How Spain's radically different approach to migration helped its economy soar

Nah! Let's get rid of all our immigrants. ... ... Well... not all of them. Some are White, after all. Gotta keep those.

Let's also keep South Africans. White South Africans, that is...

S E E D E D   C O N T E N T

From Madrid to Barcelona, restaurants and bars are brimming with people, and reservations have become essential for everything from fine dining to high-end hotels.

It's a glimpse of how Spain has become Europe's buzziest economy - named the world's best by the Economist in 2024 - fuelled in part by what analysts have described as the government's strikingly different approach to migration.

This difference was laid bare late last year when Spain's prime minister gave a stark warning on migration. But unlike his counterparts in Italy, Germany or France, Pedro Sanchez was intent on rallying the country behind a markedly different approach.

"Spain needs to choose between being an open and prosperous country or a closed-off, poor country," he told parliament in October. "It's as simple as that."

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Migration was not only a question of humanity, he said, but - in a country where the birthrate ranked among the lowest in the EU - it was the only realistic means of growing the economy and sustaining the welfare state.

Pedro Sanchez took a radically different approach to migration compared with his western European counterparts.

Months on, his stance has seemingly been backed by economic data: Spain's economy expanded by 3.2% last year. This far outpaced Germany's 0.2% contraction, France's 1.1% growth and Italy's 0.5%. The figure was also ahead of Britain, whose total GDP grew by 0.9% last year and the Netherlands' 0.8% growth.

Crucial to this growth was the movement of people, said Javier Diaz-Gimenez, a professor of economics at the IESE Business School. "It's been done with a lot of tourists and a lot of immigrants."

A record 94 million tourists visited Spain last year - up 10% on the previous year - creating jobs in hotels, restaurants and other tourist services. High rates of migration have allowed Spain to take advantage, and push unemployment levels to their lowest since 2008, as migrants have plugged the gaps in a labour market where the working-age population is ageing.

Other factors are also at play. Spain's abundance of wind and solar renewables has helped to keep energy relatively cheap while EU Covid recovery funds bolstered the economy and the socialist-led government ran a deficit to fund initiatives such as raising pensions and public sector hiring. "If you get this combination, it's hard to beat," said Diaz-Gimenez.

More than 400,000 jobs created in Spain last year were filled by migrants or people with dual nationality.

After years of watching the far right's hardline views on migration become mainstream, analysts were swift to highlight how Spain was different. "One remarkable facet of Spain's recent performance has been the role of immigration," economists at JPMorgan noted in a recent research report. "2022 saw the highest net migration in 10 years, at close to three-quarters of a million individuals."

The result was a working-age population that nearly doubled compared with other countries in western Europe. Of the 468,000 jobs created across Spain last year, roughly 409,000 were filled by migrants or people with dual nationality, many of them from Latin America, but also from across Europe and Africa. "Overall, Bank of Spain analysis suggests immigration contributed over 20% to the near 3% GDP per capita income growth during 2022-2024," noted JPMorgan.

The Spanish experience comes as countries across Europe wrestle with a seemingly intractable dilemma. As politicians on the far right and the right compete for votes by peddling hostility towards migrants, ageing populations are shrinking the pool of workers who can pay for pensions and support the welfare state.

As Germany gears up to vote in elections on 23 February, the heated campaign has hinted at how the rising rhetoric around migration is working against the needs of the economy.

While some politicians had called for Syrians in Germany to return to their homeland, a study by the German Economic Institute highlighted that about 80,000 Syrians were working in sectors experiencing deep labour shortages, from the auto industry to dentistry and childcare.

More than 5,000 Syrian doctors were also fully employed in the country, meaning returns could result in "critical shortages" in medical services, it noted.

Studies carried out across Europe and the US had long demonstrated the economic benefits of migration, said Jean-Christophe Dumont, the head of the OECD's international migration division. "What is clear is that migration makes a positive contribution to the economy, provided that it is well managed."

Migration had long been shown to be positive for productivity and income per capita in the long term, said Dumont. Additionally, "migrants contribute more in income tax and social contributions than they receive in individual benefits in all OECD countries".

The role of migration was likely to become sharper in the coming years, as the populations of OECD countries declined and people had fewer children, said Dumont. "But that migration needs to be well managed," he added , citing efforts to ensure that migrants could learn the local language, that their qualifications were recognised and that they had access to housing.

In Spain - which has in recent years become one of the EU's main recipients of migrants - the government has vowed to invest in improving integration, from helping migrants navigate the labour market to ensure they are not confined to low-skilled, low-paying jobs, to reducing red tape for residency applications.

It was a glimpse of the delicate balancing act required of governments, said Rafael Domenech, the head of economic analysis at Spain-based bank BBVA.

Spain's relative openness to migration "is certainly an advantage and it's an opportunity, but it has to be managed well", said Domenech. "If not, it can lead to major imbalances and tensions that can turn into social unrest or foment populism," he said. He cited the country's housing crisis as a potential flashpoint.

He cautioned that it was too soon to draw any sweeping lessons from Spain, a country where migrants had gone from making up less than 2% of the population in 1998, to more than 15% in two decades. "It remains to be seen how this will play out," said Domenech, who pointed to countries such as Denmark, where the far right had successfully turned migration into a polarising talking point after years of relative openness.

"I think we're just getting started here," he said. "It would be good to have this conversation in five or 10 years from now, so that we can evaluate how well Spain has done."