Burden or Blessing? The Impact of Refugees on Germany’s Labor Market
Victoria Rietig is an independent migration expert advising governments and foundations on migration and refugee issues, and a Senior Migration Fellow at AICGS.
Her current clients include Germany’s development agency GIZ, the UK’s Foreign Office, the U.S. Department of State, and think tanks and foundations in Germany and the United States. At AICGS, she conducts research on workforce integration of refugees and migrants in the U.S. and Germany.
She has published and speaks widely about asylum and refugee issues, deportations, return migration, reintegration, unaccompanied child migration, labor migration, labor market integration, and migration and development.
She and her work have been quoted in national and international media outlets, including the New York Times, NPR, Huffington Post, Al Jazeera, Foreign Affairs, Handelsblatt Global Edition, La Reforma, El Universal, and many others.
In the past, she has provided migration expertise and consulted with governments including Switzerland (Foreign Ministry, EDA), the United States (Department of State and Department of Homeland Security), and Mexico (Foreign Ministry, SRE). She began her career a decade ago as a UN consultant, working on migration and development at the New York office of the United Nations Institute for Training and Research (UNITAR). She later worked as a Policy Analyst at the Migration Policy Institute (MPI) and was a Fellow at the Atlantic Council, both think tanks in Washington, DC.
Ms. Rietig holds a Master in Public Policy (MPP) from Harvard University, Kennedy School of Government, with a focus on forced migration and human trafficking, and an M.A. in American studies, history, and psychology from Freie Universität Berlin, with a focus on U.S.-Latin American migration and integration.
Germany is in the midst of a heated discussion: Are refugees a burden or a blessing for the German labor market?
Supporters of the “blessing” camp argue the country’s aging society is in urgent need of young workers to make up for millions of retiring Germans. Around one third of the 1 million migrants and refugees who entered Germany in 2015 are under the age of 25 and their labor will help maintain the generous pension and benefits system Germans hold dear. The integration of refugees, the argument goes, may be costly for Germany in the short run, but refugees’ contributions will outweigh these start-up costs after a few years, leaving the German economy better off.
In line with this thinking, a recent study of the German Institute for Economic Research (DIW), a think tank in Berlin, finds that the net impact of refugee inflows on the German economy will be positive in any case, with benefits outweighing costs for the economy already after five to ten years. The study concludes that the question is when, not whether, refugees will prove to be a long-term gain for the German economy. The blessing, they claim, is assured in any case. The European Commission also takes a carefully optimistic view, with their European Economic Forecast stating that refugees’ impact on Germany’s economy by 2020 will likely be small, in the order of 0.2-0.3 percent of GDP, but positive even if most of them turn out to be low-skilled.
Such affirmative views are supported by survey findings of the UN Refugee Agency UNHCR that nearly nine out of ten Syrians arriving in Greece report high levels of education, with 43 percent holding a university degree, and another 43 percent a high school diploma. Nearly eight out of ten surveyed Syrians (78 percent) were under 35, and half of them said they wanted to go to Germany, citing employment and educational opportunities among their reasons.
What is the counter-narrative to the optimistic camp? Proponents of the “burden” camp cite competing studies that warn nearly two-thirds of Syrians cannot read or write fluently and have trouble with basic math, as PISA and other international comparative educational studies find. A survey conducted among Syrians in Turkish refugee camps draws similar conclusions, finding that 80 percent of Syrians bring less than a high school education. Germany’s Office for Migration and Refugee (BAMF) finds that around half of surveyed Syrians in Germany reported having either university degree or a high-school diploma—but that asylum seekers from other countries brought on average lower levels of education.
Other studies focus on the high cost of refugees. For instance, the Institute for the Global Economy (IfW) in Kiel projects the annual cost of refugees to Germany’s economy in the coming years to range between €25 million and €55 million—a burden difficult to debate away, even if the economy does well.
Why Is It So Hard to Estimate Refugees’ Impact on the Labor Market?
Why is this question so controversial? Why do we see so many competing studies with widely diverse findings? The answer lies in what we do not know. The economic impact of refugees depends on how well they integrate into the German labor market—and that depends on a lot of factors we do not yet know enough about to make solid predictions. For instance, Germany does not know how many arrivals it will see in the future, nor which countries they will come from. We have estimates, of course, but as flows and origin countries change and as Germany’s and its neighbors’ policies start to take effect, estimates change. Even if we know which countries people come from, and even if know how old they are and whether they went to school or university, we do not know how those schools’ curricula compare to Germany’s, and how able and willing each person will be to learn German and apply him or herself in the labor market.
