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Although the refugee crisis had been predictable due to civil wars and associated humanitarian challenges in such countries as Syria, Iraq, or Afghanistan, the European Union was greatly affected by its scope. Nowadays, the flow of refugees is unstoppable and immense. Many migrants decide to reach the countries they have chosen beforehand in order to escape the violence, persecution, and other life-threatening circumstances back in the native state. They assume that the host country’s high levels of human capital would bring them a prosperous life. Today, it is difficult to control and manage the migrant influx because border crossings, shelters, and centers are overwhelmed. Moreover, registration procedures cannot cover all the asylum seekers on time. In fact, the refugee crisis has revealed weaknesses in the asylum policy of the EU and raised questions whether the Union is able to integrate the newly-arrived people into the society quickly and effectively. In addition, security, political, and economic issues complicate these concerns. This paper seeks to analyze the problems associated with the refugee crisis in the European Union and highlight the political and economic implications in the member states.
The Scope of the Economic Impact
The impact of the refugee crisis strongly affects all the states throughout Europe. In addition, the whole European construction system, not just some of its policies, faces the consequences of the problem. Moreover, the huge influx has caused diverging opinions in the EU concerning the borders control and the amount of humanitarian aid; it resulted in serious social, political, and economic challenges. Although the European Commission considers this situation favorably and asserts that refugees may significantly contribute and improve the economy, some member states do not support such a positive forecast (Karakas 2). In fact, the EU poor administrative procedures, which are incapable of managing the crises, facilitate the aggravation of political and economic issues. European nations influenced by the recession, internal issues, and imbalance in both labor market and social equality do not have a sincere intention to provide opportunities to asylum seekers. Moreover, inadequate multicultural and integration policies are unable to manage the diversity created by the immigration surge (Morillas, Sanchez-Montijano, and Soler 12).
Economically, Europe still experiences consequences of the Great Recession. The unemployment rate is high in most member states. Therefore, many people in the EU object that immigrants come to their countries and occupy their potential positions. Such attitude is also supported by growing nationalistic trends. These circumstances make the further European integration more difficult and even impossible. In fact, politicians of the EU have to make a serious decision whether to work towards a more united Europe or return back to the nationalism (“Is European Integration in Trouble” 10).
The current refugee surge is characterized as the largest population movement in Europe since the World War II that is reaching a new record (Karakas 2). The migration boost has been the fastest in such EU countries as Hungary due to its geographic proximity, as well as Germany and Sweden because of the desire of refugees to live in more economically prosperous EU nations with low unemployment rates and favorable integration policies (Morillas, Sanchez-Montijano, and Soler 16). Particularly, the total number of registered asylum seekers amounted to 1.2 million in 2015 for the European Economic Area (EEA). Germany is considered the main receiving country of asylum seekers. In such a manner, 730,000 people arrived in Germany in 2015. In the case of moderate rates of the refugee influx, in the first six months of 2016, the number of newly-arrived people would reach 610,000 for Europe, in general, and 370,000 for Germany, in particular. Since there is no evidence for declining the rate of influx, it is expected that these numbers may be much higher, reaching around 1.1 million and 900,000 of asylum requests, respectively (OECD 3).
A number of factors hinder assessing the economic impact of the refugee crisis. First, the majority of refugees is highly mobile and may register for several times in different countries. Second, the expected duration of their stay in a certain state is not clear and may depend on the number of asylum seekers recognized as refugees. Last, the time necessary for processing the asylum claims is not definite; this variable affects the time for entering the labor market. Moreover, it is impossible to predict and evaluate the influence of the future family reunification and movements within the boards of the EU (OECD 1). In brief, all these conditions and evidence hamper conducting an efficient assessment of the impact of the refugee crisis on the economy and politics. Nevertheless, there is a clear impact of the refugee influx on the public finances and labor markets.
Public Finances
In the short-term perspective, the host countries face the need to handle processing asylum applications and cover costs of the economic and social integration, including expenses on social benefits, healthcare programs, education, and occupational training (Karakas 2). To newly-arrived refugees, support can be significant, including expenditures on the humanitarian assistance such as the provision of food, basic money support, and shelters. For example, asylum seekers are entitled to receive monthly allowances. However, the amount of such financial assistance varies across countries and depends on the housing conditions. Thus, single adults accommodated in reception centers receive 10 Euros whereas people deprived of housing are given 300 Euros (OECD 2). In general, the total cost for processing asylum claims and accommodation of refugees can range from 8,000 Euros to 120,000 Euros per only one application for the first year (OECD 2). In addition, according to Aiyar et al., the direct spending includes covering costs spent on all individuals in the asylum process while they are not permitted to work for almost two years. (13). Moreover, fiscal costs include financial support for the rejected refugees for one year. In total, in the EU, the direct fiscal costs will be around 0.1 percent per annum for the next biennium (Aiyar et al. 14).
