A country’s growth can be broken down into three factors. The first is productivity, calculated as output per job; the second is the employment rate, the share of employment in the population; and the last is population growth. We can thus calculate the contribution of each of these elements to GDP growth. This is an exercise I conducted a few weeks ago by comparing the evolution of GDP per capita, not GDP, between the Eurozone and the United States.

This breakdown allows us to pinpoint the origins of growth. An increase in the employment rate thus has an immediately perceptible effect. This is an objective found in French economic policy. By increasing the employment rate, for a given productivity, GDP grows more rapidly.

For a given productivity rate, we can see the major role of employment and population. In these two dimensions, contributions can be shared between locals and foreigners. In the United States, migration flows from Latin America and Asia have long been major sources of explanation for higher growth than in Europe. It is in light of this observation and the new directions of migration policy that economists are questioning the maintenance of a rapid growth rate across the Atlantic.

In Europe, the role of migratory flows has historically been more limited. Their control is a political instrument of many governments.
Economists from the European Central Bank wanted to shed more light on the situation. (https://bit.ly/43lKyp0) Based on the observation of the slowdown in the rate of population growth in the major Eurozone countries and the aging of their populations, ECB economists broke down the contributions of the employment rate and the population between locals and foreign workers.

In the post-pandemic recovery and through 2024, the contribution of foreign workers to GDP growth is significant, offsetting the reduced contributions of local workers. Over the 2022/2024 period, contributions associated with foreign workers sometimes accounted for almost half of the growth in major Eurozone countries.
In the ECB study, foreign workers have gained in qualifications compared to the pre-Covid period. They therefore have the capacity to contribute more and are no longer systematically confined to low-skilled and low-paid jobs.
Contributions are strong in Spain and Germany, and somewhat less so in France. In Italy, where the rebound is significant, foreign workers make a small, almost non-existent contribution….

The European growth model is changing. Without the contribution of foreign workers to the Eurozone, income growth would have been lower, exacerbating the public debt problem.
A strong political dilemma…