Wednesday 18 May 2016 1:35 am

Former EU adviser says refugee crisis could boost growth and wages in ailing European economies

By: Jake Cordell

The refugee crisis has sparked widespread political strife throughout Europe, with governments struggling to agree on how to manage the influx. But now a former economic adviser to Jose Manuel Barroso says that the wave of migration could provide a €127bn (£99bn) shot in the arm to the continent’s economy.

With 1.3m refugees expected to arrive in Europe over the course of this year, a study by Philippe Legrain, published today, says that new arrivals – if welcomed and allowed to work – could raise productivity, stimulate trade and even boost wages.

For every euro spent on assisting refugees, Europe could gain nearly €2 back in higher output within five years, he says.

However, Syed Kamall MEP, leader of the Conservatives in the European Parliament warned that with Europe struggling to get a grip on the current crisis, the political necessity to find a solution and control the flow of people comes first.

"Too many refugees are being forced to rely on handouts because of the large numbers of people coming," he said.

"We need to restore confidence that the system can work by detaining and processing people as soon as they arrive in a safe country, and returning failed asylum applicants. Once the current crisis has been stabilised and the proper system of asylum adjudication is being observed we can finally turn our attention to … helping to strengthen our own economies."

Demographic dangers

The table highlights how the demographics of major European economies will change, assuming net migration runs at zero. Working age populations are set to fall across the board while the dependency ratio – the number of people of working age for ever potential pensioner – will fall dangerously low.

Legrain is calling on governments to make sure they help refugees integrate, find work and contribute. “Refugees are often seen as a burden to be shared or shirked, when in fact they are an opportunity to be welcomed,” he said. His report is being published by the Open Political Economy Network (Open) ahead of the UN World Humanitarian Summit in Istanbul next week.

The research showed that after an initial public investment, refugees become net contributors to a country’s finances, can lead to higher wages for native populations, boost aggregate GDP and, in the case of Europe, offset structural problems associated with ageing populations.

"In economies where demand is depressed – notably, many European economies now – this initial investment in refugees acts like a fiscal stimulus, yielding an immediate demand dividend."

Ruma Bose, president of the Tent Foundation, an organisation which supports displaced people across the world and funded the research, said: “Countries that welcome refugees today stand to gain significantly tomorrow.”

Open found that the United States had a much better record of integrating refugees. Median incomes grew considerably for US refugees as they spent longer in the country, with refugees who had been in the US for more than 20 years taking home $52,000 compared to $50,000 for US natives.

Experts argued that Europe risked failing to harness to full potential of refugees, however, because current government policies were the “worst of both worlds” – failing to provide enough support when newcomers first arrive and making it difficult for them to find employment.

“The United States is much more successful than European countries at getting refugees into work,” said Legrain.

“The first priority should be to get asylum seekers and refugees into work. It is right for economic reasons and for social integration,” said Jonathan Portes, a migration expert and principal research fellow at the National Institute for Economic and Social Research (Niesr).

“The UK could certainly be doing more … it should be working much harder to get refugees into jobs, but we’re typically doing our best to stop them – that’s crazy,” he added.

Barriers to work

The conditions and time new arrivals must wait after submitting a claim for asylum before they can work varies across the European Union. Open and the Adam Smith Institute both want these barriers to be stripped away to promote integration and economic independence.

Sam Bowman of the Adam Smith Institute said Europe needs to adopts a policy that “gets refugees into work and supporting themselves as soon as possible”. He agreed that in the UK “the biggest problem is the ban on most work that asylum seekers face”.

A study focused on Germany found that after an initial decline, the wages of native Germans were expected to be around 0.5 per cent higher within a decade than they otherwise would have been without the arrival of refugees. Legrain added that because refugees tend to do lower-skilled jobs immediately after they arrive, this "enables locals to do higher-skilled and better-paid jobs".

Where there's a will …

Andrew Geddes, a professor at the University of Sheffield, was one of a number of experts to welcome the report as a useful contribution to the debate. However, he said: “The question that really jumps out for me is whether there are politicians in Europe prepared to make the longer term economic case for refugee protection. At the moment, it doesn’t look like it.”

Peter Ceretti, an analyst at the Economist Intelligence Unit, agreed: "The politics of Europe’s migrant crisis present the EU with an existential crisis and militate against an open-door approach.

"If the migrant crisis does intensify this summer, the EU could face something of a perfect storm of political risk in the coming weeks, with the UK’s referendum on EU membership, a repeat general election in Spain, and potentially difficult talks on debt relief between Greece and its creditors ahead."