The Economic Impact of Refugees

The transfer of refugees and displaced people between countries is commonly seen as a humanitarian emergency, but it also offers host nations substantial economic benefits. The present global refugee crisis, which is currently at its peak since World War II, brings both challenges and opportunities for host countries.

Illustration by The Geostrata

The ongoing worldwide refugee crisis is currently at its point since World War II. Presents host countries with both difficulties and chances for growth and unity in the face of adversity.

At the close of 2021, around 117 million individuals were displaced from their homes as a result of persecution, conflict, and human rights violations. 

The Global Trends Report 2023 published by UNHCR shows that currently, approximately 1.5% of the world's population, which translates to 1 in every 69 people, is being displaced by force.

This statistic highlights how serious the situation is, almost doubling the ratio from ten years ago. The economic implications of these involuntary movements of people have been extensive as well as complex.

Although there exist impacts on the host communities that are both positive and negative, it is rather the negative aspect that is always mostly emphasised. Some people tend to regard relocation of refugees as loss but in fact, it is unarguable that they are key in economic dynamics and revitalization of new regions. 

WHO ARE REFUGEES? 

Refugees are described as individuals who leave their home countries for various reasons, such as wars, violence, and even persecution. In terms of figures, the year 2024 records roughly 43.4 million refugees across the globe, according to the data from UNHCR, primarily due to armed confrontation in countries such as Ukraine and Syria, among others. Most of these refugees are looking for safety in countries with lower and middle incomes, where 85% of the world's refugees are currently hosted.

In comparison to a decade ago, the overall amount of refugees worldwide has increased by over three times. 6.4 million refugees each from Afghanistan and Syria make up the majority of refugees worldwide, amounting to one-third of all refugees under UNHCR's jurisdiction. Venezuela and Ukraine had 6.1 million and 6.0 million refugees respectively, along with others in need of international protection.

By the end of 2023, refugees prefer to stay near their home countries, with 69 percent finding refuge in neighbouring nations, as reported by the research data.

DIFFERENTIATING BETWEEN ASYLUM SEEKERS, IDPs AND STATELESS PERSONS

The terms asylum seekers and displaced persons (IDPs) along with individuals are often used in similar ways but have different meanings from each other.. Refugees refer to individuals who have left their home country and crossed a border as per laws granting them protections, like the right to seek asylum and non refoulement. As for asylum seekers and refugees differ in their status and legal protections.

While all refugees were once asylum seekers seeking safety but waiting for refugee status approval not all asylum seekers will ultimately be recognized as refugees, with protection and aid provisions provided by staying within the country's borders. People without citizenship are considered individuals. They either haven't been granted citizenship or don't belong to any country's government system yet.

As of now 75 million individuals have been internally displaced globally with the majority of them, about 68 Million are forced to leave their homes due to conflicts and violence.

There are an estimated 4 million people worldwide who are stateless. The economic implications of accepting refugees often raise concerns among host countries. Host countries frequently express concerns about the economic consequences of welcoming refugees. Hosting refugees may turn out to be an expensive affair, causing concern that welcoming them could be a financial strain.

Nevertheless, indications show that the expenses may be surpassed by the financial benefits refugees may accrue to the communities where they settle. Refugees often assist in fulfilling the need for labour in important sectors and sustain local economies by consuming more money and even setting up their own enterprises. In this case, studies show that welcoming, embedding, and incorporating refugees has been proven to increase efficiency and the economy of the countries they settle in.

REFUGEES AS ECONOMIC CONTRIBUTORS

Refugees do not just receive aid; they also play a key role in the economy. In 2019, close to 2.4 million refugees residing in the United States generated about $93.6 billion in household income and contributed $25 billion in taxes, resulting in $68.6 billion in disposable income to boost local economies, according to a report by the American Immigration Council. 

The remarkable thing is the entrepreneurial drive among refugees, with roughly 188,000 refugee business owners making up 13% of the refugee labor force and generating $5.1 billion in business revenue.

LONG-TERM ECONOMIC INTEGRATION

Over the years, refugees have demonstrated advancement in the United States through their dedication to improving their skills and education levels for better employment opportunities, with an average household income surpassing $71,400 after residing in the country for more than two decades. Higher than the national median income level.

This progress has shown their work and commitment towards personal growth, as research shows that many refugees have prioritised investing in enhancing knowledge so as to secure higher-paying positions in the future.

JOB CREATION AND ENTREPRENEURSHIP

Refugees are often recognized for their participation rates, in launching businesses or startups. Refugee businesses in areas such as Southeast Michigan generated economic activity ranging from $229.6 million to $295.3 million and resulted in the creation of roughly 1,800 to 2,300 jobs.

Additionally, refugees frequently help address important labour deficiencies in different industries such as manufacturing (20.3%), healthcare (14.2%), and general services (10%)—fields where local residents may not want or are unable to work.

Refugee entrepreneurs' success stories go beyond small businesses; notable companies like Google (with co-founder Sergey Brin) demonstrate the potential influence of refugee entrepreneurs on the economy. Research shows that new companies are the main contributors to overall job growth in the United States, highlighting the essential impact refugees have on innovation and economic vitality.

ECONOMIC BENEFITS BEYOND EMPLOYMENT

The economic influence of the refugees extends beyond employment generation. Presence alone has been shown to have a demand dividend which enhances the local economy through increased expenditure. Moreover, research shows that refugees help to improve public finances as after some years of residence they become net payers of tax which supports services and infrastructure.

Despite the positive impacts they make, misunderstandings about refugees continue to exist. Research consistently demonstrates that refugees do not have a negative effect on native employment rates; instead, they frequently enhance current labor pools by addressing shortages in certain industries.

The OECD highlights that migrants, including refugees, generally end up making positive financial contributions to public funds in the long run, helping with paying off debts and maintaining economic stability.

Thus, supporting refugee resettlement not only meets our moral responsibilities but also acts as a smart investment in economic development, which can bring long-term benefits in the future.

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BY ISHITA SHARMA

TEAM GEOSTRATA

info@thegeostrata.com