The predictions in studies we currently read are based on widely varying assumptions or, less euphemistically, guesswork. Predicting accurately the impact of the migrant and refugee flows on Germany’s labor market in the future is like trying to accurately predict precipitation: Experts come up with generally good estimates, based on factors they can measure and experience they have with weather patterns, but in the end, sometimes there is a 50 percent chance of rain: It may rain, experts say—but it also may not. This does not discard or discredit the studies we have so far, but simply acknowledges their inherent limitations. Experts’ predictions are only as good as the data sources they are based on.
Five Factors That Influence Labor Market Integration
The silver lining is not far, though. While there is a lot we do not know, we do know that refugees’ integration into the labor market depends on at least five factors.
- Language – Successful integration hinges on language learning. Gaining and keeping a job, let alone climbing a career ladder, depends on refugees’ ability to communicate in German. In many jobs, that does not just include basic language skills to get by, but also profession-specific language, such as medical or technical terms doctors, nurses, or metal workers need. Germany’s government promotes language classes as the main element of its federally funded integration courses, providing at least 600 hours of language instruction to new arrivals, and new projects combine profession-specific language training with internships to allow refugees to learn specialized terminology while already gaining work experience. While the existence of such courses shows Germany’s political and financial dedication to tackling the language challenge, critics lament an insufficient supply of these courses.
- Education and Skill Levels – Germany’s labor market needs skilled workers, some university- educated, some with a vocational or technical education. Refugees that bring these skills, especially in growth occupations with likely high demand in the future (such as health care and geriatric care workers), have better chances of finding employment and integrating successfully. Those without sufficient education levels need to catch up, by going back to school, updating their skills, or participating in so-called bridge programs that aim to fill the gaps between the skills a person has and those needed to enter employment. Social and cultural skills also matter. Recognizing authority of female bosses, punctuality, and reliability are soft skills German employers expect their workers to have. Unlike thematic knowledge and technical skills, cultural skills need to not just be understood, but internalized.
- Qualifications Recognition – Even if refugees bring qualifications well matched to the needs of employers, they often need to take the additional step of having them recognized before they are allowed to work. Rigorous recognition processes are a mechanism to protect the public, especially for licensed professions like healthcare workers. Patients seeing a Syrian dentist breathe more freely knowing that she has passed comparable training and exams as a German dentist would have. Germany’s foundational law to address this challenge is the so-called Recognition Act of 2012, which mandates that migrants who apply for recognition of their degrees and education in Germany have to receive a decision within three months. A webpage guides applicants through the process and draws a path through the complex jungle of regulating bodies and certificates needed to access different professions. In spite of this progress and success stories of the last years, getting qualifications recognized remains a long and often arduous process. Long wait times lead to de-skilling and lengthen the time refugees depend on government support.
- Legal Right to Work – Withholding a work permit from refugees is one of the most effective ways to slow down their integration. During the last big refugee wave in the early 1990s, Germany deterred labor market participation of asylum seekers, arguing it would incentivize more people to come. Today’s policies do the opposite: they encourage asylum seekers to participate in Germany’s labor market, citing the need for early integration, refugees’ desire for self-sufficiency, and the high cost of prolonged government support. Asylum seekers receive labor market access after three months, a marked decrease from the nine months they had to wait prior to the so-called asylum compromise of 2014. Their access is non-preferential until 15 months, though, meaning they can only be hired if the Federal Employment Agency gives its okay, which it generally only does if no Germans or EU citizens are available for the job. Full access is gained at the end of 15 months, once more a marked decrease from the four years asylum seekers waited beforehand. These changes are an improvement for asylum seekers’ ability to enter the labor market early, but critical voices, including the new head of the Federal Office for Migration and Refugees, argue the one year period of non-preferential treatment should be decreased or temporarily abolished to avoid unnecessary delays.
- Employer Openness – Without German businesses willing to employ asylum seekers and refugees, labor market integration remains a pipedream. The good news is that German employers have shown increasing openness to hire refugees, and have launched numerous initiatives to integrate them into their workforce. Multinational car manufacturers like Porsche and Daimler offer vocational training programs for refugees, and Germany’s Mittelstand, the countless SMEs revered as engine of the country’s export power, has also jumped on the bandwagon. Early experiences with these programs have shown that refugees need not just a job, but special support systems. The Munich Chamber of Skilled Crafts, for instance, established a mentoring system to support refugees with challenges of daily life, such as finding an affordable apartment in notoriously expensive Munich, which helped reduce dropout rates from vocational trainings. Since most of these initiatives of German enterprises are only a few months old, it remains to be seen how many refugees will be able to benefit from them and how well they manage to prepare refugees for the demands of German work life.
How to Make Things Better: Recommendations for Germans and Refugees in Germany
So what should we do with this knowledge? How do we influence these five factors positively so they help not hinder refugees’ integration?
