People fleeing conflict are a boon to almost any economy, but even Germany isn’t going far enough to welcome them.
- By Daniel AltmanDaniel Altman is the owner of North Yard Analytics LLC, a sports data consulting firm, and an adjunct associate professor of economics at New York University’s Stern School of Business.
Where should the world’s refugees go? As many economists have pointed out, including at least one Nobel laureate, they should go where they want to go — which is likely to be where they’ll find the family, community, and opportunities they need to integrate and succeed. But failing the free movement of people throughout the world, a few other factors might sway countries to accept more new citizens.
First, let’s be clear: Countries that refuse refugees are usually damaging their own prospects. Refugees are some of the best bets for almost any economy. The extraordinary journeys they undertake to flee conflict and insecurity show that they’re motivated, enterprising, and able-bodied. They want to work and support their families — they just prefer to do it somewhere safe. In the United States, a higher share of foreign-born people join the labor force than native-born people, and their unemployment rate is typically lower as well.
Moreover, the families fleeing Syria, Yemen, Afghanistan, and other countries — totaling perhaps 20 million people — are unlikely to pose a security risk. They’re trying to escape extremism and violence, not foment it. They couldn’t be further from the stereotypical villains of the global war on terror.
Perversely, the realities of politics and prejudice have stopped many countries from opening their doors more than a crack, if at all. An exception is Germany, which is expecting 800,000 asylum applications this year and is prepared to take in 500,000 more refugees annually for the foreseeable future. With the unemployment rate hovering around its lowest levels in decades, Germany is ready to absorb new workers.
But countries with tight labor markets aren’t the only ones for which refugees can provide an economic boost. Refugees are consumers before they’re workers, in fact as soon as they arrive in their new homes. Before they have jobs, they typically receive financial aid from relatives, community groups, charities, and the government so they can pay rent and buy necessities.
In each of these cases, money is converted from savings to consumption. Donations that might otherwise have sat in bank accounts join funds from treasury coffers in a massive short-term stimulus to the economy. This stimulus doesn’t come at the cost of future growth, either. Instead, it’s an upfront payment for a wellspring of long-term economic activity.
Indeed, Germany deserves the envy of other countries because it can afford to add so handsomely to its labor force and consumer base every year. There’s just one problem — it’s paying too much.
Refugees are spending thousands of euros to make treacherous journeys over land and sea. As the world has lately been reminded (but too infrequently for my taste), many die along the way. This is an economic problem as well as a moral one. An impoverished refugee will have a harder time making a fresh start, and a dead refugee never gets the chance. That’s why it makes sense for Germany and other host countries to pay for refugees’ safe transit; they’ll have to shell out less to support refugees upon arrival, and they’ll likely have more successful refugees paying taxes in the future.
So how much would it cost to send trains, planes, buses, and ships to pick up refugees from their most common way stations, such as Turkey, Lebanon, and Jordan? Could it be more than 500 euros per person? Maybe 800 euros? That’s a pittance to pay for someone who will end up generating thousands of euros in tax revenue every year for decades. Germany may understand the long-term benefits of refugees, but it hasn’t taken this understanding to its logical conclusion.
Of course, Germany is still much further along than the United States, Australia, Canada, the United Kingdom, or other growing European countries. All of them are in the privileged position of being able to absorb refugees into their economies relatively painlessly. Yet the United States has set a quota of just 70,000 refugees this year — the same number as last year — despite the fact that the American economy is five times the size of Germany’s.
The other countries accept most asylum-seekers who arrive at their borders from war-torn areas like Syria, though the ones with the biggest economies don’t always offer the warmest welcomes. If they did, Sweden — a country of barely 10 million people — probably wouldn’t keep being a top recipient of asylum applications. Moreover, none of the countries, besides the United States, accepts more than about 10,000 refugees per year through international resettlement programs. These are just drops in a 20 million-person bucket.
By contrast, if governments in wealthy countries really had their constituents’ economic interests at heart, they’d be running charter flights to Amman at all hours and sending their biggest ships to Mediterranean shores. Clearly, compassion hasn’t been enough to make politicians think big and undertake these sorts of measures. Perhaps, as more of them cotton on to Germany’s thinking, the economic incentive will be.
Photo credit: Louisa Gouliamaki/AFP/Getty Images