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Summary
The report “Borderless welfare state” deals with the consequences of immigration for Dutch public
finances. It focuses on the fiscal costs and benefits of immigration, that is, the costs and benefits of
immigration for the Dutch treasury. It answers the following questions:
• What are the fiscal costs and benefits of immigration by immigration motive (labour, study, asylum
and family immigration) and by region of origin?
• To what extent can immigration provide a solution to population ageing in the Netherlands?
The current report is an update of the Public Sector chapter of the report Immigration and the Dutch
Economy (2003) by the CPB Netherlands Bureau for Economic Policy Analysis (CPB). Both reports
deploy the method of generational accounting to calculate the net contribution – revenues minus
expenses – of immigrants to public finances, measured from the moment of their immigration to the
time of repatriation or death. This net contribution is the key concept of the current study.
The study uses microdata from 2016 provided by Statistics Netherlands. These are very detailed,
anonymized data of all 17 million Dutch residents, including about two million people with a first-
generation immigration background and almost two million people with a second-generation
immigration background. These microdata are combined with a economic projection to 2060 for the
CPB Update Medium-Term Forecast 2018-2021
Total costs and benefits
The Dutch population is growing due to immigration. Of the more than 17 million Dutch inhabitants at
the end of 2019, 13% were born abroad (first generation) and 11% were children of immigrants (second
generation). Currently, per capita expenditures on immigrants are significantly higher than on Dutch
native people in areas such as education, healthcare, justice, social security and allowances. Moreover,
immigrants pay fewer taxes and social security premiums.
The main findings for the net contribution (benefits minus costs) of the first two generations together
are given in Table 0.1. The total net cost of immigration averaged 17 billion euros per year over the
period 1995-2019. By comparison, that is as much as the government spent on defence and
unemployment benefits combined in 2016. In 2016, net costs peaked at 32 billion euros, partly due to
the ‘refugee crisis’. The total cost over the 1995-2019 period was 400 billion euros, an amount of the
same order of magnitude as the total Dutch natural gas revenues from the start of extraction until
2019. Based on forecasts from Statistics Netherlands, the report estimates the total cost of
immigration for the next two decades at 600 billion euros if policy remains unchanged.
Table 0.1 Total costs for the public sector of immigration from 1995-2040 in billions of euro, including the costs
for the second generation (rounded to multiples of 20 billion euro).
Net costs of immigration (billions)
Period
Subtotal
Total
1995-2009
€200
2010-2019
€200
+
Total 1995-2019
€400
2020-2040 (forecast)
€600
+
Total 1995-2040 (including forecast)
€1,000
Costs and benefits by immigration motive and region
The net contributions of immigrants vary. Table 0.2 shows net contributions of immigrants – including
the net contributions of their children (the second generation) – rounded to multiples of €25,000.
There are large differences between western and non-western immigrants. On average, western
immigrants make positive contributions of €25,000 and non-western immigrants cost €275,000.
Within the western and non-western categories, however, there is a lot of variation.
Immigration from most western regions is positive for the treasury. In particular, immigrants from
Japan, North America, Oceania, the British Isles, Scandinavia and Switzerland make a substantial
positive contribution of around €200,000 per immigrant. Immigration from Central and Eastern
European countries costs €50,000, excluding former Yugoslavia and the former Soviet Union. The latter
two areas of origin mainly involve asylum migrants who make a substantial negative contribution of
€150,000.
Immigration from non-Western regions tends to be negative for the treasury. This is especially true for
the regions Caribbean, Middle East (including Pakistan and Turkey) and North, Central and West Africa
(net costs of €200,000 to €400,000), Morocco (€550,000) and the Horn of Africa and Sudan (€600,000).
There are substantial differences between groups with different immigration motives. Only labour
immigration generates a positive average net contribution of €125,000 per immigrant. Study migration
costs a net €75,000 on average. Family migration costs the treasury €275,000 per immigrant on
average. The net cost of asylum migration averages €475,000 per immigrant.
Table 0.2 Average net contribution of immigrants to public finances, by immigration motive and region, including
the cost for the second generation (rounded to multiples of €10,000).
