As with most questions about money, there are always two sides to the coin.
The current refugee problem is no different, with financial analysts probing the possible effects of these asylum seekers on their country’s and the world’s economies. An estimated one million refugees are expected to arrive this year and the numbers are growing daily as war and terrorism plaguing the Middle East show no signs of abating.
The migration of so many people at once represents the largest population movement in Europe since the second world war. Its very scope and diversity make it difficult to reach simple economic conclusions. The refugees arrive with vastly different skills and backgrounds and the countries affected in Europe have different capacities to respond.
This makes trying to figure out what impact the refugee invasion will have very difficult and economists are split on the outcome. Some believe that the influx into Europe will make the region economically unsustainable, pointing to job competition, additional government expenses and reduced wages as possible effects. Most economists are optimistic, however, and agree that the long-term effect on Europe will be a positive one overall.
The migration of so many people at once represents the largest population movement in Europe since the second world war.
Population Increase Miniscule
According to a Brookings report released last month, the perceived ‘swarms’ invading Europe will result in an increase of only a small percentage of each country’s population. They report that the EU received 513,580 applications for asylum up until June of this year. Since January 2012, the number has been 1.9 million, making the size of the group equivalent to a mere 0.37 percent of the EU population, not nearly enough to cause a collapse of the economy.
Most analysts are positive about the economic impact of these asylum seekers. Rather than competing for jobs and reducing wages at the expense of the host community’s residents, analysts foresee the new arrivals playing an important role in addressing Europe’s alarming demographic trends while improving the ratio of workers to those who are economically inactive, a ratio that is dropping in many countries.
Indeed, recent research points to Syrian refugees in Turkey as an example of how they have enhanced their host country. Although the majority of these refugees had no formal work permits, they displaced unskilled informal and part-time workers, generated more formal non-agricultural jobs and prompted an increase in the average wages for Turkish workers. Furthermore, many of the displaced workers were able to go back to school and end up with higher wages when they reenter the job market.
Fiscal Burden
Concerns by some countries that the fiscal burden of ensuring EU-style living standards to such a large number of refugees can be devastating are also proving to be unfounded. Using Turkey again, Brookings points out that the Turkish government spent nearly 5.37 billion euros since the refugees first began arriving, mainly on health care and education to the registered refugees. A big number, for sure, but not enough to jeopardize the country’s financial security. The opposite is true, actually. If they are allowed to work, these newly arrived migrants may end up fiscally contributing to the host economy.
The fact is that with an economy that is 23 times larger than Turkey’s, the EU should have no trouble absorbing the costs of these refugees which translate in the immediate short-term to providing them with food and shelter.
The European Commission is currently pushing national governments to step up their budget commitments to foreign aid and to controlling the EU’s common borders and most member states can handle the load.
The impact of these refugees in the medium to long term is harder to predict. Some studies suggest that this new wave of immigration can bring relatively rapid benefits to an economy depending on how quickly new arrivals find jobs and whether their skills are complementary to the existing workforce.
Many European countries, such as Germany and the U.K. have past experience in dealing with large scale migration while others including Hungary, Poland and Bulgaria have limited experience with immigration and will undoubtedly look to the EU support on how to respond to the crisis.