Overall, German policymakers have launched a host of policies and programs to address these five challenges in recent months and years. But since most of these initiatives are still in their pilot phases, we do not yet know how well they work, nor do they reach enough people. Due to this fact, the recommendations put forward here focus on continuing the first promising steps Germany has made, evaluating them carefully, and scaling them up when possible. Concretely, here is what the German government, businesses, and civil society can do to improve integration of refugees, and what refugees themselves can do.
First, the federal government should continue to expand its language course offerings, both the basic language classes and those teaching profession-specific vocabulary. In the first nine months of 2015, nearly 1,400 language course providers conducted more than 8,000 courses, up 15 percent from the same period in the year prior. Given the parallel increases of arrivals, this development should continue. At the same time, the countless civil society initiatives that bring together volunteers to teach German in the classroom or through language tandems are indispensable in cementing the language skills newcomers learn in the classroom.
Second, carefully evaluate and, if found successful, expand pilot projects that screen asylum seekers’ skills already while their claims are processed. Existing evidence, for instance from the “Early Intervention” pilot project the Labor Ministry and Federal Labor Agency (BA) conducts in collaboration with the BAMF, shows that assessing asylum seekers’ skills and abilities at an early stage not only allows them to find employment or training more quickly, but also boosts asylum seekers’ self-esteem and integration motivation.
Third, continue to provide and expand support to undergo the complex process of qualification recognition. A government webpage helps applicants find the right agency in charge of recognizing their foreign degrees and experience, and another pilot project called “Prototyping Transfer,” this time by the Federal Institute for Vocational Education and Training (BIBB), allows refugees without written proof of their qualifications to take tests or provide work samples to prove their skills and knowledge instead. These are steps in the right direction, but they need to continue much further to impact more than a few hundred pilot participants.
Fourth, German policymakers and media should discuss the pros and cons of decreasing or abolishing the non-preferential access period. Critics say it effectively keeps many refugees out of the labor market for 15 months, an unnecessarily long time. Supporters are concerned about social tensions if newcomers stiffen labor market competition and are perceived to decrease wages. Reforms to labor market access need to guard against compounding an “us versus them” mentality that can be fueled by granting benefits too quickly and independently of the validity and outcome of asylum claims.
Fifth, the numerous integration initiatives started by German employers are good steps in the right direction, but would benefit from coordination and evaluation. The recently founded network “Enterprises integrate refugees,” supported by the Ministry for the Economy, brings together more than 300 German businesses to exchange good practices and provide practical advice on how to integrate refugees in employment and vocational training. Since many firms’ initiatives are recent, they would benefit from advice on how to overcome common hurdles.
Last, the best integration intentions get stretched to breaking point if the number of entries increases unabated, and the German people gets the impression that the many integration resources spent are nothing more than a drop in the bucket. Policymakers across the political spectrum acknowledge that limiting the number of additional entries is desirable to facilitate the successful integration of asylum seekers and refugees already in Germany.
What about the refugees themselves? Having arrived from a long journey to Europe, they have to find the motivation and willingness to dive into a new life in a culture different from their own, including a different work culture. Skilled workers need to accept that they often start at a lower level. Doctors should not work as taxi drivers, but some may end up having to work as nurses or care workers, at least in the beginning. And many refugees will have very low or no relevant skills, or reject basic principles of German society, including gender equality and freedom of religion. Their integration will take much longer, if it succeeds at all. Both sides, Germans and refugees, need to manage their expectations. Integrating the hundreds of thousands of arrivals who will receive protection and stay in Germany will take a long time, and frustrations on both sides are guaranteed.
Growth, personal and societal, always comes with pain. The migration and refugee crisis has triggered a growth spurt of German society, as it has unleashed a wave of controversial discussions about the country’s identity. While the rising popularity of the AfD and anti-immigrant movements is often interpreted as a regression of Germany’s debate to worse times, it can also be seen as a sign that Germany’s migration debate is maturing and becoming more complex. Germany’s discussions, which focused mostly on integration concerns during the last decade, are now pushed toward a more diverse conversation, and that includes extreme views any democracy has to be able to withstand.
Integration, the platitude goes, is a two-way street. Both host society and migrants need to adapt their ways for successful integration. Whether refugees turn out to be a burden or a blessing to the German labor market is not a given, it is not yet decided. It is a process in the making—a process both Germans and newcomers can and should shape.
Victoria Rietig is an expert on migration, asylum, and refugee issues in Europe, esp. Germany, and the Americas. She is a Fellow at the Atlantic Council and has worked for the United Nations, think tanks, and government agencies in the United States and Europe.
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