Migration motive
Amount
Labour immigration
+
€125,000
Study immigration
–
€75,000
Family immigration
–
€275,000
Asylum immigration
–
€475,000
Region
Amount
Western average
+
€25,000
Japan, North America, Oceania, British Isles, Scandinavia and Switzerland
+
€200,000
Central and Eastern European EU countries
–
€50,000
Other EU countries (excl. British Isles, and Scandinavian EU countries)
+
€50,000
Former Yugoslavia and the former Soviet Union
–
€150,000
Non-Western average
–
€275,000
Southern Africa (de facto RSA)
+
€150,000
Israel
+
€50,000
Morocco
–
€550,000
Horn of Africa and Sudan
–
€600,000
Immigration motive combined with region
Amount
Labour immigration from Japan, North America and Oceania
+
€625,000
Asylum immigration from Africa
–
€625,000
Study immigration from the European Union (including UK)
+
€75,000
Study immigration from Africa
–
€250,000
For all immigration motives, Western immigrants seem to ‘perform better’ than non-Western
immigrants. The difference is approximately €125,000 for labour and study immigrants, and €250,000
for asylum and family immigrants. The largest positive net contribution – €625,000 – is made by
migrant workers from Japan, North America and Oceania. The largest net cost – also €625,000 – is for
asylum migrants from Africa.
In isolation, only two categories seem favourable for Dutch public finances: study immigration from
the EU, and labour immigration from Western countries (except Central and Eastern European
countries), Asia (except the Middle East) and Latin America. However, if one takes into account the
cost of family migration (chain migration), only labour migration from North America, Oceania, the
British Isles, Scandinavia, Belgium, Luxembourg, France, Germany, Austria, Switzerland, Italy, Spain,
Israel, India, Singapore, Taiwan, South Korea and Japan is unambiguously positive from a treasury
perspective. Study migration from the EU and EFTA, taking into account chain migration, is likely to be
roughly budget-neutral or slightly positive. Study and labour migration from the rest of the world is at
best budget-neutral and mostly negative, surprisingly sometimes very negative, given the motive
reported to the Dutch Immigration and Naturalisation Service (IND). Family migration also, almost
without exception, represents an often substantial drain on the Dutch treasury. Asylum migration is
very costly in all cases.
There is a large and growing group of immigrants whose immigration motives are unknown. For a
considerable part, these are people who would not state a reason for immigration because they have
already acquired the Dutch nationality.
Costs and benefits by generation and the importance of education and test scores
For Dutch residents without an immigration background (native Dutch), the costs and benefits are
roughly in balance. In other words, they are approximately ‘budget neutral’. The effect on public
finances of persons with a second-generation background who are well integrated – i.e., with a level
of education and labour market performance very similar to native Dutch people – is therefore also
approximately budget neutral.
Immigrant groups of which the first generation yields substantial net benefits usually do not show the
same outcome for the second generation. That generation – although well integrated – is usually
roughly budget neutral.
Migrant groups of which the first generation has a (considerable) negative net contribution, usually
have a second generation that also has a (substantial) negative net contribution. For those groups, the
net present value of the net contribution of future generations will not offset the costs for the first
generation. The quite common idea that ‘things will improve in future generations’ therefore does not
apply when it comes to the costs and benefits of immigrants.
There is a substantial correlation between net life course contribution and educational attainment.
Immigrants with a master's degree make a positive net life course contribution of €130,000 (non-
western) to €245,000 (western) against €515,000 for natives (rounded off to multiples of €5,000).
Immigrants with at most primary education cost the treasury a net €360,000 (non-western) to
€195,000 (western) over their whole lives compared to €235,000 for natives. A positive net
contribution requires the immigrant to have at least a bachelor's degree or equivalent education, or
skills that enable him or her to generate an income comparable to someone working at bachelor's
level. That the Netherlands – unlike classic immigration countries – hardly selects on education level
and skills causes a large part of the net cost of non-Western immigration.
Furthermore, a robust correlation exists between net contribution and scores on the so-called ‘Cito's
End-of-Primary-School-Test’, a 50-point student assessment scale for primary education. Natives with
the highest Cito score make a positive net contribution of (rounded) €340,000 over their live course.
