How refugees could boost the European economy

Accommodating one million refugees in a single year is no easy task, even for a continent the size of Europe. In the first 10 months of last year, 995,000 first-time asylum applications were submitted to EU countries. And every day seems to offer another grim tale of culture clash.

In Denmark, MPs are debating whether to seize asylum claimants’ valuables, while Danish nightclubs are banning new migrants by imposing language rules on the door. In Germany, the town of Bornheim banned asylum seekers from using its public pool for a few days. And here in the UK, the doors of houses used by asylum seekers in Middlesbrough are to be repainted after claims they were targeted for harassment because the colour red marked them out.

It’s hard to be optimistic that the worst flashpoints are behind us, since national leaders and EU institutions appear to be overwhelmed by border issues. They are still struggling to work out where people go, on what basis you allow people to stay, and on what basis you try to stop more people coming in.

The stakes are high. European Council President Donald Tusk has said the EU has “no more than two months” to tackle the migration crisis or the Schengen Agreement that allows free movement will collapse. European leaders have tended to look at all this as a problem of legal structures.

Perhaps they should focus on something else: money. The International Monetary Fund (IMF) offered Europe some interesting advice last week, saying refugees could help boost the continent’s sluggish economic growth. The IMF’s economists said the huge influx is likely to result in a “modest increase in GDP growth” in the short term, due to higher state spending on housing and benefits for asylum seekers.

The sooner the refugees gain employment, the more they will help the public finances

This won’t win over too many euro-sceptical hearts and minds. If you worry about your country spending money on foreigners, if you worry about how foreigners are going to fit in, you really don’t care about how economists calculate gross domestic product.

But the IMF has a more compelling long-term argument: let them work and we’ll all stand to gain. “The sooner the refugees gain employment, the more they will help the public finances by paying income tax and social security contributions,” its report stated.

There are huge difficulties, of course. Governments do not want to do away with the asylum process, or erase the distinction between economic migration and political migration by those seeking safety. To do so gives authorities even less control over the way people move around.

But Europe needs to get real. Huge numbers of new people are here. Huge numbers are on their way. The numbers are unprecedented in the post-war era. The existing rules preventing people from working while making an asylum claim means large new communities are consigned to second-class, limbo status in Europe’s cities, towns and villages.

Unless rules are eased, or new, streamlined processes are introduced to make refugee status easier to obtain, Europe will be left with refugee ghettos permanently pepper-potted across the continent. Immense social problems will be inevitable.

Change is never easy. Even if rules are relaxed, countries are faced with managing skill gaps in some sectors, while other sectors will worry about the undercutting of wages. Then there is the support needed for training and education, quite aside from language barriers, housing provision and all the other potential sources of friction.

A certain kind of big-picture economist tends to ignore this. The big-picture economist always thinks about more people being a good thing, because more people are more units of economic activity. But people themselves don’t think that way, or treat each other like that. Instead life is viewed, somewhat coldly, as a competition. Yet if we choose to exclude millions of people from joining the competition in Europe, things could get colder and nastier still.

Photo: Refugees welcomed in Toulouse, Gyrostat