Recently, Joakim Ruist, a migration researcher based at the University of Gothenburg, published a paper in Population and Development Review on the fiscal impact of refugee immigration, a subject that for obvious reasons is of great interest in Sweden and in Europe more broadly. Ruist also published a brief summary of his findings at VoxEU. Essentially, Ruist’s message is that Europeans shouldn’t be terribly concerned about the fiscal impact of a massive influx of migrants if Sweden’s experience is any guide. Having read Ruist’s paper, I’ve come to the opposite conclusion.
Granted, my instincts are to be skeptical of the case for large-scale refugee resettlement in Europe and other affluent market democracies, for reasons I’ve discussed at NRO and elsewhere, so I’m hardly a neutral observer. Drawing on internal data from Frontex (the EU border agency), Frans Timmermans, a left-of-center Dutch politician who now serves as first vice president of the European Commission, has claimed, as reported in The Telegraph, that roughly 60 percent of the migrants arriving in Europe are economic migrants rather than refugees.
In 2015 alone, 163,000 migrants applied for asylum in Sweden, a country of 9.5 million.
Ruist does not address the fiscal costs of this current influx. Rather, he estimates the extent of fiscal redistribution to refugees in Sweden in 2007, on the premise that doing so will give us some indication of what the fiscal impact of refugee immigration will look like under more normal circumstances. Refugee immigrants in 2007 represented 5.1 percent of Sweden’s population, a share that would be substantially higher today. Because the government data that Ruist uses do not differentiate between refugees and economic migrants, Ruist has made a number of judgment calls to construct his sample. For example, though Poland and Turkey were a source of a large number of refugees, he excludes them from his sample on the grounds that both countries were also the source of many economic migrants to Sweden. Moreover, Ruist also excludes the Swedish-born children of refugees from his sample, despite the fact that the costs associated with the Swedish-born children of refugees are of course part of the impact of refugee immigration.
It emerges, not surprising, that refugees were highly over-represented in certain types of public spending. Most strikingly, they accounted for 55% of social assistance spending, as opposed to their share in the total population of only 5.1%. Seventeen percent of refugees received social assistance as opposed to only 3.3% of the total population. On the other hand, refugees heavily concentrated in the 20–59 age bracket, were under-represented in public spending on larger budget items like pensions, health, and education. All told, it is estimated that refugees accounted for 5.6% of total public spending, a share not drastically out of line with their share of the population. However, they performed much worse than the rest of the population on the revenue side, where they contributed only an estimated 3.4% of total public revenue, essentially through direct and payroll taxes. The reason is clear: The employment rate among adult refugees was 20 percentage points lower than that among all adults. The reasons include poor language skills, lack of applicable training, lower female labour force participation rates, and so on.
Putting the two sides of the fiscal equation together, in 2007 the net fiscal redistribution from the non-refugee population to the refugee population was almost exactly 1% of GDP. Four-fifths of the redistribution was due to lower public per capita revenues from refugees compared with the total population, and one-fifth to higher per capita public costs.
Ruist scales up his estimates to 2015 (excluding 2015 arrivals, in the expectation that large numbers of recent migrants will be expelled from Sweden) to estimate that current redistribution to refugees amounts to 1.35 percent of Swedish GDP. Keep in mind that Ruist is not factoring in all of the costs associated with the refugee influx, as many of the short-term costs associated with the asylum system aren’t best understood as fiscal redistribution.
Rather extraordinarily, Ruist concludes, “The economic burden of a generous refugee policy is not particularly heavy.” He adds:
European countries should not shirk their moral responsibility to provide safe haven for fear that refugees will break the bank. If other Western European countries would have matched the Swedish per capita intake of the past decade (not counting 2015), and Europe would have hosted an additional five million refugees today, the current crisis would have been far less serious. The lesson from my study is that this would have been far from economically impossible.
There are a number of problems with Ruist’s conclusion. First, he is offering a portrait of redistribution at one point in time. One assumes that refugee immigrants will eventually age and grow sick. The refugees he identifies will not be heavily concentrated in the 20–59 age bracket forever, and if they continue to have below-average incomes, as seems likely given their skill level, fiscal redistribution to this population is likely to increase.
Ruist neglects the fact that the cost of providing for refugees in Europe is substantially higher than the cost of providing for them in other, lower-cost countries.
Second, in referring to Europe’s moral responsibility to provide safe heavens for refugees, Ruist neglects the fact that the cost of providing for refugees in Europe is substantially higher than the cost of providing for them in other, lower-cost countries, where labor-intensive services can be delivered less expensively. Roughly speaking, 1.35 percent of Swedish GDP amounts to $8 billion. UNHCR, the U.N. agency charged with providing for millions of refugees worldwide, had a budget of $7 billion as of 2015. It is not obvious that the Swedish government is doing more for refugees by spending generously on the miniscule fraction of the global refugee population that has reached Sweden than it would have by providing more generous assistance to refugees elsewhere. Indeed, the Swedish government might consider working with partner countries to establish refugee cities, which would serve as sanctuaries while also allowing refugees to lead economically productive lives.Third, Ruist doesn’t acknowledge that 1.35 percent of GDP represents a substantial loss in forgone opportunities — how that 1.35 percent would have been used had it not gone to refugees. Consider this share of GDP in the U.S. context. Over the next decade, Obamacare will cost the federal government roughly 1.35 percent of GDP a year. Individual charitable contributions in the U.S. in 2014 were 1.51 percent of GDP. The U.S. Navy costs just under 1 percent of GDP a year. SNAP costs 0.44 percent of GDP. The list goes on. It may well be true that providing for refugees in an affluent country like the Sweden or the U.S. rather than in a less-affluent country ought to be a far higher priority than, say, increasing military expenditures or investing in early-childhood education or increasing federal housing vouchers to shield low-income families from evictions, or any number of other things. But to understand whether 1.35 percent of GDP is a cost worth bearing, we first need to understand our other options. Though Ruist deserves credit for his careful analysis, his moral conclusion is not nearly as obvious as he seems to believe.
— Reihan Salam is the executive editor of National Review and a National Review Institute Policy Fellow.