Article / 18 September 2015 at 13:00 GMT

How refugees could help Germany and Europe

  • European countries like Germany have ageing populations and unfilled jobs
  • Ware-torn Syria has a relatively young population
  • Refugees to Germany could raise GDP by 0.6%, says study
  • Integration is the key to success
  • Refugees have to be willing to contribute

By Clemens Bomsdorf

Europe’s largest economy is a stable country in good economic shape. Germany’s GDP is expected to grow 1.8% this year according to the national statistical bureau and the most recent jobless rate came in at 6.4%

Syria, where most refugees to Europe are from currently is, on the other hand, on the brink of disaster. Citing the latest economic figures might be seen as cynical and might not even make sense considering the fact that many businesses in the country have been destroyed by attacks and parts of its work force has fled the country (see The World Bank for some data).

It should be noted that Sweden too has taken a big influx with the highest intake per capita including many from Eritrea, (look at this UNHCR data presented by the BBC for refugee take in in absolute and per capita numbers.) but that aside, we'll focus on Germany.

Cologne
Germany looks tempting to you? So it does to many refugees. Cologne cityscape. Photo: iStock
  
Germany's challenges may be different from Syria but, to Germans at least, no less serious.

The demographic change means that in the future, the share of retired people in Germany will increase while that of those in work will decrease. Hence, a larger number of pensioners will have to be financed by a smaller number employed. 

In addition, companies will have a hard time to fill jobs. Already now more than 550,000 jobs in Germany are unfilled - almost twice as much as in 2009.  

The demographics of Syria’s population are quite different. Looking at the key numbers, it is more than evident that this country is far from having an aging population, which is what many Western nations are suffering from (in particular if they have a pay-as-you-go pension system like Germany's).

Demographics of Germany, Sweden, Syria and Eritrea
Source: Deutsche Stiftung Weltbevölkerung http://laenderdatenbank.weltbevoelkerung.de 
 

Many escaping their war-torn home country might in European countries like Germany not only find a safe new home, but could also contribute to head demographic problems off that the pass. 

An inflow of relatively young migrants could support the economy and slightly ease the burden on central European retirement systems. This is of course based on the assumption that the demographic among the refugees does not differ much from those of the inhabitants of Syria, a reasonable conclusion given it tends to be the young who seek new opportunities.

Refugee camp in Syria
Living peacefully at home is probably what most of these Syrian refugees would want. Since this is not possible they might prefer life in Germany over living in this camp. Photo: iStock
 

The large number of refugees fleeing to Europe has dominated the news for weeks. Recent headlines include terms like "stream of refugees“ (as here on CNN) and „refugee crisis grows“ (Reuters) while the Economist last week only had the word "Exodus“ on its title

The latter is one of those outlets suggesting that "Europe should welcome more refugees and economic migrants—for the sake of the world and itself“ as the leader was titled.

Politicians and citizens in countries as Germany and Sweden argue taking refugees is a moral duty, which is definitely the case. In addition to this, accepting refugees might not be a financial burden, but an asset - probably different to what a lot of people might think.

There are fears, that the high amount of people coming is too much of a (financial) burden. The federal government of Germany has announced an increase in migration related spending next year alone by €6 billion

That is an enormous amount and should not only cover accommodation and food, but also administrative costs such as language courses and personnel needed to handle asylum applications. Besides the federal government, other entities have to pay for refugees and nobody exactly knows what it costs to support a refugee in Germany (see these articles in Die Zeit and Die Welt for a more detailed discussion on the issue).

However, if countries like Germany invest in refugees and help them not only to survive, but to learn the language and get an education (or as many already have one, help them to adopt it to their new home country's standards) they should be able to contribute to these economies (see also "Integration as an Investment" in the latest OECD International Migration Outlook 2014). 

Refugees welcome
 Dortmund welcoming refugees - but are they already hard at work? Photo: iStock

A recent study by Oxford economics and cited in The Independent as well as in the Daily Shot suggests that refugees coming to Germany could raise its GDP by 0.6% by 2020. 

An increase of more than half a percentage point suggests refugees are hardly a financial net-burden.

