Europe is in the midst of the worst refugee crisis since World War II.
Both politicians and the voting public are concerned that the cost of rehoming them will take a toll on the economy of the countries providing them with shelter.
But former economic adviser to the president of the European Commission Philippe Legrain just destroyed that argument.
Legrain said in his report for charity The Tent Foundation, entitled “Refugees Work: A Humanitarian Investment That Yields Economic Dividends,” that “investing one euro in welcoming refugees can yield nearly two euros in economic benefits within five years.”
In other words, refugees would be able to repay all the money spent on rehoming them in a country twice over in just five years. While it might require some initial investment, there will be decent returns in just a few years’ time.
Legrain said they would be able to do this by doing the jobs that a lot of the European workforce doesn’t want to do (emphasis ours):
Refugees can contribute economically in many ways: as workers of all skill levels, entrepreneurs, innovators, taxpayers, consumers and investors.
Their efforts can help create jobs, raise the productivity and wages of local workers, lift capital returns, stimulate international trade and investment, and boost innovation, enterprise and growth. From a global perspective, enabling people to move to more technologically advanced, politically stable and secure countries boosts their economic opportunities and world output.
Once refugees start working, this investment may yield seven additional dividends.
Some refugees do dirty, difficult, (relatively) dangerous and dull (4D) jobs that locals spurn, such as cleaning offices and caring for the elderly, which is the fastest area of employment growth in advanced economies. This 4D dividend enables locals to do higher-skilled and better-paid jobs that they prefer.
Initially, countries will have to invest in rehoming and integrating refugees into the economy. Legrain said The International Monetary Fund estimated that “additional spending in the EU on refugees of 0.09% of gross domestic product (GDP) in 2015 and 0.11% in 2016 will raise its GDP by 0.13% by 2017.”
“Add in the boost to the economy from refugees working and GDP could be 0.23% higher by 2020: a total increase of 0.84% of GDP between 2015 and 2020.”
However, the report is based on the assumption that all the refugees will join the workforce.
Germany is taking in the largest amount of refugees out of the European Union at around with 600,000 migrants arriving this year, 400,000 next year, and 300,000 in each of the following years.
Germany’s government expects to spend around €93.6 billion (£73.14 billion, $105.61 billion) by the end of 2020 on costs related to the refugee crisis, said a report by German magazine Der Spiegel, citing a draft from the federal finance ministry for negotiations with the country’s 16 states.
Out of that amount, only 55% are expected to have a job after five years. That leaves 45% that will depend on the state for handouts. The report estimated that €25.7 billion would be needed for jobless payments, rent subsidies, and other benefits for recognised asylum applicants by the end of 2020.
Another €5.7 billion would be needed for language courses and €4.6 billion would be required for measures to help migrants get jobs.
However, Legrain outlined in his report just how beneficial it is for Germany to welcome lots of refugees, even in the most pessimistic scenario (see the chart).
Legrain said in his report that “the key message of this study is that policymakers and practitioners should stop considering refugees as a ‘burden’ to be shared, but rather as an opportunity to be welcomed. With a suitable upfront investment and wise policies, welcoming refugees can yield substantial economic dividends.”