A leap within the share of foreign-born staff after the pandemic helped Europe convey inflation down with out sharply slower development, European Central Financial institution President Christine Lagarde mentioned Saturday.
A key issue “has been the rise in each the quantity and participation charge of overseas staff,” Lagarde mentioned in a speech in Jackson Gap, Wyoming, at a Federal Reserve financial symposium. “In Germany, for instance, GDP can be round 6% decrease than in 2019 with out the contribution of overseas staff.”
Spain’s sturdy post-pandemic financial development “additionally owes a lot to the contribution of overseas labor,” she mentioned.
Lagarde’s feedback echoed a standard view amongst economists that an inflow of overseas staff helped corporations increase their output and meet a spike in demand after the pandemic that adopted stimulus advantages. The elevated provide helped convey down inflation in Europe and the US. But the rise in immigration additionally sparked a political backlash in each economies.
“Migration might, in precept, play a vital position in easing” labor shortages as native populations age, Lagarde mentioned. However “political economic system pressures could more and more restrict inflows.”
Lagarde additionally mentioned {that a} drop in inflation-adjusted wages, better hoarding of staff by corporations, and an inflow of aged folks into the labor drive additionally contributed to regular financial development even because the ECB lifted rates of interest.
Traditionally, Lagarde emphasised, greater borrowing prices have dragged down financial development, typically inflicting recessions and resulting in greater unemployment. But that didn’t occur because the ECB raised its key charge in 2022 and 2023.
Whereas overseas born staff accounted for simply 9% of the EU’s labor drive in 2022, they’ve made up half of the bloc’s labor drive development prior to now three years, Lagarde mentioned.
Extra aged folks additionally joined the workforce, Lagarde famous. With out that improve, the unemployment charge within the 20 international locations that use the euro foreign money can be elevated — 6.6%, moderately than the present charge of 6.3%, she mentioned.
Kazuo Ueda, governor of the Financial institution of Japan, spoke on the identical panel at Jackson Gap and famous an analogous pattern in Japan for the reason that pandemic. Whereas the foreign-born make up simply 3% of the workforce, they’ve made up half of latest workforce development.
