4 October 2017

Refugees are a boon – not a burden

By Luis Pablo de la Horra

Since the Syrian Civil War started in 2011, over five million people have seen themselves forced to flee the country in search of a better life. Most of them have resettled in neighboring countries, mainly in Turkey, which has accommodated around 3 million refugees since the outbreak of the war.

In the EU, Germany has been the most generous country to those escaping the conflict, granting asylum to 75 per cent of all Syrian refugees that arrived in the Continent in 2016. By contrast, the percentage of total refugee admissions in the UK has declined significantly, partly due to the anti-immigration mood in the country. In 2016, 66 per cent of applications were refusals, the highest proportion in five years.

The Obama administration took some steps to facilitate the resettlement of refugees on US soil. In response to the humanitarian emergency in Syria, the refugee target (that is, the number of refugees that the US Government is willing to accept each year) was raised by 30 per cent, moving from 86,000 in 2016 to 110,000 for 2017.

However, thanks to an executive order that President Trump signed in March to suspend the US Refugee Admissions Program (USRAP), that number will not be reached. The executive order, which was partially amended by a lower court due to its doubtful constitutionality, has been provisionally endorsed by the US Supreme Court. The higher court has recently revoked previous rulings that questioned its lawfulness until a final decision is made later this year.

The US has traditionally welcomed refugees from across the world. Since 1975, over three million asylum seekers have been admitted into the country. Trump appears determined to change course. Last month, the President gave his support to the RAISE Act, which, if passed, would halve legal immigration over the following decade.

Concerns about refugees raised by the White House are twofold. On the one hand, the executive order invokes national security to justify the ban on refugees. Unfortunately for the US President, this is a weak argument. Of the 3.2 million refugees that entered the country between 1975 and 2015, only 20 were terrorists. This means that the probability of finding a terrorist among the refugee population was just 0.00062 per cent.

Something similar could be said about the alleged threat to national security posed by refugees entering Europe, which has been recently brought to the spotlight due to the arrest of two refugees in the aftermath of the Parsons Green attack. But the idea of linking increasing refugee flows with more terrorist attacks just is not consistent with the facts. According to Europol, there is “no concrete evidence that terrorist travellers systematically use those flows of refugees to enter Europe unnoticed.”

In addition to the national security rationale, the White House has also alluded on several occasions to the costs for taxpayers of relocating refugees. However, the focus has been placed on the net fiscal impact (defined as taxes paid minus public services and benefits received) of refugees in the short term, which tends to be negative due to resettling costs as well as other costs derived from the use refugees make of welfare programs in the first months of their stay.

The long-term fiscal impact of refugees had been neglected until now. A working paper by two economists from the University of Notre Dame examines the economic and social outcomes of refugees in the US. In particular, the authors concentrate on earnings, unemployment rate, education and welfare use. Their findings are revealing.

Contrary to conventional wisdom, the net fiscal effect of refugees over the long term is positive. Refugees tend to receive more in benefits than they pay in taxes during the first eight years of their lives in the US. But from the eighth year onwards, this trend reverses: taxes paid widely exceed benefits received (resettlement costs included).

In fact, if we consider the 20-year period after arrival, refugees have a positive net fiscal impact of $21,000. In other words, they pay considerably more in taxes than they receive in welfare benefits. The results are even more emphatic if we take into account that refugees tend to earn lower wages than natives. In the authors’ words:

“At the start of their U.S. residency, refugees do extract high costs because of the direct costs of relocation and high welfare use.  However, over time these costs decrease quickly, and our estimates show that over a twenty-year period, refugees pay $21,000 more in taxes than they receive in benefits (…) [In addition] after about six years in the U.S., refugees have higher labor force participation and employment rates compared to similarly-aged U.S.-born residents (…) Despite these successes, they never earn as much on average as similarly-aged natives.”

Trump has recently announced on Twitter his plans to renew the refugee ban and make it “far larger, tougher, and more specific”. The President is planning to further reduce refugee admissions, accepting no more than 50,000 refugees in 2018. There is no justification for such a measure.

Luis Pablo de la Horra holds a BA in English and MSc in Finance. He will be starting a PhD in Economics in 2018. He has written for the Foundation for Economic Education, the Institute of Economic Affairs and Speakfreely.today.