Reducing immigration in Portugal only has short-term benefits. In the future, it will lead to higher taxes, lower public spending and greater inequality. These are the conclusions of a study by Nova SBE, presented this Wednesday, on the impact of the European pact on migration in Portugal.
In an increasingly ageing country, where the weight of the immigrant community's contributions to Social Security represented more than 12% last year, the imposition of strict rules on the entry of foreigners will cause a “significant increase” in the tax burden on future generations. This is the conclusion of a study by Nova SBE, presented this Wednesday, which assessed the impact of the application of the “Pact for Migration and Asylum” from an intergenerational perspective.
According to the authors of the study, the controversial pact approved by the European Parliament on April 10, 2024, which aims to reduce the number of immigrants in the Member States, “would deteriorate Social Security balances in the short term and have negative effects on the allocation of pensions in the medium and long term”, forcing the Government to choose between reducing pensions or increasing transfers from the Budget to Social Security. “If the current flow of immigration continues, it will be necessary to increase taxes by almost 15%. If Portugal adopted an extreme situation of not allowing any more immigrants, then it would have to increase taxes by almost 20%”, concludes the study.
The researchers argue that restrictions on immigration will not only reinforce inequalities, but also limit the choices of future generations, since Portugal is experiencing an “ageing demographic trend” and the arrival of immigrants, especially younger ones, needs to remain stable. “Restricting immigration will lead to an increase in taxes, a decrease in public spending, a deterioration in public finances and a subsequent impact on public debt, or a combination of the three. In any case, future generations will see their choices limited due to a tighter public budget,” they describe.
Effects on housing and crime
The Nova SBE study argues that, in the short term, the implementation of the European pact could reduce pressure on the wages of the least qualified and on housing prices, as well as reduce crime through an increase in “deportations of illegal immigrants”.
However, in the medium and long term, the understanding changes because the trend will be towards the stabilization of the labor market and the normalization of the housing stock, as well as the irrelevance of the security issue. “When immigrants are well integrated into the labor market, immigration has no impact on crime,” the experts assume.
In addition to studying the impact of the “Pact for Migration and Asylum” established by the European Union, whose member states will have to transpose it by 2026, the Nova SBE research group analyzed public housing policies, especially with regard to rent control and the expansion of social housing. On this subject, the authors recommend choosing policies based on data and scientific evidence, progressively reducing or eliminating rent control, introducing a 30% housing quota and investing heavily in the renovation of vacant buildings.
Rent control doesn't work in the long run
According to the research carried out, rent control is only effective in the short term because it "prevents housing prices from rising above the legal limit", but in the medium and long term it ends up having "the opposite effect to that desired" because landlords choose to "put housing up for sale or simply withdraw it from the rental market", which leads to a decrease in supply and an increase in prices. "In the long term, rent control leads to an increase in housing prices. Citizens who own housing become richer, while citizens from the lower classes who do not own housing have even greater difficulties in acquiring it".
The group of researchers advocates that public housing should be increased to 30% to provide more affordable homes without mortgaging future generations, stressing that Portugal is at the bottom of Europe when it comes to public housing stock. Compared to Sweden, where 40% of homes are social and cooperative housing, Portugal has only 2% of public housing, a percentage close to 3.5% in Italy.
Project to promote justice between generations
The study’s conclusions were announced this Wednesday during the presentation of the project “Policy assessment from an intergenerational perspective”, by Nova SBE and the Calouste Gulbenkian Foundation, which aims to “contribute to a more equitable future” for all. The event was attended by Nova SBE researchers Francesco Franco, Marli Fernandes and Marlon Francisco.
The study on the European Union pact on migration and asylum is one of six developed within the scope of the project.