Migration as a Location Factor: Fiscal Burden Today, Opportunity for Governance Tomorrow (2026–2031)

Initial situation & findings

The fiscal assessment of immigration in Germany is twofold: the numerically dominant asylum- and humanitarian-driven migration burdens public budgets, while the smaller, managed skilled-labour immigration has a positive effect. According to the Federal Ministry of Finance's refugee cost report, the federal government spent around €24.8 billion on refugees and migration in 2025, €3.2 billion less than in 2024 and thus the lowest value since 2021 (€21.7 billion). This sum captures only the direct federal share, such as the flat rate of €7,500 per initial asylum application and the contribution to state and municipal costs. For comparison: in 2025 the federal government spent only €22.4 billion on research and €19.3 billion on health. The foreigner share among citizen's income recipients averaged 47.6 % in 2025 (2005: 18.8 %), with more than 2.5 million foreigners receiving benefits. The SGB II rate among foreigners under 65 is around 19–21 % and thus far above the 8.3 % of the total population. The finding is therefore clear: the tax and contribution payments of the currently dominant cohorts do not cover the expenditure on basic income support, health, accommodation and future pensions in the short to medium term.

How it came about – historical development

The rise in foreign transfer recipients follows two major waves of immigration: the refugee migration from 2015 onwards (above all Syria, Afghanistan) and the influx of around 1.25 million war refugees from Ukraine since February 2022. Between 2015 and 2023, direct asylum-related federal expenditure totalled around €189.6 billion. The number of foreign citizen's income recipients rose significantly from 2015 to 2017 and again from 2022 onwards, reaching an average of around 2.64 million people in 2024. A structural driver is the length of residence: in the first years after arrival, employment rates are low because asylum procedures, employment bans, residence requirements and language barriers delay the take-up of work. The average procedure duration in 2025 was 12.2 months, with an overall protection rate of 28.1 %. Ukrainian refugees do not go through a regular asylum procedure but instead receive temporary protection under Section 24 of the Residence Act (AufenthG) with immediate access to citizen's income – a key reason for the sharp rise in the foreigner share. This history explains why the snapshot of the employment and transfer statistics turns out structurally unfavourable.

Central drivers and mechanisms

Fiscally decisive is the causal chain of qualification structure, labour-market participation, wage level and transfer receipt. Because the humanitarian-driven cohorts initially exhibit low employment rates and predominantly wages in the lower segment, tax and contribution payments remain low at first, while expenditure on basic security, housing and healthcare arises immediately. On the basis of generational accounting, the Stiftung Marktwirtschaft puts the permanent net burden at around €6.3 billion per year per 1 million refugees. In a present-value analysis, Bernd Raffelhüschen in 2024 even arrived at a negative fiscal balance of future migration of 149.7% of GDP – under rather optimistic assumptions regarding qualification. A second mechanism is the coupling of the welfare state with migration incentives: generous transfers increase the attractiveness for poverty and asylum migration, which drives case numbers and thus expenditure. At the same time, length of residence acts as a countervailing force, because completed procedures, language acquisition and recognition of qualifications raise employment rates. The IAB emphasises that accelerated asylum procedures and the removal of employment bans measurably promote integration. The fiscal balance thus depends directly on how quickly and durably labour-market integration succeeds.

Ongoing and planned measures

Policy is responding with a change of course along two axes: limiting uncontrolled migration and promoting labour migration. The number of initial asylum applications fell in 2025 to 113,236 (-50.7% compared with 2024); net immigration overall dropped by 45% to 235,000 people. Instruments include Dublin centres (from 2025 in Hamburg and Brandenburg), exclusions from benefits for those subject to transfer obligations, and tightened border controls. On 1 July 2026, the reform of the Bürgergeld will gradually take effect; it will be renamed Grundsicherungsgeld and provides for tougher sanctions up to the complete withdrawal of benefits in cases of repeatedly missed appointments. On the employment side, the Skilled Immigration Act (FEG 1.0 since 2020, FEG 2.0 since 2023) has facilitated immigration: EU Blue Card, opportunity card for job searches, and the consideration of professional experience. The Western Balkans regulation was doubled in mid-2024 to a quota of 50,000 annual admissions; in December 2025, however, around 18,000 requests still had to be rejected. These measures aim to gradually shift the burdensome structure in favour of fiscally positive labour migration.

Economic impact (costs/benefits, fiscal)

In the short to medium term, the fiscal burden clearly predominates. In addition to the €24.8 billion in federal expenditure in 2025, the Länder in 2024 bore around €6.7 billion in gross expenditure under the Asylum Seekers' Benefits Act; the Länder criticise that their total costs significantly exceed the federal government's VAT funds. Older ifo calculations arrived at a fiscal net balance of around minus €1,800 per migrant and year – an indication of the structural gap with low-skilled immigration. On the positive side is the dynamic integration curve: the employment rate of the 2015 cohort reached 64% in 2024, nearly the overall level of 70%; refugee men exceeded the male average by four percentage points at 76%. 90% of employed refugees were in jobs subject to social insurance contributions; the median gross hourly wage of €13.70 was above the low-wage threshold of €12.50. The benefit thus unfolds only with a delay, while the costs take effect immediately. The weakest lever remains the labour-market participation of refugee women at only 35% – this is where the greatest untapped fiscal potential lies. On balance, the outcome of the dominant structure remains negative over the five-year horizon.