Nevertheless, support of the host country is not limited to the allowances and is also needed to help recognized refugees. Hence, the long-term expenditures are aimed to cover the language training and schooling. Moreover, additional funding is required in order to identify skills and knowledge of migrants, and assist refugees in entering the labor market and society (OECD 2). Such investments may have a positive rapid result if the new employees efficiently integrate and start contributing to the economy of the host country. However, the time necessary for acquiring the full financial independence of refugees is different in various countries and cases. On average, 75 percent of government-assisted refugees need four years after opening the asylum claim and the start of the social assistance in order to be able to live without any financial help (OECD 2).
To process asylum applications and accept the growing number of refugees, many countries have already increased public spending. In addition, many nations have allocated additional funding in order to support asylum seekers and enable their transit. For example, Germany planned as additional 0.5 percent of GDP of public spending for 2016 and the forthcoming year with the view to covering the foremost needs of the newcomers and integrating them into the labor market. Likewise, Austria predicted that spending on refugees would increase by 0.3 percent of GDP in order to improve their integration process. Sweden, a major host country for many asylum seekers, allocated as much as 0.9 percent of GDP in 2016 for the same needs (OECD 1). Hungary, which is a core transit country into the Schengen zone, budgeted additional 0.1 percent of GDP in 2015 with the aim to finance expenses associated with the refugee influx. Overall, the European Commission agreed on the additional 9.2 billion Euros, which is 0.1 percent of the EU GDP, in order to handle the existing crisis (OECD 2).
Consequently, such fiscal measures should provide a reasonable increase in the aggregate demand upon condition that budgetary reductions do not offset this additional spending, and the public funds are not used to cover non-tradable services and goods. For example, in 2017, the supplementary funding is expected to guarantee a boost to the aggregate demand in economies of the European countries of around 0.1-0.2 percent of GDP (Aiyar et al. 12). The fiscal expansion will be able to compensate any possible negative impacts on the wages and inflation that are triggered by the entry of refugees into the labor force. Furthermore, immigrants’ low income will increase “the marginal propensity to consume” (Aiyar et al. 12).
Demographic characteristics also influence the type of assistance required from the host countries. Thus, in 2015, one of four recognized refugees was a woman, and 22 percent of male and 36 percent of female were under 18 years old (OECD 3). It means that families with children need additional governmental aid. Aiyar et al. emphasize that women migrants have worse labor market perspectives and outcomes; thus, they have to rely on such assistance fully (15). In addition, 50 percent of adult men are assumed to reunite with their family within the first 12 months upon arrival in the host country (OECD 3). It means that the real number of people ready and willing to enter the labor market is much higher.
Economic aspects are tightly connected with the social effects. Thus, there is a popular perception among citizens that the arrival of refugees creates an additional competition for the social allowances and benefits. In addition, refugees are whole families with members of all ages, with various levels of education, work experience, and income. Thus, they require different types of assistance and ways of integration into the society (“Is European Integration in Trouble?” 17).
Labor Markets
The immediate impact of asylum seekers on the labor market depends on the time they need to gain the refugee status, the duration of the application process, and the final result of whether they will be given the right to enter the labor force or will be refused. In general, these factors influence waiting periods for becoming recognized refugee differently; everything depends on the country and conditions in it (“Is European Integration in Trouble?” 8).
The time that is given for accessing the labor market also varies across nations. Some states guarantee an almost immediate labor market access whereas, in other countries, refugees have to wait for as long as a year (OECD 1). By the end of 2016, it is predicted that around one million people would enter the labor market, accounting for 0.4 percent of the European Economic Area force. By contrast, Germany anticipates only 400,000 entries or 1 percent of its labor force (OECD 1).
In the long run, the effects on labor markets in host countries will progressively improve because refugees would be better integrated. Upon their arrival, immigrants earn 20 percent less than natives with the similar skills and experience (Aiyar et al. 16). Although each year, immigrant wages increase by one percent, they will never fully meet the income of locals. For example, in Germany, refugees, who do not speak the language or have no German degree, face a wage gap as high as 30 percent (Aiyar et al. 16). In brief, immigrants need time to overcome considerable obstacles in the labor market gradually. It is estimated that the full and effective integration in the economy of the host country will take one approximately 20 years (Aiyar et al. 16).
However, refugees may struggle because they are likely to face obstacles while trying to find a place where they can achieve their full potential and settle where their skills are the most required and needed (OECD 1). Moreover, the labor market performance may be less successful and beneficial because asylum seekers, first of all, are trying to secure personal safety rather than maximize income from performing the job. The time required for processing asylum applications also create additional barriers to the refugee’s employment (Aiyar et al. 37).
