Foreign-Born Workers Contribute to Steady European Economic Growth

European Central Bank President Christine Lagarde pointed out during a speech in Jackson Hole, Wyoming, that the contribution of foreign-born workers played a significant role in supporting economic growth in Europe. According to Lagarde, the rise in participation rates and numbers of foreign workers contributed to a decrease in inflation without negatively affecting economic growth. This trend is observed not only in Europe but also in the United States, where a similar surge in immigration contributed to increased supply and lower inflation.

Key Takeaways:

• A significant factor in the steady European economic growth has been the rise in both the number and participation rate of foreign workers.
• In Germany, GDP would be around 6% lower than in 2019 without the contribution of foreign workers, demonstrating their substantial impact on the economy.
• The influx of foreign workers has also been crucial in Spain, contributing to the country's economic growth and helping meet the increased demand in the post-pandemic period.
• An influx of foreign workers has played a crucial role in meeting labor shortages caused by an aging native population.
• However, the rise in immigration has also sparked a political backlash, which may limit the flow of foreign workers in the future.
• A drop in inflation-adjusted wages, companies' hoarding of workers, and an influx of elderly people into the labor force also contributed to steady economic growth.
• Historically, higher borrowing costs have dragged down economic growth, leading to recessions and higher unemployment, but this did not occur when the ECB raised interest rates in 2022 and 2023.
• Foreign-born workers accounted for 9% of the EU's labor force in 2022 but have made up half of the bloc's labor force growth in the past three years.
• The increase in elderly people entering the workforce also had a significant impact on employment rates, as the EU's unemployment rate would be higher (currently 6.3%, rather than 6.6%) without it.

Statistics:

• 9% of the EU's labor force was foreign-born in 2022.
• Foreign-born workers accounted for half of the EU's labor force growth over the past three years.
• In Germany, GDP would be 6% lower than in 2019 without the contribution of foreign workers.
• Unemployment rate in the 20 countries using the euro currency would be 6.6% without the influx of elderly people into the workforce.

Sources:

• AP News, August (year not specified) 2023.
• Copyright 2025 The Associated Press. All rights reserved.