Syria’s recent refugee crisis has instigated debates about the economic effects of refugees seeking asylum in foreign countries. While some countries, such as Hungary, are deploying armies to prevent refugees from entering, others such as Germany are openly embracing them in the hopes that they will bring economic benefits. The stark disparity in reactions naturally begs the question: what really are the economic effects of accepting refugees?

Since October, millions of Syrians have been racing across international borders to seek asylum from their war-ravaged country. Syrian refugees now account for one in five people in Lebanon and one in ten in Jordan. Both the World Health Organization (WHO) and the United Nations High Commissioner for Refugees (UNHCR) fear that these countries’ fragile infrastructures and limited resources may be approaching their breaking points, and that the mass exodus is altering the social, cultural and economic climate of Syria’s neighbors.

The notion that refugees pose an economic burden still remains prevalent. Many countries point to the initial costs of building temporary housing, feeding refugees, and paying for jobs and skills training. In order to prevent Syrian refugees from entering, some countries have even constructed barriers, and Hungary has gone so far as to deploy armed forces.

Refugees have also begun seeking asylum throughout all of Europe. Yet Europe, similarly to Syria’s neighbors, is providing little refuge, fearing that letting some refugees in will encourage more to come, and that these refugees are destined to become an economic burden.

An article earlier this month in the International Business Times reported that three hundred UK judges in an open letter criticized government officials over their repose to the migrant crisis saying it is “too low, slow and narrow.” In a September news release, Amnesty International cited key facts on resettlement efforts of Syrian refugees, noting that Germany and Sweden have received 47 percent of Syrian asylum applications while the remaining 26 European Union countries have pledged around 8,700 resettlement places, well under one percent of the refugees. Gulf countries, like Qatar, Saudi Arabia and Kuwait have offered zero resettlement places to Syrian refugees, as is also the case with other high-income counties, such as Japan.

Governments who refuse refugees typically emphasize the negative impacts that refugees might bring. They cite that the costs of strained public welfare budgets will hinder economic growth, reduce jobs, drive down wages and waste tax dollars. The UNHCR issued a report on the impacts of large refugee populations in January 1997, in which it cited how refugees in Zaire were receiving services and entitlements that were not available to the local poor populations.

But until recently, quantitative methods and empirical data that tell a very different story have been noticeably missing, as economists focused only on the “costs” of refugees on their hosts. Today, new evidence appears to defy public perceptions that refugees are a burden.

According to Alexander Betts, the Director of the Refugee Studies Centre (RSC) at the University of Oxford, refugees bring measurable economic benefits and development potential. They are a younger population with new skills and expand the consumption of food and commodities, which stimulates growth of the host economy.

“The RSC’s research has shown that, with socioeconomic rights, refugees can make an enormous contribution,” writes Bett in a June 2014 report entitled “Refugee Economies: Rethinking Popular Assumptions.”

Betts’s research shows that the economic impact of accepting refugees is generally positive, especially if immigrants are well-educated, as most Syrians are. Recent figures released from the U.N. and other aid organizations have shown that the majority of Syrians seeking asylum in Europe come from upper-middle class, and well-educated backgrounds. From an international trade standpoint, accepting Syrian refugees is a policy decision that could potentially lead to economic benefits.

In a recent report issued by the World Bank examining the impacts of Syrian refugees on Lebanese trade, a one-percent increase in Syrian refugees increased Lebanese services exports by about 1.5 percent, after just two months.

The main impacts, according to Roger Zetter of the Refugees Study Centre at Oxford University, “are seen in investment and capital formation – for example, in additions to the housing stock or to infrastructure, or in the start-up of new businesses.”

He cites the Eastleigh area of Nairobi, where many Somali refugees settled, as a textbook example. It can best be described as “a country within a country with its own economy,” according to the Norwegian Council for Africa, on account of its robust business sector.

Likewise, Afghan refugees expanded Pakistan’s trucking business, creating new markets for transport and adding to the productivity of the host country as well as international trade. Similar stories are found in the surprisingly resilient economies of Lebanon, Jordan and Turkey, despite the large inflows of refugees. According to the World Bank, Lebanon is predicted to grow 2.5 percent, which is remarkable considering the spillover from the war in neighboring Syria. Jordan and Turkey have also seen economic growth throughout the inflow of refugees.

Germany’s Chancellor Angela Merkel recognizes the opportunity Syria’s refugees provide because she is wary that Germany will soon suffer from the effects of an aging economy. Moreover, a study commissioned by the German government showed that migrants actually pay more taxes than they take out in public benefits, leaving a net surplus.

Last year, according to the International Business Times, Germany invested $2.7 billion for its 203,000 migrants, or just under $14,000 per refugee. This year Germany expects to accept 800,000 at an estimated cost of $11 billion.

