Magazine | June 27, 2016, Issue

Does Europe Need Refugees?

A look at the case of Sweden

Over the past year, more than 1 million asylum seekers have made their way to Europe, and voters are in revolt. Anti-immigration populists have been gaining ground in almost every European country, and one of them, Norbert Hofer, just came very close to winning Austria’s presidential election. To an awfully loud chorus of open-borders enthusiasts on both sides of the Atlantic, this anti-immigration sentiment is not just hard-hearted — it’s also soft-headed. Their argument in a nutshell is that because Europe’s native populations are aging so rapidly and its birth rates are so dismally low, it badly needs a demographic shot in the arm. And that is where the asylum seekers could come in, if only Europeans were enlightened enough to understand that today’s impoverished migrants will be tomorrow’s productive citizens.

What should we make of this argument? Does Europe really need millions of refugees to get its economies back on track? I’m not so sure. Most European nations suffer from obscenely high levels of youth unemployment, which suggests that they aren’t desperate for workers. Raising labor-force-participation rates could go a long way toward addressing any future demographic crunch.

More important, the asylum seekers who are knocking on Europe’s door tend to have very low skill levels. My guess is that in the years to come, demand for less skilled workers will stagnate and decline, particularly if advances in automation proceed apace and if minimum wages continue to rise, making it illegal for employers to hire workers at cheaper-than-machine rates. This is a very easy thing for one to assert, but it’s much harder to prove.

What we can do, however, is look at the experience of at least one very enlightened European democracy to see what happens when you open your borders to impoverished asylum seekers in large numbers. Recently, Joakim Ruist, a migration researcher based at the University of Gothenburg, tried to assess the fiscal impact of refugee immigration in the case of Sweden. Ruist makes it very clear that he favors opening Europe to more refugee immigration, but he is admirably transparent about how he reaches his conclusions.

Because the recent influx has been so large and so sudden, Ruist bases his analysis on how refugees impacted Sweden’s budget in 2007. In that year, refugee immigrants 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, he makes a number of judgment calls to construct his sample. For example, though Poland and Turkey were sources of a large number of refugees, he excludes them from his sample on the grounds that both countries were also sources of many economic migrants to Sweden. Ruist also excludes the Swedish-born children of refugees from his sample, even though the costs associated with the Swedish-born children of refugees are part of the impact of refugee immigration.

So what does Ruist find? Overall, refugees accounted for 5.6 percent of total public spending, which is not that much higher than their 5.1 percent share of the population. Though refugees accounted for 55 percent of social-assistance spending, the fact that they were overwhelmingly in the 20–59 age bracket meant that they accounted for a smaller share of public spending on pensions, health, and education than they would have had they been older or younger. Suffice it to say, had Ruist factored in the costs associated with educating the Swedish-born children of refugees, these numbers would have looked quite a bit worse.

Ruist estimates that, even though refugees tend to be working-age adults, they contributed only 3.4 percent of total public revenue through direct and payroll taxes, a share far lower than their share of the total population. Why so little? It’s fairly straightforward: Ruist observes that the employment rate for adult refugees was 20 percentage points lower than for Swedish adults as a whole. This reflects the fact that the language skills of refugees tend to be fairly poor, they generally lack the training they need to flourish in the Swedish labor market, and refugee women are far less likely than Swedish women to seek employment in the first place.

Overall, Ruist estimates that the net fiscal redistribution from Sweden’s non-refugee population to its refugee population was 1 percent of GDP. Ruist scales up his figures to 2015 to estimate that current redistribution to refugees amounts to 1.35 percent of Swedish GDP. Keep in mind that he is not factoring in all of the short-term costs associated with the refugee influx, as he’s interested in the longer-term fiscal impact of the refugees who are going to stick around.

Where is the harm in shifting 1.35 percent of GDP from Swedes to adult refugees? According to Ruist, the economic burden of welcoming refugees in large numbers is quite manageable. He writes that “European countries should not shirk their moral responsibility to provide safe havens for fear that refugees will break the bank.” That is not the only plausible interpretation of his findings, alas. First, Ruist 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 almost certain to increase.

And by ignoring the Swedish-born children of refugees, Ruist neglects the possibility that they might suffer from serious disadvantages in the labor market as they reach adulthood. One worrisome sign that the social scientists Laurence Lessard-Phillips, Rosita Fibbi, and Philippe Wanner have found is that the Swedish-born children of less skilled Turkish immigrants suffer from lower levels of employment and income than those of other native-born Swedes. Past experience suggests that today’s adult refugees will give rise to tomorrow’s underemployed second-generation Swedes.

What of Europe’s moral responsibility to provide safe havens for refugees? Ruist fails to reckon with the fact that the cost of providing for refugees in Europe is substantially higher than the cost of providing for them in poorer countries. In The Price of Rights, the Oxford economist Martin Ruhs argues that there is a trade-off between how generous countries are to migrants and how many of them they can feasibly welcome. At one extreme you find Qatar, where 90 percent of the population consists of foreign workers who earn paltry wages and enjoy virtually no rights or social protections. At the other extreme is Norway, which welcomes relatively few migrants yet provides those who do arrive with an extensive array of benefits. Indeed, Norway is so generous that its foreign ministry has calculated that the cost of providing for a single Syrian refugee is $125,000 annually. In Jordan, in contrast, $125,000 could support as many as 26 Syrian refugees annually. Norway could become more like Qatar, but I’m not sure anyone, least of all Ruist, would celebrate that outcome. Paul Collier and Alexander Betts, two migration experts also based at Oxford, have argued that European governments ought to do more to help Jordan provide employment opportunities for Syrian refugees, and the Jordanian government has embraced their call for a series of special economic zones that would allow Syrians to make a living while in exile. There is much to be said for this approach.

Imagine if Sweden decided to spend the 1.35 percent of GDP it currently devotes to hundreds of thousands of refugee immigrants at home providing for millions of refugees around the world instead. 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. Suffice it to say, doubling the resources provided to refugees in poor countries could go a long way toward bettering their living conditions. This is not to speak of how far $8 billion would go if it were spent to improve the lives of the poorest of the poor around the world. Rent for a small apartment in the suburbs of Stockholm could pay for a high-quality education for dozens of children in the developing world. Though Ruist deserves credit for his careful analysis, his moral conclusion is not nearly as straightforward as he would have you believe.

The notion that Europe badly needs refugees to keep its economies afloat is backward. The best evidence we have tells us that providing for traumatized, desperately poor people is pretty expensive, as most of those fortunate enough to find jobs will earn very low wages for their entire working lives. If you’re going to welcome refugees, you’d better do it for love, not for money.

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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