A new International Monetary Fund study points out the potential boost to the European economy from the wave of refugees entering the Continent. But the same report, looking at the experience of Turkey and Germany in particular, shows just how long and painful that process may be.
Turkey is of particular note because, as Syria’s neighbor, it’s received about half of the Syrian refugee inflows, some 2 million since March 2011, the IMF says, drawing on United Nations statistics. That’s the equivalent of 2.5% of Turkey’s own population.
Beyond the roughly $8 billion Turkey has spent providing a home for these refugees, the economic impact is noteworthy, if perhaps expected.
These refugees are only allowed to work in Turkey’s “informal” sector. What’s happened, the IMF report says, is that these refugees have displaced female Turkish workers with low-education levels in agricultural jobs. But higher-paid, formal jobs filled by native workers have increased, and so have average wages — suggesting, according to the IMF, a compositional change in employment.
The German experience also is illustrative. Germany has a higher foreign-born population share than the U.K. or the U.S. since waves of migration in the 1960s and 1990s, and is facing another wave now.
Immigrants earn 20% less than natives with similar characteristics when they enter the country. While wages of these immigrants then rise by a point each year, the gains slow over time, and wages never fully converge, according to the IMF.
The IMF says the lower wages of immigrants largely reflect what’s called “skill downgrading” — in other words, the engineer driving a taxi. Some two-thirds of highly skilled natives have a job that actually requires higher education, compared to only 42% for immigrants not born in advanced economies.
On the other hand, the participation rate fully converges after 20 years, the IMF adds.
That’s broadly what has been found by the European Social Study survey, covering nearly 300,000 people across 36 countries from 2002 to 2012. The gap between native and immigrant employment, income and happiness all narrow, but not completely, in about 20 years’ time.
In the short term, the IMF says the refugee surge is likely to lead to a “modest” increase in GDP growth, due to both the extra money spent by governments to support asylum seekers and the expansion of the labor supply, and it will be concentrated in the main destination countries: Austria, Germany and Sweden.
The medium- to longer-term impact will depend on how well refugees are integrated. The IMF advocates putting few restrictions on taking up work and subsidizing employers for providing employment to refugees.