Yet, many European countries, particularly Great Britain, continue to oppose accepting refugees, despite recent research that suggests refugees can actually benefit economies.

“A lot of politics is relatively fact-free in this arena, and we need to much better understand what drives migration before we can form the right policies,” Hein de Haas told The WorldPost. In general, “migration has a relatively small – rather than radical or negative – effect on economies,” Hein de Haas said.

The reality remains that more refugees are staged to flee Syria as the war escalates with Russia’s involvement. More Syrians are willing to risk the perilous journey, even for temporary asylum, to escape deplorable living conditions.

In light of new facts and research, political leaders need to see beyond the near-term costs of accommodating a new work force. If the international community allows itself to remain burdened by timeworn dogmatic thinking, then it stands to risk sacrificing the benefits of accepting refugees.

Since the start of the 21st century, the European Union (EU) has experienced a migrant problem. According to Eurostat, asylum applications from non-EU countries to members of the EU have steadily risen from 200,000 in 2008 to over 600,000 in 2014. Only a little under a half of these applications were approved in 2014, and these are just the documented numbers. The International Organization for Migration estimates that, as of Oct. 6, in 2015 alone about half a million migrants have entered the Mediterranean region by sea. The United Nations even predicts that from 2015 to 2050, net migration in a moderate scenario will account for 82 percent of population growth in these high-income European countries. With ongoing difficulties of integration and assimilation, the response by the public to this crisis has not been positive.

Is this wave of irregular migration simply a curse or a blessing in disguise? Historically, periods of unusually high immigration have also been periods of strong innovation and economic progress, especially in the United States. For example, the Industrial Revolution in the United States during the 19th century was a period of rapid increase in immigration. From 1850 to 1930, the population of foreign-born citizens in the United States increased from 2.2 million to 14.2 million according to the Census Bureau. This flow of immigrants into the labor force of the United States greatly influenced production in the United States. Expanding industries such as the railroad industry and the creation of the intercontinental railroad were largely driven by the extreme low cost of labor of immigrants. Likewise, at the beginning of the 20th century the steel industry expanded rapidly due to an availability of labor provided mostly by European immigrants. These two instances of economic growth demonstrate the meeting of demand for labor by supply through immigration.

The large influx of immigrants in the United States during the 20th century boosted the U.S. economy because there was a growing demand for labor amongst expanding industries such as the steel and railroad industry. Applying this reasoning to the movement of migrants into Europe, one needs to determine if there is a demand for labor in Europe to decide whether or not this migration could strengthen the economies of countries in the European Union. Eurostat’s statistics suggest that a demand for labor is currently opening up in Europe due to Europe’s age distributions. According to Eurostat, the median age of population in the European Union has increased steadily from 38 year old in 2001 to 42 years old in 2014. With an average retirement age of about 64 years old amongst the countries in the European Union, Eurostat estimates that in 2014, about 18.5 percent of the population in the European Union aged 64 years old and above is therefore retired; it also projects that that percentage will steadily increase to about 28.7 percent in 2080. Consequently, Eurostat also predicts that the age group of 15 to 64 years old, the labor force, as a percentage of the population will decrease from 65.9 percent to 56.2 percent by 2080. To meet hypothetical constant demand for labor in the future, countries in the European Union would presumably have to increase the retirement age. The integration of migrants can fill the potential gap in the labor force in the future. The Organization for Economic Co-operation and Development (OECD) stated that migrants accounted for 70 percent of the increase in the workforce in Europe from 2004 to 2014. With a native population steadily increasing in age, the migrant population is an economic opportunity for Europe to boost its declining labor force.

Figure 3. Projection of EU Population Structure by Age Group
Figure 1. Projection of EU Population Structure by Age Group

The greatest fear of this migration’s effect on the labor market in Europe is the idea that this sudden availability of cheap, foreign labor will either lower the wages or take the jobs of native workers through competition. Data gathered by the Institute for the Study of Labor (IZA) demonstrates this fear to be irrational. IZA research is unable to account for any significant correlation between migrant immigration and changes in native wages; whereby immigrants are not lowering the wages of native workers. Furthermore, there were no EU OECD nations that experienced a significantly negative effect of immigration on native employment. With the two key facts that immigration affects neither the wage of native workers nor their employment rate, integration of migrants into the labor force of Europe is likely uncorrelated to the position of native European workers already in the labor force.

Figure 2. Percentage effects of non-OECD immigrants on average native wages
Figure 2. Percentage effects of non-OECD immigrants on average native wages

 

Figure 3. Percentage effects of total immigration on employment of all natives
Figure 3. Percentage effects of total immigration on employment of all natives

The migrant problem in Europe is not necessarily a problem of invasion or a threat to the native population; it is a problem of resettlement, assimilation and human rights. If kept under control, these waves of migrant immigration could prove to benefit the economy of the EU at a time where, in terms of demographics, the nations are in their “darkest hours.”