Spending 1 euro on refugees will yield 2 euros in return, report reveals

Investing 1 euro in welcoming refugees could yield nearly 2 euros in economic benefits within five years, according to a recent report published by the Open Political Economy Network (Open), an international think-tank. Two weeks ago, Germany's statistical agency reported that a surge in government spending to support the influx of refugees to Germany over the last year was one of the main drivers in first-quarter economic growth, which was higher than expected with a gross domestic product (GDP) growth of 0.7 percent quarter-on-quarter. Open's study reveals that these spending amounts should not be considered as only humanitarian aid but also as a humanitarian investment which will help economies win in the long term.

With more than 22 million people displaced from their countries by war and persecution, the world is facing its biggest refugee crisis after World War II. Still, a one of the biggest problems is that major world economies including the EU, the U.S., Australia, Canada and Japan are not that willing to admit them. The arguments given for this reluctance are based partly on cultural reasons, but also putatively economic. Open argues in response that welcoming refugees is an investment that can yield significant economic dividends, in addition to being a moral and legal obligation.

The immediate obligations for spending on refugees can be seen in increase in demand, and for economies where the demand is depressed it means an initial investment, typically by government spending. According to the International Monetary Fund (IMF) calculations, additional spending on refugees in the EU corresponds to 0.09 percent of gross domestic product (GDP). This is expected to reach 0.11 percent in 2016 and 0.13 percent in 2017. If we add the economy from refugees working, GDP in EU countries accepting migrants could be 0.23 percent higher by 2020, meaning a total increase of 0.84 percent of GDP between 2015 and 2020.

The crucial point is to get refugees working. Once they are involved in the labor market, Open argues this yields deftness, dynamism, diversity, demographic and debt dividends.

Refugees do more than just strengthen the labor market, they are often investors in their hosting countries. Out of total of 4,729 new foreign companies in Turkey in 2015, Syrians established 1,599, according to data released by the Union of Chambers and Commodity Exchanges of Turkey. This number was closely followed in Germany by 330 new companies. Open's report noted that when nearly a million Vietnamese "boat people" fled their country in the late 1970s and early 1980s and sought refuge abroad, they were typically seen as a burden and often turned away. Eventually, many were allowed to settle in the US and other countries. Most arrived speaking little or no English, with few assets or relevant job skills. Yet the same refugees from Vietnam now have a higher employment rate and greater average incomes than people born in the U.S., and they have played a key role in promoting trade and investment links with Vietnam.

This dynamism dividend can be huge, Open suggests. Sergey Brin, the co-founder of America's second-most valuable company Google, was a child refugee who arrived to the U.S. from the Soviet Union. Li Ka-Shing, the business magnate and Asia's richest man, is another example. He was among the mainland Chinese who sought refuge in then-British-administered Hong Kong after the Communist Revolution in 1949.

While only 25 percent of Somali refugees aged 25-64 in Sweden were employed in 2010, 57 percent of those in the U.S/ were. Refugees' ability to contribute to the economy depends more on the policies and institutions of the welcoming country than on their personal characteristics. After years of making hard for refugees to work, Sweden now focuses more on getting refugees jobs instead of just granting generous social support. The U.S. has been more successful than the EU at getting refugees into work. Refugees in the U.S. have a higher employment rate than those born in the U.S., and their earnings tend to rise rapidly over time while their reliance on social assistance declines sharply, according to the report. Open criticizes the EU on this point and notes that, "Arguably, an ideal refugee welcome program would combine the active assistance of the Swedish model with the job and enterprise opportunities of the U.S. program. Other EU countries have a lot to learn. Many provide the worst of both worlds: little help for refugees and high barriers to employment and enterprise. This breeds hardship and failure for refugees, and displaced resentment towards them from locals."