Economic Growth

Refugees will repay EU spending twice over by 2020

A refugee woman washes dishes at a refugee camp.

Image:  REUTERS/Umit Bektas

Emma Luxton
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Refugees will repay twice the amount countries spend taking them in, a new report has found.

The study by the Tent Foundation, authored by Philippe Legrain, a former economic adviser to the European Commission, has found that refugees, seen by many as a burden, actually bring economic benefits.

Although welcoming refugees is a humanitarian and legal obligation, many countries are reluctant to admit them for cultural and economic reasons. However, the report shows that investing €1 in accepting refugees can yield nearly €2 in economic benefits within five years. It found that while governments will need to spend almost €69 billion on refugees by 2020, they would increase GDP by €126.6 billion in the same period.

“The main misconception is that refugees are a burden – and that’s a misconception shared even by people who are in favour of letting them in, who think they are costly but it’s still the right thing to do,” Legrain said.

“But that’s incorrect,” he added. “While of course the primary motivation to let in refugees is that they’re fleeing death, once they arrive they can contribute to the economy.”

The world is facing the biggest movement of people since the Second World War, with more than 22 million displaced from their home countries and seeking refuge. More than 1 million people arrived in Europe in 2015 alone.

 1 million arrivals of migrants to Europe by sea in 2015

How can refugees boost the economy?

Refugees can contribute to the economy in a number of ways. When they begin to work they add economic dividends, and over time bolster public finances through taxes.

In Germany, refugees are expected to boost GDP by around 0.5% by 2030.

 Net benefit of refugees to German economy
Image: Tent

Refugees often take on jobs that locals choose not to do, such as caring for the elderly, which is the fastest area of employment growth in advanced economies.

Fears that refugees doing low-skilled jobs may take opportunities from locals are misplaced, the report says, adding: “Refugees who take jobs also create them. When they spend their wages, they boost demand.”

High-skilled refugees can also fill gaps in the labour market and enhance productivity. Many refugees are graduates, with 30% of refugees in 2015 in Sweden having a college or university education.

“Enterprising refugees start new businesses that create wealth, employ locals, make the economy more dynamic and adaptable, and boost international trade and investment.”

The report found that in Britain, migrants are nearly twice as likely as locals to start a business and in Australia refugees are the most entrepreneurial migrants.

The report also highlights that refugees could help solve Europe’s demographic challenge of an ageing population: 83% of asylum seekers registered in the EU in 2015 were under 35.

“Younger refugees are of particular benefit to ageing societies, especially those with shrinking local working-age populations, because they complement older, more experienced workers.”

Refugees also send money home – remittances amount to three times as much as overseas aid – providing developing countries with an economic boost.

What can Europe do?

Legrain believes that for refugees to provide this positive economic development to Europe, the region must take immediate steps to bring refugees into the workforce.

He recommends that asylum seekers be allowed to work while their applications are being processed, as well as being given language lessons and housed in areas where jobs are available.

Governments also need to speed up the certification of qualifications to allow refugees to start working in high-skilled jobs and fill the labour gaps many countries are experiencing.

“Refugees have a lot to contribute as workers, entrepreneurs, innovators, taxpayers, consumers and investors,” the report notes.

“Refugees have already suffered enough. It is in everyone’s interest to make the most of their talents and energy.”

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Economic GrowthGeographies in Depth
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