How Spain Thrives on Immigration

The open-border policy under Prime Minister José Luis Zapatero is driving a Spanish economic and social revival

by Carol Matlack

Imagine what would happen if a prosperous Western nation threw open its borders, allowing immigrants to flood in virtually unchecked. Soaring unemployment, overstretched social services, rising crime, even rioting in the streets? Not in Spain.

Over the past decade, the traditionally homogeneous country has become a sort of open-door laboratory on immigration. Spain has absorbed more than 3 million foreigners from places as diverse as Romania, Morocco, and South America. More than 11% of the country's 44 million residents are now foreign-born, one of the highest proportions in Europe. With hundreds of thousands more arriving each year, Spain could soon match the U.S. rate of 12.9%.

And it doesn't seem to have hurt much. Spain is Europe's best-performing major economy, with growth averaging 3.1% over the past five years. Since 2002, the country has created half the new jobs in the euro zone. Unemployment has plummeted from more than 20% in the 1990s to 8.6%, within shooting distance of the 7.2% euro zone average. The government attributes more than half this stellar performance to immigration. "We are very thankful for all these people who have come here to work with us," says Javier Vallés, economic policy chief for Prime Minister José Luis Zapatero.

Many Benefits

If anything, the worry is that Spain is a bubble waiting to burst. Construction, which accounts for 18% of the economy and is a major employer of immigrants, is slowing noticeably after a decade-long boom. A steep decline could trigger social conflict, which so far has been minimal—perhaps because about three-fourths of immigrants come from Latin American and European countries with languages and cultures similar to Spain's.

For now, Spain is keeping the welcome mat out. Besides providing muscle for construction, immigrants care for children and the elderly, allowing more Spanish women to take jobs outside the home. They do backbreaking agricultural labor and take minimum-wage positions in restaurants and hotels. "Spanish workers don't want these jobs," says Marta Martín, who has recruited immigrant employees for the Madrid-based hotel chain NH Hoteles. And the government says immigrants' tax and social security contributions exceed by more than 20% the cost of the public services they use.

Immigrants are weaving vitality into Spanish society, too. Stroll through Tetuán, a vibrant multiethnic neighborhood in north-central Madrid, and you'll find an Ecuadoran bakery, a Moroccan furniture shop, and an everything-for-€1 store called Los Chinos because its owners are Chinese. On Calle Bravo Murillo, Tetuán's main drag, mobile-phone stores and bank branches beckon with discounts on international calls and wire transfers.

A Model for Globalization

"They understand now that we are a good market for them," Ecuadoran immigrant Mercedes Factos says over lunch at San Francisco de Quito, a Tetuán café that serves Ecuadoran specialties such as fried yucca and toasted corn. Like many immigrant women, Factos arrived on her own and found a job as a domestic worker, sharing a room with a cousin until she saved enough to get her own apartment and send for her child.

Could Spain be a model for invigorating aging, slow-growth societies in Western Europe and elsewhere? Many economists say yes. "If you make your labor market more open and flexible, in a world where populations are more mobile and economies are globalizing, you attract people who want to work," says Eric Chaney, chief economist for Europe at Morgan Stanley (MS) in London.

Yet in much of the developed world, immigration is seen as a threat. Anti-immigrant politicians have gained strength even in tolerant nations such as Denmark and the Netherlands.