The refugee’s integration may have a positive influence on the economy of host countries in the long run by improving the ratio of active workers to the non-active, bringing innovation, increasing the GDP growth, and contributing to the labor-market flexibility (Karakas 3). By contrast, refugees’ failure to find work will increase the fiscal cost to cover expenses necessary for accommodating new immigrants (OECD 4).
Some EU countries still have high rates of unemployment, and a huge refugee inflow can only worsen the situation. Another adverse effect associated with the refugees influx is connected with the labor supply. In the case recognized refugees have similar skills to the native employees, it may lead to large employment displacement within the native labor force and negative wage pressure (Aiyar et al. 22). Similarly, an inflow of low-skilled workers may negatively affect low-wage native employees and other recent immigrants (Aiyar et al. 23). Moreover, in host countries, immigrants concentrate in certain areas according to integration measures. Such tendency may create additional tension for the local authority and native people. In addition, many rejected asylum seekers do not have an intention or possibility to return to their homes. Consequently, they remain in host nations and increase the ranks of the informal labor market.
Political Implications
A big number of asylum seekers has created serious challenges in terms of policy for member states with the aim to respond to the existing crisis effectively. The European Union is characterized by a hybrid structure with many “institutional asymmetries” (“Is European Integration in Trouble?” 2). It means that every project and decision on any further actions should receive unanimous approval of all members. Moreover, the political union presupposes the economic integration. Each member state is involved in the functioning of the whole system but enjoys sovereignty at the same time. However, there had not been tensions in peaceful times, but the recent refugee crisis provoked serious disagreements among member states and affected the political aspect of the Union. Moreover, the poor implementation of the common currency approach, freedom of movement, and overestimation of policymakers regarding the shift of the sovereignty to the European level have caused a serious risk of the European collapse (Morillas, Sanchez-Montijano, and Soler 4).
For the EU countries on the frontline such as Italy, Hungary, Croatia, and Greece, the speed and the amount of the inflow is unbearable for their asylum systems. They significantly affect not only their economy but also politics (“Is European Integration in Trouble?” 6). They are not able to handle the crises without the help of the EU. In general, only the EU collectively, and not its individual member states, can manage the flow of refugees. One of the solutions is connected with the EU involvement in the restoration of stability in the troubled regions, which people leave in the pursuit of the better life in other countries. The success of this mission may define the overall future of the EU integrity and its further political direction (“Is European Integration in Trouble?” 7).
The EU has not reached a consensus concerning an appropriate and effective strategy for addressing and managing the crisis. Moreover, Merkel has not managed to involve governments of member states in adopting a policy of joint action. The EU Commission has demonstrated its ineffectual role. Particularly, the initiate to relocate refugees to other countries by using a quota principle does not cover the real number and dynamics of the growing inflow of refugees (“Is European Integration in Trouble?” 8). Previously, Germany and France used to cooperate and combine their political power in order to address and solve certain challenges in the EU. However, in the current crisis, the two countries have failed to adopt a common stance. In fact, Germany is isolated, and France does not actively participate in solving this issue. Many European countries refuse to accept refugees; they explain their unwillingness by cultural and religious reasons. Such inability to share common values proves that Europe cannot be culturally and politically homogenous (“Is European Integration in Trouble?” 9).
The refugee influx causes a political crisis also due to the fact that refugees do not arrive alone. They reach destination countries in large groups, which the local authorities are unable to process and accommodate because of insufficient resources and capacity. Thus, the current crisis is characterized by the lack of control on the borders and over the public space. Such challenging situation may have repercussion for political leaders of the EU. Particularly, the German Chancellor, Angela Merkel, may lose her position in the political system of the country if she fails to develop and implement strategies with the aim to regain control over the existing crisis (“Is European Integration in Trouble?” 5). In addition, in the light of the refugee surge, she should also demonstrate Germans that the EU can be helpful and beneficial by taking a part of the refugee burden (“Is European Integration in Trouble?” 5).