To contribute to a society, migrants first of all have to want to do so. Being well integrated should help - in the labour market of course, but also into society as a whole since that should make them want to not only receive, but also give. Again, this needs willingness to do so and sometimes economist theory is easier to explain than to execute.

Many inhabitants of Germany and other countries have made an effort to show refugees they are welcome and await them even hosting refugees at their home. Such "Willkommenskultur" is a good start into a new life and should help the refugees feel a part of their new home.

It should also wean them away from just wanting to rely on the welfare state, to actively contributing to it. 

r
In all honesty, who wouldn't want to escape this? Proper incentives for
refugees and host country alike can create a win-win scenario. Photo: iStock


— Edited by Martin O'Rourke

Clemens Bomsdorf is an editor on TradingFloor.com


4y
Juhani Huopainen Juhani Huopainen
GDP growth alone does not suggest "hardly a net financial burden". The current refugee flows are a net fiscal burden, and will most likely remain that way for decades, given the past performance. Studies that lump together all migration should be used very carefully when estimating the true cost of the refugee crisis. OECD has in the past emphasized that humanitarian migration is a fiscal burden for the recipient country, even though migration is a slight positive overall.

See DB Research for one estimate of early costs: http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000364625/Migration+into+the+EU+-+a+first+look+at+the+impact.pdf;jsessionid=23FAFCC4EB4BE03ED95D3C1DD707195F.srv-tc2-dbr-com

Or the attached chart on how integration has failed for several common refugee nationalities.
4y
Juhani Huopainen Juhani Huopainen
Eurostat has come to similar conclusions: http://ec.europa.eu/eurostat/documents/2995521/6943082/3-21082015-AP-EN.pdf/d0985d4e-8c33-41bf-b078-21ba6e42d6e7

Education, employment and PISA-test data suggest problems continue in the next generation as well - the fiscal burden is thus not only an issue with fresh refugees.

The real issue should be minimizing the costs caused by the refugee flows - integration, selectivity and spending more at the source of the refugee flows - military intervention, development aid etc, are much more cost-effective than the current lottery system with people's lives.
4y
Clare MacCarthy Clare MacCarthy
Hi Juhani, I don't disagree with you completely, but speaking as someone who's observed and analysed migration into the Nordics for 30 years I'll just say that this time it's different. Probably 50% of the people now trapped in muddy fields behind barbed wire fences are well-educated Syrians who have the potential to meld into Nordic society and enrich and invigorate us. These are smart people, unlike the unfortunate (and largely illiterate) workers who came this way in the 1960s. The current PISA tests reference an historical flow. The people on our borders right now were as well-functioning as you and I until they got crushed between Bashar and Isis. A salutary thought: Steve Jobs' father was Syrian. Good weekend, Clare.
4y
Clemens Bomsdorf Clemens Bomsdorf
Hi Juhani, thanks for your comments. By outlining how refugees could contribute to Germany and Europe it is looked at their potential. Activating it needs investment and of course the result also depends on their prior education etc. When it comes to the latter German FAZ tried to have a closer look. Their recent article is interesting to read (though the journalists say that not that much data is available, some is): http://www.faz.net/aktuell/politik/fluechtlingskrise/fluechtlinge-wer-kommt-da-eigentlich-zu-uns-13812517.html Sorry, it's in German. In English these might be interesting http://www.nytimes.com/2015/09/18/business/international/migrants-refugees-jobs-germany.html?_r=0 and http://www.bloomberg.com/news/articles/2015-09-17/syrian-lawyer-becomes-janitor-as-germany-puts-refugees-to-work
4y
Juhani Huopainen Juhani Huopainen
Clare: Syrians definitely have a better chance to become productive members of modern societies, so I do not think there is a high risk of long-term fiscal burden from them. Unfortunately, the same is not true of people from Somalia, Iraq and Afghanistan. It should not be surprising that failed states produce people with skillsets that make them less employable.

Less than 5% of the migrants coming to Finland come from Syria. The overwhelming majority of asylum seekers come from either failed states or safe countries (Albania is a big one). Thus, I'd say you are right on the Syrians, but one should not forget there are others, and such costs should be budgeted.

I assume the current ethnic employment rates in EU-countries are a good first-pass estimate of what is to come. I also assume that integration measures will be about as successful as in the past - i.e. will help, but will not make the problems go away completely.

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