spain, immigrants contribute around 10% of Social Security revenue, while accounting only for 1% of its spending. And the Spanish government loves to point to this as proof of how much immigrants give back to society. But is this actually sustainable because immigrants, like the rest of us, also age? So the real question is whether their lifetime contributions exceed the benefits they will be entitled to after retirement. And here's a problem if someone is a high skilled native with a very well-paying job, then their curve looks like this. They contribute more into the system over their lifetime than they take out. But what happens if a very low skilled immigrant comes in that will only have a very low wage? Then, while they may contribute a little bit into the system, they could still take out more from it in the end. Of course, then the question will be how big will the cost be for the Spanish government in the future? This turns out to be a very hard question to answer, because you have to take into account many things. How much public services do they consume? How much do they pay in taxes and how much will they help? Spaniards work longer hours, for example, by providing childcare services to highly skilled mothers. And of course, what happens to the kids of immigrants? Other countries with better data have tried to put some numbers into this question. For example, in Denmark, researchers have found that Danish workers and those from rich countries tend to have a curve that looks very healthy, but that lowly skilled migrants from other countries do not, in the end, make the welfare system sustainable. But Spain is not like Denmark in very crucial ways. We cannot copy paste that result into Spain because Denmark has very generous public housing that Spain doesn't have, and Denmark has far larger social transfers to low income families, which Spain also does not have. So while immigrants in Spain do not contribute a lot into the system, they also cost less than another northern European countries. So the net fiscal cost could end up being relatively small. But even if immigrants do not end up costing Spain much more in pensions over their lifetime, then there's still the problem that they do not have that many children themselves. And that means that while the system may look much better today, it could be that in 30 years time, Spain again has the same problem where they do not have many children and they have a lot of old people now, including former immigrants. That being said, just if we're looking at today Spain's immigration boom, even though they're young, skilled, because they're young, they are making the pension system more sustainable right now.

But what about working age Spaniards? Are immigrants making them better off as well? Or are they just taking local jobs? Well, given that the unemployment rate is lower than it almost ever was, it's quite difficult to argue that immigrants are purely taking jobs away from Spaniards and not creating new ones. What could be happening, though, is that instead they are pushing down wages, especially in sectors like agriculture, hospitality and construction. And this could help explain why inflation adjusted wages have been pretty stagnant over the last two decades. But then again, as we've seen earlier, migration only picked up after 2016 and Spanish wages have not clearly gone down after that. On top of that, we simply do not know what life would have looked like without these immigrants if it wasn't for immigrants. Would childcare, elderly care, and food have been much more expensive in Spain because there are not enough people to do those jobs? When considering all of this evidence. I do not think that immigrants are clearly making Spain's economy much better, but also know that they're clearly making Spain's economy much worse. But I do think that it is very clear that young immigrants are, at least for now, greatly helping the Spanish retirement system, the welfare state. I also think that it's clear that unlike other immigration waves, this one had less of a significant cultural impact because so many immigrants are from South America, former Spanish colonies. So Spain's prime minister is right about the positive effects on the welfare state. But are there no downside to this immigration wave at all? This brings us back to this chart. What do Spaniards worry about today? Immigration? Sure, a little bit, but the main worry is by far housing. And that's not a coincidence, because more people simply means that you need more facilities, more hospitals, more infrastructure, more houses. And if immigrants arrive. But the government does not expand public services in parallel, those services get congested longer, waits for a doctor's appointment, more crowded public transport and higher housing costs. So is the Spanish government keeping up with their investments? The answer is probably no. Yes, the Spanish socialist government has increased investments in health care and education. But housing? It has barely moved. What has increased, though, are pension payments. So, interestingly, you could argue that through its policies of keeping investments pretty low while letting in many, many more people into the country, Spain's socialist government is actually doing some sort of austerity in the shadows. A similar dynamic might then be contributing to the housing affordability crisis. But okay, maybe immigrants have gone into the construction sector, and the private sector has instead invested a lot in new homes. No, as you can see here, new home building in Spain is at an all time low despite a massive immigration boom. So then this slide does not surprise, though. House prices have gone up like crazy while wages have remained stagnant in Spain. So in conclusion, how is Spain's mass migration experiment going and what can the world learn from it? For me, there are four key takeaways. First, Spain has shown us that immigration can absolutely offer at least some relief to a rapidly aging population in the short run. Second, if you mainly bring in low skilled immigrants that also have low fertility, then immigration is not a long term sustainable solution to rapid aging. Third, if you encourage immigration from culturally similar places, you risk a far lower backlash. Then, if these immigrants come from culturally very different places. And fourth, if you do decide to encourage an immigration boom but fail to invest in housing and infrastructure, you risk a massive political backlash anyway. As people start suffering from rapidly increasing house prices and the deterioration of public services. So Spain's current immigration boom is far less controversial than the 2016 European migration crisis. But if you do encourage immigration to save the pension system, don't forget to build houses and infrastructure. That is my take. What do you think? Let me know in the comments below.