Natives with the lowest Cito score cost a net €440,000 over their life course. For the most common
Cito scores, a one-point higher Cito score provides roughly €20,000 extra net contribution over the life
course. For people with a second-generation migration background, there is a similar relationship
between Cito score and net contribution, albeit at a considerably lower level. The net contributions of
the western second generation are on average about €60,000 lower than of natives with the same Cito
score. The non-western second generation on average even has a €170,000 lower net contribution
than natives with the same Cito score. These differences are not caused by the Dutch education
system, because immigrants with a certain Cito score hardly differ from natives with the same Cito
score when it comes to final educational attainment. These differences arise after education, in the
labour market.
There are considerable differences in Cito scores between regions of origin and also between
immigration motives. For the second generation, Cito scores and secondary school performance are
low for Turkey, Morocco, Caribbean, (former) Netherlands Antilles, Suriname and much of Africa. High
Cito scores and school performance are found among children from second-generation migration
backgrounds in East Asia, Israel, Scandinavia, Switzerland and North America.
Children of migrants with migration motives involving explicit selection – i.e. work and study – have
significantly higher Cito scores than children of migrants with other migration motives such as asylum
and family. When further broken down by western and non-western, only children born in the
Netherlands to western study and labour migrants have higher Cito scores than natives.
The net contribution of first and second generation immigrants is strongly related to the average Cito
score in the group of origin. This is true for the Cito scores of Dutch-born second-generation children
and also for foreign-born first-generation immigrants who come to the Netherlands before the age of
twelve.
The Cito scores of first- and second-generation children are further related to the educational level of
their first-generation parents. Partly for this reason, a disadvantage in the first generation almost
always has a strong impact on the net contribution of the second generation. However, there are some
exceptions to this. Among older Chinese immigrants, the first generation had, on average, a low level
of education and income, while the second generation is doing very well due to exceptionally high Cito
scores and school performance.
Cito scores of successive generations are strongly correlated. On average, there is progress with each
generation and the differences with natives become smaller. However, with very low Cito scores,
disadvantages sometimes prove to be persistent: in the five first-generation groups with the lowest
Cito scores, even by the third generation, on average less than half of the disadvantage has been
‘caught up’.
In the transmission of disadvantages to the next generation, the proportion of ‘mixed relationships’
plays a major role. Especially in groups where the first generation entered Dutch society at a
considerable disadvantage, second-generation children with a ‘mixed-parent couple’ – i.e. one parent
born in the Netherlands and one parent born abroad – often have significantly higher Cito scores. In
the third generation, one parent with a Dutch background has a similar positive effect. Among
Antilleans, for example, a significant rise in Cito scores across the generations coincides with a high
proportion of mixed relationships. In general, higher Cito scores have a positive effect on the net
contribution to the treasury via educational attainment and labour market performance. For some
second-generation groups, the difference between one or two foreign-born parents amounts to a few
hundred thousand euros. If the Dutch-born parent is a native, the favourable effect is usually much
greater than if the Dutch-born parent has a migration background themselves.
Net contribution as an indicator of integration
Net contribution is about more than just money. The net contribution sums up in a single figure a
variety of integration indicators. Net contribution correlates strongly positively with income from own
work or business and negatively with benefits received. There is also a strong correlation with taxes
and contributions paid and with rent allowance, child allowance and child budget received. Net
contribution is further strongly related to educational level, Cito score and education costs and to
participation in ‘special needs education’; education intended for children with physical or mental
disabilities, low IQ, developmental and behavioural disorders and the like. There is also a strong
correlation with healthcare costs and costs of crime, police and justice. These correlations concern the
first and second generation and, in the case of Cito scores, even the third generation. Finally, there is
a correlation with the chance of remigration, the proportion of second-generation children born from
mixed relationships and the ‘cultural distance’ between the Netherlands and the country of origin.
Greater ‘cultural distance’ correlates with lower chances of integration
It is possible to measure the ‘cultural distance’ between the Netherlands and the country of origin on
the so-called ‘cultural values map’. This is a map based on the results of the World Values Survey, a
large-scale and long-term survey of values and norms in a large number of countries. It turns out that
this cultural distance is strongly negatively correlated with all kinds of integration indicators such as
education level, Cito score and net contribution to the Dutch treasury. The further away the culture of
a migrant group is from Dutch culture, the lower the score on net contribution and all kinds of other
integration indicators. This also affects the second generation born, raised and educated in the
Netherlands, with the group with the greatest cultural distance – the so-called African-Islamic cluster
– having a net contribution almost two hundred thousand euros lower than one would expect based
on education and the like.
