Inclusion in the Labor Market: the Impact of Immigration

“With over 22 million non-EU citizens living in the EU in early 2018, it makes you wonder how countries manage their new population with a lack of a common universal policy. When many politicians and local citizens have conflicting views towards migrants and refugees, it is hard to depict what is true and what is false.” 

This is the second article in a series on inclusion in the labor market written by our researcher Allie Murphy. Read her first article here.

Common misconceptions such as immigrants steal good jobs or don’t pay taxes have been proven false time after time through statistical analysis. In a 2017 analysis of alternative refugee integration scenarios, European Commissioners d’ Artis Kancs and Patrizio Lecca presented arguments in favor of the investment of immigrants for long-term sustainability. Discovering that although refugee integration costs are high in the short term, host countries will begin to see medium/long-term social, economic, and fiscal benefits, achieving full repayment in 9-19 years. James Heckman, a Nobel laureate in economics stated, “It is a rare public policy initiative that promotes fairness and social justice and at the same time promotes productivity in the economy and in society at large”. 

By spending the public budget on welfare benefits, language training, education and other accommodations for immigrants, host countries will soon see increased income taxes, payments to welfare systems and decreased labor market shortages. Sustainable integrated refugees can play an important role in addressing some of the alarming EU demographic trends, such as aging populations and low fertility rates. Immigrants can also fill vacancies in the labor market by bringing in special skills, which improves the ratio of working individuals.

A specific example of success is Germany, being one of the most welcoming countries in terms of immigration. Leading up to the current situation, Germany was facing an economic crisis due to their decreasing population size. To save their economy, they relied on refugees to occupy their workforce. Since then, they introduced a new immigration law in 2005 and a neutralization test in 2008, simplifying their regulations for newcomers to become a citizen or temporary resident. By making immigration a legal and moral duty, Germany has experienced profitability through a boosted economy, lower unemployment rates and contribution to their welfare system.

After spending billions of euros on apprentice systems, job training programs and language courses for refugees and asylum seekers, Germany has started to see positive progress in both the integration of immigrants and the accommodation of native-born populations. Each year, hundreds of thousands of asylum seekers master professions, being a key factor to Germany’s industrial markets. While some immigrants began fulfilling low-wage jobs in restaurants or warehouses, others went on to higher paid jobs such as engineering once they completed their apprenticeship. On the other hand, native Germans were now allowed more opportunities to attend universities and find higher paying jobs since the demand for lower-ended jobs decreased. This concept argues against the common misunderstanding of immigrants stealing jobs away from local citizens. 

In addition, a 2018 macroeconomic analysis of the economic and fiscal effects of immigrants and asylum seekers was conducted, which analyzed data from 1985-2015 in 15 different Western European countries. To do so, they measured the changes in GDP per capita, unemployment rates, public spending and net tax revenues by the inflow of immigrants and asylum seekers. Using a statistical model, they found that host countries’ economic performance and fiscal balance is not deteriorated because of increased immigration. Despite common misinterpretations, the increased public spending caused by immigrants and asylum seekers, often known as the “refugee burden”, is more than compensated from the increased tax revenues. Within a 2 year span, favorable outcomes were seen, such as increased GDP per capita, reduced unemployment and improved balance of public finances. As a result, immigration can be used as an economic opportunity if the cliché about international migration is changed.

As we have seen, inclusion in the labor market leads to promising effects on host countries economies and it would only make sense to further continue this work as it can improve the humanitarian and economic aspects of the immigration situation. 

Andrew Funk, one of our advisers and president of #HomelessEntrepreneur, explains it as “inclusion in the labor market creates a richer society emotionally, psychologically and economically. Homelessness and refugee crises look bad for cities, alleviating the problem creates happier citizens and a happier society”. Positive impact is possible, we must create sustainable solutions to become an inclusive environment for all. 

That is why we at Project Phoenix are working to bring awareness to these issues. Part of what we do is developing relationships with businesses willing to support an inclusive atmosphere. As part of the LeadCyprus Summer Camp event, we are organizing a panel discussion on why inclusion in the labor market is good for business and the greater economy. We hope to start a conversation around this topic and perhaps impact those listening to make the change.