Immigration in the United States and the European Union.: Helping to solve the economic consequences of ageing?

Most societies of the developed world are ageing rapidly. The number of pensioners has been rising continuously during the past decades. In the future we are facing even bigger rises in the number and share of old (65 +) population while the number of working age (15-64) population will rise only slowly or in many developed countries it is going to stagnate or decline. The old-age dependency ratio (number of older people over 65 relative to the working age population) will rise in all OECD economies posing a critical challenge to public finances. Public pension expenditure as a percent of GDP has risen in the EU-15 from about 6% in 1960 to over 12% in 2000 and on the assumption that no action will be taken to address this situation, pension spending could reach unsustainable levels close to 20% of GDP in the coming decades. The ageing together with the fast improvement of the (mostly very expensive) medical technologies also leads to expanding health-care costs in public budgets. The replacement of the part of working age population through migration could help to reduce the financial burden of ageing. The aim of the paper is to answer the question: is replacement migration a good solution for the EU and America to tackle the rising fiscal expenditure on pensions? Does it help to solve the financial consequences of ageing? If the main goal of the immigration is the economic benefit for the host societies - I think it should be - than migration must have a positive fiscal effect on public budgets. If immigrants pay more to the public budget than they receive from it, the fiscal effect of migration is positive. If the immigrants "pay their way" we can talk about a transfer of wealth from immigrants to natives. In this case immigration helps to reduce the financial burden of ageing. I will argue that during the last two decades in many Western countries the migration lead to more costs then benefits and created more problems than solved. Some EU members - instead of using immigration as a tool to tackle the financial consequences of ageing - were creating their new ethnic underclass. The fiscal impact of immigration is strongly dependent on various factors, notably the state of the labour market, the composition of migrants, the extension of the welfare states and the access of immigrants to welfare benefits. So any immigration reform targeting a positive fiscal balance shall take these factors into consideration.