Banning refugees from having jobs hurts, not helps, local workers

Giving refugees work can create significant benefits, a new report says

A refugee working in a bakery in eastern Chad.

Millions of refugees and asylum seekers are denied the right to work because governments are worried about their potential to displace locals from jobs and drive down wages.

But trying to ban refugees from working can magnify harmful effects by concentrating their labour in low-skilled, informal work, creating greater competition. Allowing them unrestricted access to the labour market can actually reduce the impact on wages and create fiscal benefits for government.

That’s according to a new report from the Center for Global Development and the Tent Partnership for Refugees, which argues that opening up labour markets can be a winning proposition — for both refugees and locals.

Unintended consequences

Some developing countries, such as Turkey and Jordan, play host to millions of refugees. Governments have been reluctant to give these refugees work rights because of the potentially disruptive effects on local working conditions of such large numbers of new workers.

There is some evidence of negative effects on wages and employment levels from refugee flows. These effects typically occur, the report says, “when there is an especially large concentration of refugees in certain geographies and industries”.

But those conditions are often inadvertently created by governments, according to Cindy Huang, co-director of the Center for Global Development’s migration program and one of the reports co-authors. Without the right to work, refugees’ only options are in the informal economy, characterised by low-skill and insecure jobs, regardless of their qualifications and experience.

In some countries, refugees’ free movement is also limited. Even when they aren’t confined to camps, refugees can be assigned to a particular province or barred from accessing services if they move, Huang explained.

“What happens when you have a concentration,” Huang said, “is that you then, in fact, see a lot of the feared consequences.”

With more extensive rights, by contrast, refugees can spread between areas and lines of work according to their skills.

Even those who stay in the informal sector can benefit because their bargaining position improves when their work is no longer illegal. “We are seeing some evidence from Jordan that people feel they have more legal protection if they have a permit,” according to Huang, “even if they continue to work in the informal market.”

That means higher wages and better conditions for refugees, and makes them less likely to undercut or displace locals.

Negative effects typically occur when refugees are concentrated in certain geographies and industries — conditions inadvertently created by governments

Another key to harnessing refugees’ productive potential is making sure they’re given the right to work as quickly as possible.

This is crucial, the report says, to their integration into a country’s labour market.  When they integrate successfully, refugees make a sizeable contribution to the government’s bottom line.

In Germany, a policy change in 2000 significantly shortened the delay before asylum seekers were allowed to work.

The Stanford Immigration Policy Lab found that five years later, the refugees who’d had a shorter wait were nearly twice as likely to be employed. That gap did not close until ten years had passed.

“Generally speaking, the sooner you can get in, the more likely you’re able to integrate into the labour market in the long term,” Huang said.

Winners and losers?

But liberalising refugee employment policy would have its challenges. “There are always people who benefit and people who lose,” Huang said. In this case, locals in higher-skilled work in the formal economy could face new competition from refugees.

Long-run evidence suggests that these workers will ultimately also benefit, by developing new skills and upgrading to higher-paid positions, the report says — but it recommends policies such as training programs and cash assistance to help ease that transition.

“We’ve seen that a minority that is harmed can have really big political effects,” Huang said, which makes those compensating policies vital accompaniments to granting labour market access. “But from an economic and fiscal perspective, there’s no question: this is a far superior and more sustainable policy.” — Fergus Peace

(Picture credit: Flickr/EU Civil Protection & Humanitarian Aid)

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