The Syrian Refugee Crisis in the EU: A Look at Economic Impacts

Refugees working in Germany :
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The migration of Syrian Refugees into Europe is not solely a humanitarian issue; it also carries the burden of potential political, economic and cultural contentions. The European Union has been viewing this phenomenon through an economic lense, as countries try to gauge the possible impacts that a massive migration of people would have on not only their individual society and economy, but also to that of the EU. Population increases may have a wide variety of economic impacts depending on the pre existing state of a country’s economy. For highly developed countries, it is predicted that population growth will positively affect the economy by increasing consumer spending and stimulating high demands (Connor, 2016).  Countries like Germany and France have been accepting the highest number of refugees within the European Union, yet are expected to experience increasing GDP growth (Goldstein, 2016). However, many countries in the European Union are also wary that an increase in population will heighten competition for work and drag down wages. There are also several unknown variables, including how many more Syrian refugees will arrive and how easily they can find work (Cassidy, 2016). Since the countries within the European Union have all responded differently to the arrival of Syrian refugees, the economic impacts are difficult to gauge because it is constantly evolving and changing.

Short Term and Long Term Effects

To account for the potential economic effects that the mass movement of Syrians will have on the economies of the European Union, it is important to first discuss the economic impact in a general sense.  As as whole, the initial short term macroeconomic impact has predicted that the inflow of asylum seekers will primarily affect aggregate demand, while the effects on labor will develop gradually overtime. According to a recent IMF discussion (2016), the additional spending that has been forcibly allocated towards the support services for the asylum seekers, such as those focused on housing, food, health and education, will increase aggregate demand. In the long run, the impact of the refugees on employment and GDP will be based on the extent and gradual impact of integration of the refugees (Aiyar, 2016).  As historical patterns have shown, an increase of employment will be associated with pressures to wages and inflation. The rate at which refugees will find employment, will be based on “the extent to which the newcomers’ skills will complement or substitute those of the native labor force, and their impact on the allocation of resources, product mix, and production technology” (Aiyar, 2016). To illustrate the potential short-run economic impacts to the current surge, the IMF has conducted a simulation using the EUROMOD model. The model focused on two main categories that recorded the value of shock to both the size of the population and the government expenditure. While accounting the expected magnitude of the inflows based on those of 2015, the population has assumed an annual increase of 0.15 percent of the EU total population (or 0.8 million) through 2017 and 0.1 percent in the later years. By estimate, it will take two years for refugees to become eligible workers, in which they will naturally have lower participation rates than natives and a higher unemployment rate (Aiyar, 2016).

Potential Benefits

The arrival of Syrian refugees to the EU is not a complete economic stress; there is possible economic gain for EU member states in handling a number of refugees. According to Stefan Lehne, a contributor to Carnegie Europe, below average birth rates in the EU has generated demand for a larger work force that can contribute to future economic growth. The shared responsibility that EU member states have in regard to the refugee response, can help facilitate a more cohesive and integrated economic situation in the European Union - the key is for the EU member states to maintain shared responsibility (Lehne, 2016). Studies show that the economic impact in Turkey and Germany, countries receiving large amounts of Syrian refugees, have seen an increase in annual GDP since the migration of Syrian refugees began. In addition, the International Monetary Fund has suggested that the integration of refugees into the EU will continue to raise GDP, but that depends on how well the refugees integrate into individual states within the EU (Goldstein, 2016).

What are others experiencing?

Based on research conducted by the United Nations, individual countries that accepted a bulk of the Syrian refugees are actually relatively unscathed economically - contrary to the increasing belief that the surge of refugees is putting too much economic stress on the European Union (UN cited in Cassidy, 2016). Turkey, although not a member of the EU, has become a very important model for the EU’s response to the Syrian refugee crisis. According to an article in The New Yorker, since the onset of the refugee crisis, Turkey has taken in roughly one million more refugees than the entire European Union; over 2.2 million refugees have found asylum in Turkey. This may seem like a lot, but when put in relative terms, the economic cost is nominal. The Turkish government has spent approximately 5.37 billion euros on screening and housing Syrian refugees - which translates into about 0.2% of Turkey’s annual GDP. Another concern for members of the European Union is the possibility of refugees taking jobs from native workers - which could trigger a reduction in wages. Evidence from a study done in Turkey shows this is a possibility, but to a very small extent. The study showed that Syrian refugees mostly took the jobs that Turkish citizens did not want, or they started businesses in Turkey’s informal sector. Both of these options contributed to the Turkish economy, helping it grow roughly 3% this year. The only downside to this was that rent prices and inflation have slightly increased, which is expected to be temporary. The European Union can learn a lot from the Turkish example; taking in more refugees isn’t necessarily a strain on the economy as much as it is in social and political realms (Cassidy, 2016). Again, the key here is to integrate the Syrian refugees into the European Union smoothly in order to reduce economic stress.

What can the EU do to reduce economic shock?

Although the EU currently has several economic policies in place for immigrants, their policies will have to adjust in order to integrate the larger population of refugees who wish to participate in the works of their economy. The Single Permit Directive, a common application for third-country nationals to request residency and work permits within Member states, was an EU policy created to incorporate immigrants into their economy smoothly (Chateau & Rafaelli, 2016). However, with such a high number of incoming and current refugees in the EU, this policy should be assisted by additional policies on asylum regulation in order to maintain application balances between Member states. If refugees are spread throughout the EU, the economic impacts are less likely be dramatic and sudden. Besides that, the relatively fast arrival of refugees in the EU also calls for quick immersion into the economy, as quick market labor integration is crucial, and legal restrictions on migrant workers should be eased by lowering language barriers and skill requirements (Aiyar, 2016). Aiyar highlights the success of this approach through Sweden’s “introduction programme”; allowing refugees to work at temporary agencies, to help low-skill workers transition into the workforce, and eventually graduate to regular employment (2016). This is an effective strategy of integrating immigrants into the economy, especially when skill level and experience is uncertain among refugees seeking jobs. However, this will not suffice; the EU will have to reconsider many more policies in order to construct a beneficial, and stable transition for refugees into their economy.

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 No matter how you look at the situation, the reality is, the EU faces various economic constituents from accepting Syrian refugees into their member states. Whether their GDP increases, or wages lower, member states are bound to face fluctuating effects as they work to integrate refugees into their economy. Although each member state operates on an individual level apart from the EU, the collective economy of the union will depend on the strategic collaboration of EU member states; either leading to minimal outcomes, or drastic repercussions. Whatever the outcome, the focus should not be on the effects necessarily, but rather the needed actions to quickly, and placidly immerse refugees in their economic system. The refugees are living in desperate times; the last thing they need is to be denied the opportunity to make a living, and live comfortably in a safe environment. If the EU approaches the arrival of refugees with a holistic plan for smooth economic transition, labor security, and equal worker’s rights, everyone will be in a better position to start with.