Remigration opportunities: the welfare state acts as a ‘reverse welfare magnet’
Differences in educational attainment and cito scores between groups arise through historical
coincidence and processes of (self)selection. Negative self-selection in remigration further exacerbates
existing differences, because it is precisely groups with a low net contribution to the Dutch treasury
and a large cultural distance to the Netherlands that tend to stay in the Netherlands for a long time.
These are also the immigrants who score poorly on all kinds of integration indicators: low income, low
education level and ditto cito scores, high benefit dependence and crime rates, and so on. The Dutch
welfare state thus acts as a ‘reverse welfare magnet’ that tends to ‘hold on’ to immigrants with a
negative net contribution, while immigrants who score well on integration indicators often leave
quickly.
Immigration as a demographic solution to the problems of population ageing
Like many Western nations, the Netherlands has an ageing population. There are incidental elements
to population ageing, such as the baby boom, but also a structural elements, such as rising life
expectancy and especially a persistently low fertility rate. For almost half a century, the average
number of children per woman has been around 1.7, well below the replacement level of
approximately 2.1 needed for a constant population size. This causes every new generation to be
smaller in size than the previous one, resulting in a dwindling share of young people in the population,
a process sometimes referred to as dejuvenation. It also leads to an increase in the so-called grey
pressure, that is, an increase in the ratio between people over the age of 65 and people between 20
to 65 years of age.
Fully in line with the literature, this study found that solving ageing by means of immigration resembles
a pyramid or Ponzi scheme. A simulation shows that ever-increasing numbers of immigrants are
needed to keep the Dutch grey pressure – the ratio of people over 70 to people aged 20 to 70 – at the
2020 level. This results in significant population growth: 100 million inhabitants by the end of this
century, and one billion inhabitants by the year 2200. A pension age of 70 has been assumed because
the state pension age in the Netherlands is slowly rising to 70.
Immigration does not provide a stable solution to population ageing because the underlying problems
of rising life expectancy and low fertility are not resolved. On average, the fertility of immigrants is
below the replacement level as well, partly because immigrants from high-fertility groups adjust their
fertility downwards over time, and partly because immigrants from most countries in the Americas,
Europe and Eastern Asia already have low fertility rates. In time, life expectancy will also trend towards
the Dutch level.
Immigration as a solution to the financial burden of population ageing
Due to the increasing ageing of the population (the grey pressure), the costs for healthcare and state
pensions are rising rapidly. The current study challenges the idea that it is possible to absorb the
additional costs of an ageing population through immigration.
Immigration as a means of absorbing the costs of an ageing population encounters the same practical
objection as the strategy of immigration as a demographic solution to the ageing population, namely
strong population growth. A simulation shows that closing a permanent financial gap in public
finances of 2.5% of gross domestic product by admitting labour immigrants with high economic
potential would lead to additional population growth of 7 to 10 million inhabitants in the period 2020-
2080. The exact population growth depends on the extent to which the inevitable family migrants
contribute positively or negatively to the Dutch treasury. Based on the current net contribution of
family migrants, 10 million additional population growth is much more likely than 7 million.
In addition, mass recruitment of high-potential immigrants may prove difficult in practice, as most high
net contributors currently come from countries that are themselves grappling with a rapidly aging
population and/or trying to attract highly skilled immigrants.
Future costs and benefits
The findings in the current report and recent projections for immigration indicate the total cost of
immigration is expected to continue to rise. For the period 2020-2040, the estimated total additional
costs of future immigration amount to around 600 billion euros.
A slight increase in the share of asylum seekers would lead to a significant increase in future costs. If,
for example, the volume of asylum immigration from West Asia and Africa kept pace with the
population growth there, this alone would result in additional costs of approximately 64 billion euros
in the years 2020-2040.
A complicating factor is that the vast majority of the estimated costs are delayed entering the budget.
After all, it also involves costs for the old age of – at the time of admission – often young immigrants.
This makes the realised annual budgetary impact of immigration – 17 billion euros in 2016 – steadily
increasing, partly due to irreversible past decisions. If immigration remains at the 2015-2019 level in
terms of volume and net contribution, the realised budget seizure will rise to around 50 billion euros
a year.