Skilled labour immigration: the positive counterpole

The burdensome asylum migration must be clearly distinguished from managed labour migration, which is predominantly positive fiscally. The number of employees subject to social insurance contributions holding a residence title for employment purposes rose from a good 200,000 (2020) to 420,000 in June 2025, thus more than doubling. Around 164,000 of these employees came via the EU Blue Card, which corresponds to an increase of 114% compared with 2020. Nevertheless, the volume falls short of the targets: the IAB puts the requirement at an annual net immigration of around 400,000 people in order to maintain the labour-force potential until 2060. Initial Blue Card grants without a prior title even declined recently (H1 2023: 12,430; 2025: 7,385), pointing to cyclical weakness and shifts towards other titles. The IAB attests a significantly positive effect to the FEG, but sees the targets clearly missed. As long as labour migration does not shape the overall structure, the burdensome asylum-humanitarian component dominates the fiscal balance.

International classification and distributional effects

Germany attracts a disproportionate share of asylum and poverty-driven migration, favoured by its comparatively generous social transfers; East-Central European countries with lower benefits record significantly lower inflows. The migration balance with the EU was negative in 2025 at -54,000 persons, while the largest positive contribution came from Asia (+158,000). In distributional terms, second-round effects arise: because purely tax-financed expenditures and subsidies to the social insurance schemes are not covered by the contributions of low-earning migrants, according to the Council of Economic Experts the burden shifts onto future contribution and taxpayers. High migration expenditures also compete directly with future-oriented investments: the notional budget item for refugee costs would rank sixth in the federal budget in 2025, ahead of research and education. The decline in net migration to 235,000 (2025) eases public coffers, but at the same time intensifies demographic pressure, since the potential labour force shrinks without immigration. Fiscally advantageous would be a shift in the migration mix towards qualified, immediately employable migration – precisely the structure that does not yet dominate.

Key fiscal and labour-market indicators of migration

Scenarios

Options for action

1. Radically accelerate asylum proceduresPushing procedure durations well below the current 12.2 months and dismantling employment bans early demonstrably raises employment rates according to the IAB. Early entry into work shortens the phase of pure transfer dependency and improves the fiscal life-cycle balance of every person entitled to stay.
2. Correct disincentives in the transfer systemThe switch to the basic security allowance starting on 1 July 2026, with stricter sanctions, should be implemented consistently. Since generous transfers attract poverty-driven migration, a targeted design reduces both migration incentives and the roughly €6.3 billion net burden per 1 million refugees.
3. Prioritise and cut red tape in labour migrationThe Opportunity Card, the EU Blue Card and the Western Balkans regulation, doubled to 50,000, should be strengthened through faster visa and recognition procedures – in December 2025, 18,000 Western Balkans requests had to be rejected for lack of quota. Every additional skilled worker who immediately pays contributions improves the fiscal outcome directly.
4. Specifically promote female labour-force participationWith an employment rate of only 35%, refugee women represent the largest untapped potential (male comparison value: 76%). Childcare, language and labour-market-oriented programmes could raise this rate and convert billions in transfers into contribution and tax revenue.
5. Cost transparency and burden-sharing between federal government and statesA complete, annual cost report spanning all levels and a dynamic, needs-based federal-state financing arrangement create predictability. This makes it possible to avoid disproportionately burdening municipalities – for instance in the case of unaccompanied minors – and eroding their scope for investment.

Key risks

• Renewed increase in refugee numbersGeopolitical crises could drive up the asylum figures, which were halved in 2025, once again and push federal expenditure back towards 28–30 billion euros.
• Entrenched dependency on transfersIf the employment rates of new cohorts remain permanently low, the SGB II rate among foreigners will become entrenched well above the 8.3 % of the total population and place a structural burden on the social security funds.
• Demographic gap amid declining immigrationThe decline in net immigration to 235,000 exacerbates ageing; without around 400,000 in annual net immigration, the potential labour force shrinks and, with it, the contribution base.
• Crowding-out of future-oriented investmentMigration expenditure exceeding the budgets for research (22.4 billion) and education ties up funds that are then lacking for the future competitiveness of Germany as a business location.
• Weak impact of skilled labour immigrationDeclining Blue Card issuances and the failure to meet the targets of the Skilled Immigration Act (FEG) show that positive labour migration has so far not tipped the burdensome overall structure.
• Federal cost conflictsStates and municipalities bear costs exceeding federal reimbursement; unresolved financing questions can constrain municipal capacity to invest and act.

Outlook

Over the five-year horizon to 2031, the fiscal burden prevails, because the currently dominant asylum- and humanitarian-driven migration – with low initial employment rates, high dependency on transfers and wages in the lower segment – does not cover contributions and tax revenue. The decisive factor will be whether the politically initiated shift towards managed labour migration and accelerated integration succeeds, and whether the Bürgergeld reform effectively removes false incentives. A positive effect comes from the documented integration curve: after eight to nine years, employment rates converge towards the population average, and male refugees even exceed it. The tipping point is determined by the pace of labour-market integration – particularly among women –, the level of future immigration figures and the ability to scale skilled labour immigration towards the required 400,000 annually. Until this shift takes hold, the overall structure remains burdensome, which is why the five-year outlook is rated -6.