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26th May 2019

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Refugees will give EU economy a boost

  • Some refugees do dirty, difficult, dangerous and dull jobs, freeing locals to do higher-skilled jobs. (Photo: Tax Credits)

Welcoming refugees is not only a humanitarian act, it is also an investment that can yield significant economic benefits.

Investing €1 in welcoming refugees could yield nearly €2 in economic benefits within five years, said a Tent Foundation report.

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  • Investing one euro in refugee assistance can yield nearly two euros in economic benefits within five years. (Photo: PROEDUCTUS BILDBANK)

It is authored by Philippe Legrain, a former economic adviser to the president of the European Commission.

The key message of the study is that policymakers and practitioners should stop considering refugees as a "burden" to be shared, but rather as an opportunity to be welcomed.

Calculations based on IMF data suggest that welcoming refugees would increase public debt by €68.8 billion between 2015 and 2020, but cumulative GDP over the same period would be €126.6 billion higher.

But that is not the only benefit from welcoming refugees.

"Ageing societies with a shrinking native working age population, such as Germany's, benefit from the arrival of younger refugees whose skills complement those of older, more experienced workers. Refugees can also help care and pay for the swelling ranks of pensioners," read the study.

Legrain says it is a common misconception that refugees' economic contribution depends on their skill level, with highly skilled refugees making a positive contribution and less-skilled ones having a negligible – or even a negative – impact.

Once they start working, some refugees do dirty, difficult, dangerous and dull jobs that locals spurn, freeing locals to do higher-skilled jobs that they prefer, his report concluded.

Business incentives

The real problem is rather that European countries have inflexible labour markets that privilege insiders at the expense of outsiders.

There is a spectrum of models for welcoming refugees to chose from.

At one extreme, the US gives refugees a burst of initial help, after which they are expected to fend for themselves.

At the other extreme, Sweden has traditionally provided refugees with generous social support, but made it hard for them to work.

While Sweden now focuses much more on getting refugees into work, barriers to employment remain high. But overall, the US is much more successful than European countries at getting refugees into work, the study found.

"Arguably, an ideal refugee welcome programme would combine the active assistance of the Swedish model with the job and enterprise opportunities of the US one," the report concluded.

Many provide the worst of both worlds: little help for refugees and high barriers to employment and enterprise.

Skills aren't much use without job opportunities. So refugees should be resettled in areas where there are jobs, not in areas where cheap housing is available and jobs aren't, recommended the report.

An opportunity to be welcomed

Yet, with so many positive indications of refugees bringing long term positive contributions to society, why are so many Europeans hostile?

"On the economic side, both the opponents of refugees and the supporters of refugees tend to believe they are cost. Opponents say it is a cost that we can't afford to bear and supporters say it is a cost that we have a duty to bear for humanitarian reasons," Philippe Legrain explained to EUobserver.

"And so they both talk about a burden and that is a misconception as the report documents."

"So they ought to be looking at this as an opportunity to be welcomed. You need to start changing the language to show refugees contribute."

However, he also recognised there were issues to add to the economic rationale, such as culture, security and terrorism.

"They need to be addressed separated," he said.

The report can be found here: Refugees work: A humanitarian investment that yields economic dividends.

This story was originally published in EUobserver's 2016 Business in Europe Magazine.

Click here to read previous editions of our Business in Europe magazine.

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