6 Ways Refugees Benefit Economies

As Europe continues to struggle with what is quite clearly the worst refugee crisis seen in decades, there appears to be a growing consensus that refugees are little more than a burden on their host nations and economies.

Although there has not been a great deal of conclusive research conducted on the subject of refugees and how they may benefit economies, there is some data to suggest that this may be the case.

Sergey Brin of Google, Yahoo’s Jerry Yang, and former Secretary of State Madeleine Albright are just a few examples of dynamic and innovative refugees who have provided massive benefits to their host economies.

Nevertheless, even unskilled and semi-skilled refugees come with their own benefits to offer.

Michael Clemens, a senior fellow who leads the Migration and Development Initiative at the Center for Global Development in Washington says, “There’s not any credible research that I know of that in the medium and long term that refugees are anything but a hugely profitable investment. There is a myth … that desirable immigrants are the ones with PhDs, and people with high school degrees aren’t desirable. And there’s no economic substance behind that myth.”

In this article we are going to look at six ways in which refugees can actually be of some benefit to their host economies.

  1. New Skills

While this is not always the case, many refugees – such as those fleeing the Syrian conflict, for example – bringing with them a great deal of skills and expertise in particular trades.

A counter argument to this would be that bringing in skilled labour from foreign sources could reduce the demand for home-grown workers.

However, in situations where there is a current shortage of a particular skill set or knowledge base this could prove highly beneficial to local and national businesses and infrastructures.

  1. Increased Consumption and Demand

Whenever a population grows consumption and the demand for goods and services will always increase, regardless of where the population growth stems from.

Increased consumption necessitates an expansion of the means of production within the host nation, directly affecting the national GDP.

An investigation of the Dadaab refugee camp showed that the camps actually provided a benefit to the host economy of around $14 million. This is roughly 25% of the per capita income in the province, creating an undeniably significant stimulus to the local community.

What’s more, milk and livestock sales alone were responsible for upwards of $3 million of this.

The difficulty of assessing the benefits of increased consumption and demand is that they tend to be more apparent over the long term, with short-term benefits being hard to recognise in the day-to-day life of local communities.

  1. New Jobs

With increased consumption and an expansion of production facilities, new job opportunities will inevitably emerge.

In addition to the obvious employment growth stemming from increased demand for goods and services, it is also worth mentioning that in the example of the Dadaab refugee camp there were more than 1,200 jobs created due to a demand for both skilled and unskilled camp-related labour.

Giovanni Peri from the University of California has this to say on the matter: “For economies, immigrants brings a push to specialisation, and specialisation increases productivity, and increases the size of the firm and the amount of jobs that you can create.”

  1. Shifting Cultural Paradigms

A slightly less obvious benefit of refugees entering new countries is that the interaction between sometimes very different cultures can help to shift paradigms and create more progressive thinking.

A change in gender roles and child labour are just two examples of things that can change when refugees leave war-torn nations and enter into more forward-thinking regions such as Western Europe.

Although there is an obvious amount of tension created its local communities, there is certainly something to be learnt from both the refugees and their host nations.

  1. “Teach a Man to Fish…”

Another interesting aspect of shifting cultural paradigms is the ability for refugee populations to develop a greater emphasis on self-reliance in order to provide for both themselves and their host economies.

It is likely that some form of investment is required in order to develop such self-reliance and assist refugees in expanding existing skill sets; however, this may well prove to be a lucrative investment in the long term.

It is, however, important to grant refugees the freedom to develop and exercise their skills.

Erik Jones, a professor at the Johns Hopkins University School of Advanced International Studies says that, “What you want to do is to process them as quickly and efficiently as possible, and to integrate them as quickly and efficiently as possible.”

Countries such as the UK prevent immigrants from working while their claims are being processed, while Australia automatically detains refugees until they have been processed. This alone costs Australia more than $1 billion every year.

  1. Small Business Development

Financial investment and the development of small businesses is a huge aspect of the growth of refugee populations.

And increased demand for housing and amenities leads to an expansion of existing infrastructure, and of course this creates all manner of opportunities for starting up new businesses, in addition to stimulating existing businesses that are in their infancy.

One example of this phenomenon is in Pakistan, where a trucking industry largely dominated by Afghan refugees has transformed the transport markets and stimulated the national economy.

The Eastleigh area of Nairobi is often given as another good example of this, where a large number of refugees from Somalia and other nations have settled and turned the area into a great spot for the development of new businesses. This of course creates a subsequent stimulation of Kenya’s economy as a whole.

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