July 7, 2023 - 1:00pm

In a recent interview, Chancellor Olaf Scholz claimed that Germany needed more immigration in order to save the country’s pension system. The question of just how many was answered shortly after by the chair of the Council of Economic Experts, an institution that advises the federal government. In order to account for population decline and emigration, Germany will need no fewer than 1.5 million new immigrants per year.

Just to put that number into context, during the refugee crisis of 2015 Germany accepted slightly over 1 million people, straining the capabilities of the country’s social services perilously close to breaking point, and marking the beginning of the rise of the AfD. Not to worry, argue German politicians, since these 1.5 million would be skilled workers and their families, not a wave of refugees like those who arrived in 2015.

The question remains, however, as to why such large numbers of highly talented individuals should come to Germany year after year. In the United States, 55% of startup companies valued at $1 billion or more have been founded by immigrants, like Elon Musk; this figure rises to 64% when including the children of immigrants, such as Steve Jobs. But the United States has a very different offer to make: whatever one thinks of the current state of the American Dream, the ideal remains that anyone can move to the US, start their own company and within a generation be the head of a multi-billion-dollar corporate empire. The German pitch, on the other hand, seems to consist of coming to the country, paying extremely high taxes and financing the pension of German retirees. It is unlikely that a software engineer from Taiwan or India will find this more appealing than the opportunities available in North America.

It is, in fact, not even clear if Germany is still appealing to Germans. Every year 180,000 of them leave the country, 75% of whom have higher education degrees and in many cases under the age 40. The emigration rate of 5.1% is the third highest among the 38 member states of the OECD and a clear indicator that skilled labour is not only not coming to Germany, but is actually leaving.

At the same time, 45% of the recipients of unemployment benefits don’t hold a German passport, which demonstrates that a significant part of the current migration system is draining, rather than strengthening, the welfare state. This creates a vicious cycle of an ever-growing need for higher taxes or reduced social services, which in turn makes the country less attractive to high-skilled immigrants.

Instead of solving this dilemma, there are growing calls for taxes on high-income citizens, because apparently German politicians believe that immigrants would prefer paying taxes to getting rich. This is a dangerous delusion that will continue to prevent the emergence of a German Jeff Bezos or Mark Zuckerberg while encouraging immigration into the welfare state. Not only is this unsustainable, it will also exacerbate the brain drain already taking place. Germany, clearly, is not the mecca for highly skilled labour that it was just a few decades ago.