Comments and Questions

Economic vs. political arguments in shaping refugee policies Uri Dadush is right in his skeptical attitude to programs, which try to encourage a voluntary refugee return from advanced economies to home countries. In most cases, they do not make sense both on economic and humanitarian grounds. Humanitarian arguments seems to be obvious: most contemporary conflicts, which have generated the largest waves of refugees have a protracted character. Even if stopped at some point their full resolution and reconciliation phase take years. Often the concrete reasons, which pushed individuals to flee their home country such as ethnic, religious or gender discrimination, violation of human rights, etc., continue after the violent phase of conflict is over. Uri Dadush also convincingly presented economic arguments against such programs. For an individual refugee from low or lower-middle income country (and these are the countries of origin of most contemporary refugees) who lives in high-income country the current income gap is too large to be compensated by any one-off grant aimed at encouraging a truly voluntary return. Each individual also takes into account non-income differences in living standards such as access to education, health care, infrastructure, housing and sanitary standards, public security, etc. Finally, one cannot ignore costs of fleeing a home country and coming to final destination that are (i) high, (ii) front-loaded, and (iii) involving hardly measureable components such as risk to life and humiliation. That is, the correct economic calculation of a potential return decision goes beyond measuring a present value of foregone refugee’s earnings in her/his lifetime horizon. For the host country, it makes even less sense, as Dadush rightly points out. Most of costs of refugees’ adaptation is front-loaded while economic benefits in terms of their labor market participation, paying taxes, etc. come only gradually. Therefore, once admitted a refugee should be given perspective of long-term stay and fast integration into home country labor market, education system and social and legal institutions (In this note I do not discuss cases when a refugee cannot be granted asylum because s/he does not meet formal criteria or for security reasons and should be deported). In such a context, investing in voluntary return programs means adding to costs of refugee policy while giving up potential economic benefits of refugee integration. Furthermore, because most of advanced economies in Europe and Asia face dramatic demographic constraints (shrinking and aging population) smooth absorption of refugee labor force is in their vital interest. These are the long-term demographic and labor supply considerations, which provide the strongest argument not only against voluntary return programs but also in favor of more open immigration policies, including acceptance of refugees. Obviously economic arguments are not the only ones, which determine refugee policies. Quite often, the clash with cultural and social reservations of host societies against excessive or (in extreme cases) any immigration, including refugee inflow. Such reservations play into hand of populist and xenophobic politicians who, in turn, try to add to anti-immigrant and anti-refugee fears and prejudices of given societies. Trying to respond to anti-immigrant sentiments the mainstream parties and politicians take initiatives, which are not always economically rational but demonstrate their willingness to keep the number of refugees under control. Undoubtedly, voluntary return programs belong to this category. However, the presence of anti-immigrant reservations and fears also calls for improvement in policies and programs aimed at smooth integration of refugees into labor markets of host countries. Some of them such as acceleration of asylum application and refugee vetting process, or granting refugees labor permits early upon their arrival would not only bring forward potential economic benefits for host economies but also reduce upfront costs, including the fiscal ones. Other policies, especially those related to education, professional training, learning host country language, culture and legal system, and other integration measures mean higher costs (especially in the early stages of refugee stay) but also higher economic and social returns in future. Therefore, they can be considered as investment in increasing labor supply and labor productivity, and social and political stabilization. The same concerns public education programs targeted to host societies to minimize their fears and potential prejudices. There are also new tasks for socio-economic research. One of the questions relates to the potential negative impact of refugee inflow on employment chances of local workers and their wages. While Uri Dadush, based on the large body of existing research, tends to downplay such an impact, the widespread political narratives suggest the opposite. To confront those narratives, more updated and detail empirical analyses (related to concrete countries and sectors) are badly needed. Furthermore, the mass refugee inflow can also have hypothetical positive impact on income and wealth inequalities. This can happen not only as result of increasing number of low-income population (most of refugees) but also via increasing profit margins of firms who employ low paid refugees. While income inequality has become recently a hot political topic in many countries, the knowledge on factors, which determine it, remains limited. Progress in such research might help in demining political debate on refugee policies and increase role of economic arguments in their elaboration.