May 23, 2016

Investing €68.8 billion in refugees would yield nearly €126.6 billion in economic benefits within 5 years

An increase in net government debt of €68.8 billion by 2020 to fund investment in refugees could yield a total increase in GDP of €126.6 billion between 2015 and 2020—a ratio of almost two to one.

The figures, based on IMF data, were released in a report last week by the Tent Foundation and Open Political Economy Network titled Refugees Work: A Humanitarian Investment that Yields Economic Dividends. The report highlights how accepting refugees and empowering them to succeed in the workforce can lead to significant economic growth, increased productivity and wages, new businesses and jobs, and increased international trade and innovation.

From a global perspective, enabling people to move to more technologically advanced, politically stable, and secure countries also boosts their economic opportunities and world output.

However, the report’s author, Philippe Legrain, warns that unless immediate steps are taken to accelerate refugees’ entry into the workforce, their positive economic impact will be hindered.

In order to reduce their reliance on public funds, Legrain recommends that asylum seekers should be allowed to work while their applications are being processed; given language lessons as a matter of urgency to help them adapt faster to their new societies; and housed in areas where there are more jobs rather than simply in places where housing is cheapest. He also believes that authorities should speed up certification of qualifications obtained in refugees’ countries of origin, particularly in areas of local skills shortage.

The key message is that welcoming refugees is not just a humanitarian and legal obligation, it is an investment that can yield many economic dividends.

In an article published this week on IZA world of Labor, Pieter Bevelander of the University of Malmö, Sweden, calls for more in-depth knowledge about the integration of refugees into a host country’s labor market, a subject also covered by Legrain. Bevelander notes that “[e]xisting studies show that refugees have a lower employment rate and income level than family reunion migrants and labor migrants, but that over time this income and employment gap diminishes or disappears altogether.” Depreciation of human capital and credentials due to current asylum and skill accreditation processes is perhaps one reason for this slower adaptation. Bevelander concurs with Legrain that “[p]olicies should improve these processes to reduce both individual and societal costs.”

Related articles:
Integrating refugees into labor markets, by Pieter Bevelander
Read more articles on migration policy on IZA World of Labor.