The economic data tell us there’s no cause for alarm about refugees

It’s worth remembering that skills and talent flee along with people

Ben Chu
Wednesday 27 January 2016 17:30 GMT
The IMF suggests refugees can help alleviate Europe’s demographic crisis
The IMF suggests refugees can help alleviate Europe’s demographic crisis (Getty Images)

There has been some disgraceful treatment of refugees across Europe in recent days. The Danish parliament has passed a law forcing refugees to surrender their valuables on arrival. Asylum-seekers in Cardiff have been required to wear coloured wristbands to receive food. Our own Government is still “considering” whether to take in 3,000 unaccompanied children who have fled the Middle East’s war zones. Quite a way to mark Holocaust Memorial Day.

Great currents of fear about refugees are swirling around the Continent. Some of this anxiety relates to culture, some to crime, some to terrorism, but much is economic in nature. And there are many economic myths around asylum-seekers.

First, the numbers. One prevalent idea is that Europe is bearing the brunt of the human fallout from the conflicts of the Middle East. There has certainly been a pronounced pick-up in asylum applications in the European Union: 995,000 in 2015 alone, double the previous year. Yet that still needs to be put in a global perspective. Of the 14 million cross-border refugees worldwide just one million are in Europe. There are two million Syrian refugees in Turkey alone. Jordan is also home to two million displaced people, equivalent to around a third of the native population.

Another perception is that refugees are all indigents who can’t work or contribute economically. But the experience of Nordic countries in recent decades suggests the labour market participation rates of refugees show the greatest increase over time of all migrant groups. While on arrival only around 15 per cent of refugees in Sweden worked that ratio ultimately rose to more than 60 per cent.

It’s worth remembering that skills flee along with people. In Germany a fifth of Syrian refugees in 2013-14 had been through higher education, roughly the same ratio as native Germans. This may be because often only wealthier and more educated individuals can afford the passage to Europe. Another fear centres around how European countries with already painfully high jobless rates, such as Spain and Greece, can possibly cope if there is a new influx into the labour market. Yet most asylum-seekers have tended to choose to claim asylum in countries with high employment rates such as Germany and Sweden.

What about the impact of refugees on the economy and public finances? The International Monetary Fund recently estimated that there will actually be a modest short-term GDP boost due to the higher government spending on feeding and sheltering refugees. The IMF also suggests refugees can, in the longer term, help alleviate Europe’s demographic crisis, helping relieve the pressure on national pension systems. Many fear that a flow of refugees will have a negative impact on natives’ living standards. But evidence from Turkey suggests its sizeable influx of Syrian refugees into the informal local labour market has actually boosted the average wages of native workers in the formal economy.

In the end, the case for generosity to refugees should be based on humanitarian, rather than economic, arguments and there is a danger of over-claiming over the material benefits from an open door policy. There is a short-term boost to Europe’s GDP under the IMF’s latest forecasts, but GDP per capita is still seen as falling slightly. And much of long-term fiscal impact will depend on the extent of refugees’ participation in the labour market and the skills mix of refugees. Yet it is still useful to dowse the economic alarmism. The facts also suggest some sensible policy avenues for politicians. The net impact on the public finances of higher refugee flows could be offset by allowing asylum-seekers to work while awaiting their claims to be processed. The UK has considerably more onerous restrictions in this regard than Germany and Sweden.

Finally, we should recognise that refugees are not simply economic statistics, but people with talents and ambitions. A 17-year-old Hungarian called George Soros fled to England in 1947. He earned a crust as a waiter, a house painter and, bizarrely, a handbag salesman in Wales. The billionaire investor and philanthropist for liberal causes recalls, with gratitude, that he was able to dream about making his fortune in Britain while still a displaced person. Similarly, Michael Marks arrived in Leeds as a child from Belarus to escape anti-Jewish pogroms in the 1880s. He founded a penny bazaar in the city which eventually became Marks & Spencer. His business empire was significant even before Marks was finally naturalised as a British subject in 1897.

If we’re going to think about the economics of refugees, let’s remember that there will be more like Soros and Marks among the wretched masses fleeing war and repression and seeking asylum in Europe today.

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