The massive arrivals of refugees from Syria, Afghanistan, and sub-Saharan Africa have demonstrated that the EU foreign policy lacks comprehensive and effective approach to immigration issues. There is a lack of coherence among all 28 EU member states in their reaction to the refugee influx. Moreover, the EU has shown an inadequate implementation of existing policies and instruments in terms of the humanitarian aid and neighborhood regulations. In fact, this administrative failure has led to a general breakdown in the European institutions and their functions with regard to shaping the continent’s foreign policy, as well as compounded underlying political and economic division in the EU (“Is European Integration in Trouble?” 5; Morillas, Sanchez-Montijano, and Soler 27). For example, arguments concerning refugees’ movements across shared borders have intensified the tension between Serbia and Croatia. In addition, the UK refused to adopt the plan about the relocation of the next 120,000 refugees in Greece, Hungary, and Italy despite the fact that this initiative was passed by other member states on 22 September 2015. In addition, the refugee crisis has increased the probability of the UK to cease its membership in the EU at all. Nowadays, British politicians use the current crisis for explaining the unwillingness to be a further member of the EU despite the fact that the UK is not in the Schengen zone and do not face the same number of refugees as other EU states (“Is European Integration in Trouble?” 8).
The refugee crisis has endangered the fundamental EU achievement, the ability to cross borders within the EU freely. Thus, the Schengen agreement has already been considerably affected. A number of member states either begin to consider closing their borders or have already started building fences and walls around their territories. In fact, there is little evidence and hope that the free cross-border movement will return to its initial state (“Is European Integration in Trouble?” 5). Moreover, many politicians agree that walls, guns, and transition zones inside or near the EU cannot stop a huge refugee inflow. Only an open immigration policy, growing economy, and improved systems of administration may help manage the crisis properly, as well as strengthening the economic and political situations in Europe (“Is European Integration in Trouble?” 7).
In addition, the refugee crisis has necessitated an objective evaluation of the membership of the EU states in terms of costs and benefits. As a result, a number of countries do not consider the Union a community of solidarity anymore and concentrate on national interests first. They understand that, in the light of the large scope of the refugee crisis, the EU will demand national sacrifices to sustain the stability of the union (“Is European Integration in Trouble?” 9).
Nowadays, the EU policy aimed at the humanitarian assistance for refugees to compete with the growing fears of an Islamic invasion and absorption. France, Germany, and the UK are three countries, which play a key role in the EU politics, have not insisted on settling refugees nearer the borders of the country of origin. Instead, they “display a cheap xenophobic line of argument,” referring both to the need for helping refugees and threat presented by the Islamic extremism. As a result of such an indefinite position, anti-immigration political parties have begun to protest more radically by targeting asylum centers and setting them on fire. Right-wing politicians from Hungary, Slovakia, and Poland also voice their fear of the Islamic invasion (Morillas, Sanchez-Montijano, and Soler 27). Furthermore, centrist parties and governments are losing their authority and position; they are pressured to adopt firm and uncompromising actions to handle the refugee surge. If anti-immigration movements and xenophobic outbursts develop further, the situation could cause serious political instability and changes of governments in these countries. Moreover, states may adopt tougher policies on the immigration (“Is European Integration in Trouble?” 10). On the broader scale, such shift policies may undermine the freedom of movement within the EU countries, which is the core of the political and economic integration system. The refugee crisis can also lead to considerable changes in the geopolitical landscape of Europe.
Conclusion
The immense flow of refugees to Europe has been intensifying for the last few years and bringing a constantly increasing number of immigrants from the crisis and war zones in Africa and the Middle East. Such refugee surge has challenged Europe and questioned main values and political principles. In fact, many factors have contributed to the development of the refugee crisis. Furthermore, the European Union is limited in its administrative and financial capabilities in order to provide asylum seekers with food and enough accommodation. Although the rapid influx of immigrants has induced a strong instinctive response to assist people from conflict-ridden countries, it has appeared that governments need to face additional expenses to handle refugees and integrate them into the labor market and European society. As a result, new entrants may put pressure on local wages, increase the rates of unemployment, and deprive the local citizens of work. In terms of the political impact, the refugee crisis has demonstrated the incompleteness of the European integration system. Moreover, it has revealed internal issues in the structure of the European Union, which may result in its fragmentation and the EU political leaders’ losing their position within political systems of their countries. Thus, it is vital to create a coordinated and comprehensive policy at the EU level together with measures adopted in individual member states for improving and facilitating the labor market and social integration.
Works Cited
“Is European Integration in Trouble?” The International Economy, 2015. Web. 17 Apr. 2016.
Aiyar, Shekhar, et al. The Refugee Surge in Europe: Economic Challenges. International Monetary Fund, 2016. Web. 17 Apr. 2016.
Karakas, Cemal. Economic Challenges and Prospects of the Refugee Influx. European Parliamentary Research Service, 2015. Web. 17 Apr. 2016.
Morillas, Pol, Elena Sanchez-Montijano, and Eduard Soler. Europe and the Refugee Crisis: 10 Side-Effects. Barcelona: CIDOB, 2015. Web. 17 Apr. 2016.
OECD. “How Will the Refugee Surge Affect the European Economy?” Migration Policy Debates 8 (2015): 1-4. Web. 17 Apr. 2016.
