European countries should make it easier for refugees to work

MOUHANAD SALHA would like nothing better than to work. But since arriving in the Netherlands in late 2014, he has managed to do so for just one week. Like more than 80% of Syrian refugees in Europe, he is unemployed.

He was studying information technology when he fled Syria in 2012, and worked as an apprentice electrician in Lebanon, where “you can just go in and fix everything.” Not so in the Netherlands. Becoming an electrician requires elaborate certification, and jobs usually need proficiency in Dutch. Such rules, intended to shield native workers, deter asylum-seekers from looking for jobs. Refugees who do find work lose their government-paid benefits.

Asylum-seekers in the Netherlands are housed in government-run centres and not allowed to work until six months after they arrive. If they then find a job, the government withholds 75% of their wages to cover room and board. (Unsurprisingly, few do.) Once granted refugee status, as Mr Salha was last year, they are moved out into subsidised housing. Mr Salha registered with a temporary-job agency, but the local government told him working would mean losing housing and other subsidies.

The agency could not guarantee enough work, so he quit, and the Dutch taxpayer is supporting him again. Across Europe unemployment rates among refugees are higher than among the native-born. In the Netherlands, the gap is among the highest. Even among refugees who arrived in the Netherlands in the late 1990s, only 55% were in the workforce 15 years later, compared with a rate among natives of 80%. Yet the Dutch unemployment rate is under 5%, and last year 40% of Dutch construction firms said they were struggling to fill positions. In particular they needed electricians, like the redundant Mr Salha.

Evidence from past refugee waves, and the experience of other countries, suggest that the long-term gains to everyone of allowing refugees to work outweigh the short-term costs, not just to the public purse, but to natives’ jobs and wages. In America, within six years, refugees’ employment rates exceed natives’. The average refugee becomes a net fiscal contributor just eight years after arriving. Also, in European countries sectoral wage agreements often make it expensive to employ low-productivity workers and tough to fire them. America has no difficulty creating low-wage jobs for unskilled immigrants, and its welfare benefits are too mean to tempt refugees out of work.

But European countries have shown that it is possible to accommodate an influx of low-paid workers without either driving people permanently out of work, or forcing their wages down. A study that examined two decades of employment data from Denmark found that low-skilled native workers in towns that received large numbers of refugees (mostly from Afghanistan, Iraq, Somalia and Bosnia) were indeed displaced from their jobs. But they tended, eventually, to move into higher-skilled, higher-paying jobs at other firms.

A recent study by Patrick Joyce, a Swedish economist, compared refugee labour-force integration in Denmark, Germany, the Netherlands, Norway and Sweden. Germany was the clear leader, with 70% of refugees working after 15 years, nearly as high as the native employment rate of 74%.

One reason for Germany’s success is that the Hartz labour-market reforms, beginning in 2003, allowed the economy to create more low-wage jobs suitable for immigrants. Moreover, Germany has allowed municipalities to adapt their refugee-integration policies to local conditions, whereas Scandinavian countries have one-size-fits-all policies. Unlike the Netherlands, Germany encourages asylum-seekers with a high likelihood of receiving approval to begin working before they get it. Germany does a better job of co-ordinating asylum-claim processing with refugee housing, language and job training, and job placement. Other European countries could do a lot more along these lines to increase the chances that refugees’ role in the labour force is complementary to native workers, rather than competitive.

But, first, rich places that receive just a fraction of the world’s refugees would need to heed their own advice to the poorer countries that receive the lion’s share: allow asylum-seekers to work. Mr Salha is now enrolled in a training programme sponsored by Alliander, an electrical-grid operator. It will earn him a job at the company and a piece of paper that proves that he knows how to install electric cable. This is a step in the right direction. But it has taken three years.

Sources

“Explaining the refugee gap: a longitudinal study on labour market participation of refugees in the Netherlands”, by Linda Bakker, Jaco Dagevos & Godfried Engbersen, Journal of Ethnic and Migration Studies, 2017, vol. 43, issue 11

“The Economic and Social Outcomes of Refugees in the United States: Evidence from the ACS”, by William N. Evans and Daniel Fitzgerald, National Bureau of Economic Research, 2017, Working Paper 23498

“The Labor Market Effects of Refugee Waves: Reconciling Conflicting Results”, by Michael Clemens and Jennifer Hunt, Center for Global Development, 2017, Working Paper 455

“The Labor Market Effects of Immigrants: New Analysis Using Longitudinal Data”, by Mette Foged and Giovanni Peri, American Economic Journal: Applied Economics, 2016, Vol. 8, issue 2

“Inspiration for integration. Labour market policies for refugees in five Northern European countries”, by Patrick Joyce, The Ratio Institute, 2018, Working Paper No. 308

“Deterring Emigration with Foreign Aid: An Overview of Evidence from Low-Income Countries”, by Michael A. Clemens and Hannah M. Postel, Center for Global Development, 2018

The following sources pertain to a related story in this International section, “Making them welcome”

“Their Suffering, Our Burden? How Congolese Refugees Affect the Ugandan Population”, by Merle Kreibaum, World Development, 2016, vol. 78, issue C

“Economic Impact of Refugees”, by J. Edward Taylor et al., PNAS—Proceedings of the National Academy of Sciences, 2016, vol. 113, issue 27

“Refugee Economies: Rethinking Popular Assumptions”, by Alexander Betts et al., Refugee Studies Centre, University of Oxford, 2014

“Yes in my backyard? The economics of refugees and their social dynamics in Kakuma, Kenya”, by Apurva Sanghi, Harun Onder and Varalakshmi Vemuru, World Bank Group, 2016

“Do refugee camps help or hurt hosts? The case of Kakuma, Kenya”, by Jennifer Alix-Garcia et al., Journal of Development Economics, 2018, vol. 130

“The Effect of Refugee Inflows on Host Communities: Evidence from Tanzania”, by Jennifer Alix-Garcia and David Saah, The World Bank Economic Review, 2010, vol. 24, issue 1

“Civil wars beyond their borders: The human capital and health consequences of hosting refugees”, by Javier E. Baez, Journal of Development Economics, 2011, vol. 96, issue 2