The economics and politics of receiving refugees

Last year, we published a survey of the research on the economic and political implications of receiving refugees, focusing on the 2015 European refugee protection crisis and its aftermath. Our aim was to help policymakers facing future refugee protection crises by presenting a review and an interpretation of the relevant research in economics and political science. Sadly, this work has become pertinent far sooner than we anticipated.

In our review, we emphasised three main points: (i) the direct labour market and fiscal impacts of receiving refugees tend to be relatively modest; (ii) the political impact of receiving refugees can be substantial and has the potential to indirectly affect policies beyond immigration; and (iii) host country policies play an important role in facilitating labour market integration.

For economic effects of hosting Ukrainian refugees, policies fostering economic integration – like those giving Ukrainian refugees’ direct labour market access – are key, because economic integration mitigates fiscal effects. Furthermore, these gains are unlikely to be offset by decreases in native workers’ wage or employment rate. Most importantly, a growing body of work suggests that (i) a lengthy asylum process reduces later employment prospects; (ii) temporary employment bans for asylum seekers have a detrimental impact on long-term economic integration; and (iii) well-designed active labour market policies (including substantial language training) can have substantial positive effects on refugees’ – and their children’s – integration. These findings continue to be relevant to today’s policymakers with the discretion to improve integration policies.

Focusing on political effects, past research suggests that the reception of refugees can fuel anti-immigrant sentiment and propel the rise of authoritarian, populist, anti-immigrant parties. Since these parties typically support isolationist policies more broadly (e.g., withdrawal from trade agreements or the European Union), we argue that refugee protection crises have the potential to trigger indirect economic consequences that can be more substantial than any direct economic effects. However, existing research also suggests that such political effects are conditional on several factors, including the macro-level narrative surrounding asylum seekers and refugees and policies regulating their reception and integration.

How native citizens interact with immigrants is framed by macro-level narratives. For example, more positive, generous, and welcoming media coverage of the plight and deservingness of arriving refugees may give later encounters with refugees a positive spin and reduce the chances of a backlash against refugees. In comparison to 2015, the initial macro-level narrative surrounding Ukrainian refugees appears to be more positive in terms of media responses and natives’ baseline attitudes across Europe. At least part of this divergence in initial narratives and attitudes is likely due to differences in the gender and age composition of the refugees (i.e., more women with children), the perception of Putin as a common threat, and a perceived closeness in terms of culture, religion, and ethnicity. 

This interpretation is also echoed by policymakers and pundits across Europe, who tend to suggest that the plight of Ukrainian refugees calls closer to home. However, it is important to note that this initial positive narrative may change over time.

Existing research indicates that Europeans are more willing to receive refugees when their allocation across European countries is perceived as fair. Unlike other refugees and asylum seekers, people fleeing the war in Ukraine have the right to visa-free entry and residence permits in the country of their choice within the EU, Switzerland and Norway. These freedoms were laid out in the EU’s Temporary Protection Directive, which also guarantees “access to education and to the labour market.” Thus far, Ukrainian refugees have settled predominantly in neighbouring countries but according to the Directive, a “Solidarity Platform” will be set up “where Member States can exchange information about reception capacity”.

Across Europe, communities are volunteering to host Ukrainian refugees and many governments and non-governmental organizations have created schemes that allow individuals to host and support Ukrainian refugees (e.g., #Unterkunft Ukraine campaign in Germany and Homes for Ukraine in the UK). In our review, we discussed research suggesting that meaningful and repeated contact between locals and refugees has the potential to reduce anti-refugee prejudice. Well-managed co-sponsorship and co-living programs could be one way to increase both reception capacity and opportunities for meaningful contact. However, the nature of the contact is crucial as there is plenty of evidence that superficial contact (e.g., seeing refugees passing through) leads to an increase in anti-refugee hostility.

These are early days, and it is hard to anticipate how many displaced Ukrainians eventually settle outside of Ukraine, and for how long. Nevertheless, governments around Europe need to prepare to host a substantial number of Ukrainians, some of them most likely permanently. In comparison to earlier refugee protection crises, the starting point is in some ways promising. Initial narratives surrounding people fleeing Ukraine, attitudes and policy responses have been less exclusionary and more welcoming across European countries. 

The policy decisions taken thus far – particularly the freedom of settlement in the EU, Switzerland and Norway and the direct access to labour markets without a lengthy asylum application process – have removed some obstacles that hold back other refugees. However, the scale of the crisis means that the short-term fiscal effects will be substantial even if Ukrainian refugees fare better in the labour market than refugees from other origin countries. The large number of refugee arrivals also means that it is possible that labour market effects turn out to be non-negligible.

Furthermore, keeping in mind previous reception crises, it is entirely possible that attitudes towards Ukrainians harden in the months and years ahead, fuelling the rise of anti-refugee politicians and thereby triggering major economic and geopolitical effects. There are at least three ways to mitigate this risk. First, the EU’s discussion of a Solidarity Platform and burden sharing needs to turn into a concrete policy that voters perceive as fair. Second, governments need to make sufficient investments in language training and other forms of integration policies to facilitate integration into local labour markets and host communities. Finally, it is vital that governments provide opportunities and spaces that facilitate meaningful contact between locals and refugees. We hope that future refugees will benefit from these policy learnings – including those refugees that might have a different skin tone or religion than the majority of the host community.

Dr Judith Spirig is a Lecturer in Political Science. A longer version of this post appears on the UCL CReAM Ukrainian Migration Information Hub.