• Opinion
  • October 26, 2018
  • 7 minutes
  • 1

The impact of refugees on the labour market: a big splash in a small pond?

Opinion: The refugee shock has come on top of existing challenges for low-skilled individuals

economic impact of refugees

This piece was written by Mikkel Barslund, Mattia Di Salvo and Nadzeya Laurentsyeva from the Centre for European Policy Studies. It also appears in our refugees and migration newsfeed. You can read their longer study here.

Around 1.6 million refugees gained asylum in Europe from 2014 to 2017. Many are likely to stay in Europe, at least in the short and medium term. More than a million are of working age and could potentially enter the labour market in the receiving country.

Relative to each EU member states’ population, the recent refugee inflow does not appear so shocking. Even in Sweden, which accepted the largest number of asylum seekers in relative terms during 2014-17, the share of recognised working-age refugees to the employed population is only slightly more than 2%. The European average is 0.5%.

Overall, at the macro level, refugees’ impact on wages or the unemployment rate in receiving countries will not be economically significant. What has been less noted, however, is that recent refugee cohorts have been largely homogenous: young low-skilled men account for more than a third of all arrivals to the EU.

This means that the “refugee shock” is mainly concentrated in one population group. In Sweden, for instance, the number of low-skilled young men recognised as refugees in 2014-17 constitutes close to 20% of the employed in the same gender, education and age group. The number for Germany is about 12%.

low-skilled migrants

“Refugee shock” within a population group (by age, gender, and education) in Germany and Sweden. You can explore data for other Member States using these interactive graphs. Source: IAB-BAMF-SOEP Survey, 2016 refugee sample, Eurostat

The refugee shock has come on top of the existing challenges that low-skilled individuals face in EU labour markets and uncertainty over their future employment prospects due to import competition from low-wage countries and continuing technological change.

High unemployment for low-skilled men and segmented labour markets

Young low-skilled men face high unemployment rates in the EU. In 2017, the unemployment rate for this population group constituted 18.9% compared to 7.8% on average for all those between 15 and 64 years old.

Even in Germany, with a headline unemployment rate of 3.8%, young low-skilled men faced an unemployment rate of 13.1%.

And, industries employing predominantly men — such as manufacturing and construction — account for around half of total young low-skilled male employment in Germany and for over 40% in Sweden. Together with possible segmentation along age and experience, the competition for jobs between young low-skilled men is likely to become more intense as a result of the refugee inflow.

Increasingly, those affected by the arrival of low-skilled young men are likely to be “yesterday’s” immigrants themselves. In Sweden, close to one in five employed, young low-skilled men are foreign nationals, and the number has been increasing fast in recent years, even before the refugee inflow. The same pattern can be seen in many other EU countries, with part of the increase being due to higher intra-EU mobility

low-skilled workers

Low-skilled male workers from NMS (new member states) and non-EU countries in Germany and Sweden (15-34 years old). You can explore data for other Member States using these interactive graphs. Source: Eurostat

The future of low-skilled jobs

In recent years, the number of low-skilled jobs relative to the total employment in the EU has decreased. While this trend could be also consistent with the decrease in supply of, rather than the demand for low-skilled workers, the data show that in the EU15 the employment rate of low-skilled workers has decreased at the same time.

Germany is a notable exception to the overall trend, whereas in Sweden the employment rate of low-skilled has declined by about 10 percentage points in the last 15 years, particularly for younger workers.

Known remedies: education and vocational training

Recent findings show that third country nationals are more likely to be employed in occupations with high automation potential. They are also less likely to access professional training and are more likely to be employed under fixed-term contracts, which increases the risk of contracts not being renewed in the event of economic and technological shocks.

Upgrading their education and skills therefore appears to be the obvious way forward. Training and skill upgrading — as well as fostering recognition of existing skills — is a well-known standard policy prescription that is the focus of integration policies in many countries. Yet, it is important to be realistic about the time needed for the acquisition of new skills and hence successful integration.

Not acknowledging their concerns risks giving room to anti-immigrant sentiment

These same policy prescriptions — training and skill upgrading — apply to low-skilled immigrants as well as to the low-skilled native population. Young low-skilled men in EU member states are a particular vulnerable group. Over the next few years, they may face more direct labour market competition than is revealed by average country-wide statistics, given the composition of the recent refugee inflow on the one side and their current struggle for a foothold in the labour market on the other.

Even though this group represents a small minority in the electorate, not catering to or acknowledging their concerns risks fermenting discontent and giving room to anti-immigrant sentiment. A drive for better inclusion of this population group into the economy should go hand in hand with efforts to integrate newcomers. — Mikkel Barslund, Mattia Di Salvo and Nadzeya Laurentsyeva

(Picture credit: Pexels)


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