Are refugees a burden for our economies?


This week, not an easy topic. You have most probably seen in the press, on TV, on the Internet, the flows of refugees from Africa and the Middle-East.

When we talk about refugees and their impact on a country’s economy, it is very soon associated with the word “burden”, which would be defined here as something that is exacting, oppressive, or difficult to bear.

burden too heavy

That was too difficult to bear

This burden can take several forms such as a drain on welfare, expenses to cover degradation, higher unemployment, etc.

However, there is often a gap in the thinking about what positives the refugees can bring to an economy.

Many papers have been written on the theme:  “Are refugees an economic burden or benefit?”

They argue, that under the right conditions, refugees make contributions to the economy by filling vacant jobs, increasing domestic consumption, creating new markets and bringing new skills.

One key aspect is probably behavioural. As refugees arrive mostly without resources or contacts, they need to establish themselves in a field and therefore exhibit entrepreneurial skills. If they have been supported by community projects, they will also exhibit a willingness to “give back to society”. It is therefore not surprising to see many refugees or children of refugees among the top rich lists.

One other aspect of refugee flows is demography. Refugees are on average a young group and may help rejuvenate an aging population. This could be one pillar of the decision taken recently by Germany to welcome many migrants. Germany has a rapidly aging population and refugees could help to this regard.

Moreover, as refugees often have no option to return to the country they originated from, they have a stronger likelihood to invest in country-specific human capital, i.e. training or acquiring the citizenship.

However, research shows that refugees need more time than pure economic migrants to settle in and start contributing decisively. A key paper by Kalena Cortes in 2004 showed that it took more than 10 years for refugees to outperform the performance (measured in English skills and income) of economic migrants in the USA. You can read the details here.

The lag between entry in a country and decisive contribution is probably what is drawing attention from refugee critics.

Finally, to convince you that refugees can contribute greatly to a country, I will quote a few famous refugees:

    • Aristotle Onassis, an Asia Minor refugee, a Greek shipping magnate, once the wealthiest man on Earth.
    • Andy Grove, a Hungarian refugee, legendary CEO of Intel
    • Michael Marks, a Russian refugee who then co-founded Marks & Spencer
    • Rashmi Thakrar, founder of the Tilda rice food company (you know, the expensive Basmati rice in supermarkets), a Ugandan refugee
    • Sigmund Freud, fled the Nazis and set up in Austria his psychanalysis cabinet
    • Albert Einstein, a German refugee, who contributed to physics
    • Madeleine Albright, a Czech Republic refugee, former Secretary of State in the USA.

One interesting case is George Soros, financier extraordinaire, who famously broke the Bank of England in 1992, making a successful £1bn in a bet against the pound. He was not technically a refugee but emigrated from Hungary after WWII to England as an impoverished young man. He may be classified as a burden on this occasion.

Famous artists (maybe their struggle inspired them) include:

    • Marlene Dietrich, a German refugee, an actress
    • Freddie Mercury, who fled massacres of Indians in Zanzibar (now a sought-after holiday destination), lead singer of Queen
    • Wyclef Jean, a refugee from Haiti, lead of band the Fugees, whose name is derived from refugees…
    • Rita Ora – born in Pristina during the Yugoslavia war – I put her here because I quite like her songs.

Picture2A few refugees who contributed to our societies

To sum up, given time, refugees will contribute more than economic migrants. It is therefore a national interest to welcome many and put in place policies to support them, such as, but not limited to: language courses, training classes, quick work permits.

Sadly, the subject of refugees is crystallising fears and is being re-used by politicians. Let’s hope that the “invisible hand” of capitalism can triumph once more.

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