A less negative or a positive fiscal impact of immigration can be attained, but this requires
a fundamental policy change. The present study calculates a restrictive scenario, in which labour
immigration mainly originates from Western countries (except Central and Eastern Europe), Latin
America and Asia (except the Middle East), in which there is also a 50% reduction in family immigration
and a 90% reduction in asylum immigration. This scenario is highly selective compared to the current
situation and requires changes in international treaties, such as the UN Refugee
Convention. Nevertheless, even in that case, immigration is not even budget-neutral.
Policy implications
The net costs of immigration for the government are considerable, and projections show they will
consume a steadily increasing portion of the annual government budget. These costs are mainly due
to redistribution through the welfare state. Continuation of the current level of
immigration and current arrangements of the welfare state will increase pressure on public
finances. Downsizing the welfare state and/or curtailment of immigration will then be inevitable.
Immigration does not appear to be a solution to population ageing either. On the contrary,
calculations in this report show that the impact of immigration – expressed as a percentage of gross
domestic product (GDP) – over the period 2015-2019 was, on average, more than twice the current
impact of ageing. Current immigration is therefore making the problem worse rather than better.
In essence, ageing is mainly dejuvenation due to a low fertility rate. The only structural solution for
that is an increase in the average number of children per woman in the Netherlands to approximately
2.1. To compensate for rising life expectancy, one can increase the retirement age, but that is already
standing policy in the Netherlands.
Nowadays, the consequences for public finances hardly play a role in policy decisions on
immigration. This could change if the type of calculations presented in this report were taken into
consideration. First of all, the results presented offer starting points for the admission policy for
immigrants from outside the EU with the motives ‘work’ and ‘study’. The policies can relate to the size
of these immigration flows and selection of immigrants on proven predictors of positive outcomes,
such as educational attainment. Other examples include cost estimates of specific policy proposals,
such as a general amnesty scheme, the number of invited refugees, approval of new EU
rules, admission of new EU member states and the opening of our labour market to their residents, an
asylum seekers quota assigned by the EU, the required compensation for above-average quota, et
cetera.
The calculations may also offer a starting point for integration policy. A study of the net contributions
to our government, as described in this report, provides a good indication of the socioeconomic
position of various immigrant groups. Indeed, the net contribution is about more than just money: it
summarises in one figure the most diverse integration indicators, ranging from education and the
labour market to benefits and criminality. Not only the integration of the first generation, but also of
the second and third generation requires attention. As this report demonstrates, the educational
attainment of the first generation, as well as the school success of children of the first and second
generation, are quintessential for positive outcomes.
A more structural approach is to monitor the costs of current immigration flows and to keep an
account of the outstanding claims that immigrants have on the treasury. This brings us to the value of
periodic surveys of net contributions. The Dutch government has not published data on net
contributions to public finances of immigrants since 2003. We can only guess the reasons for
this. Hopefully, this research will make it clear that this information is necessary for the foundation of
policies and insight into future government spending. In our view, the report fits well with the yearly
government report ‘State of Migration’ and the work of the State Commission on Demographic
Developments 2050 (Staatscommissie Demografische Ontwikkelingen 2050) on the consequences of
changes in the size and composition of the population in the Netherlands by mid-century.
Perspective
Immigrants that make on average a significantly negative contribution to Dutch public finances are
mainly those who exercise the right to asylum, especially if they come from Africa and the Middle
East. The latest UN population forecast shows that the total population in these areas will increase
from 1.6 billion to 4.7 billion by the end of this century. It is not implausible that the immigration
potential will at least keep pace. Immigration pressure, in particular on the welfare states in Northwest
Europe, will therefore increase to an unprecedented degree. This raises the question of whether
maintaining the open-ended arrangement enshrined in the existing legal framework is a realistic
option under these circumstances.
The current cabinet recently indicated to the House of Representatives how it views the existing legal
framework. This was in response to a report on an “investigation into the question of whether, and if
so how, the 1951 Refugee Convention can be updated to provide a sustainable legal framework for
the international asylum policy of the future”.
This response shows that the Dutch cabinet wants to maintain the existing legal framework for asylum
immigration – despite the large-scale abuse identified by the cabinet. The calculations in this report
leave no doubt about what this means in the long term: increasing pressure on public finances and
ultimately the end of the welfare state as we know it today. A choice for the current legal framework
is, therefore, implicitly a choice against the welfare state.
