How do you integrate last year’s refugees into the labour market?

“Last year the graph over the number of asylum seekers looked like the Matterhorn. This year it looks more like a flat Danish landscape,” said Tor Bjørnestad, state secretary at the Norwegian Ministry of Finance, as he opened the Nordic Economic Policy Review (NEPR) seminar on 10 November. It was organised by the Nordic Council of Ministers together with Nordregio, in the finance ministry’s offices in central Oslo. 

Five European Schengen member states have reintroduced border controls – the main reason why the number of refugees is now so low. Bjørnestad warned against believing the low asylum seeker figures meant the basic migration push towards Europe was easing:

“There are polls indicating that 165 million people would emigrate to Europe if they had the chance,” he said.  

According to researchers from institutions like the International Monetary Fund, 2015 saw the highest number of asylum applications in Europe for 30 years. It was high even compared to migration from the new EU countries. 

“We know very little about the difference between labour migrants and refugees, since few studies differentiate between the two groups,” said professor Anna Piil Damm from Aarhus University. She is one of the guest editors for NEPR’s upcoming special issue on the integration of refugees into the labour market. 

Comparing Bosnians and Somalis

Bernt Bratsberg from Norway’s Frisch Centre also pointed out that there are major differences between refugees of different nationalities, educations and sexes. 

“We will for instance look at what has been happening since 2008, creating a graph for how well-integrated Bosnians have done in the labour market and one for newly arrived Somalis and Iraqis who are less well-integrated. We then link the two graphs to forecast what will happen with the Iraqis and Somalis in ten years from now. It is not easy,” he said ironically. 

Refugees from low-income countries

Bernt Bratsberg, Oddbjørn Raaum and Knut Røed have carried out a study where they divided refugees and labour immigrants into different groups according to country, sex, education, links to the host country and many other factors.  

“For refugees and people on family reunion we see encouraging signs of integration into the labour market during the first period of time after they have arrived,” said Bernt Bratsberg.

“But after five to ten years the integration process starts moving in the opposite direction, and the gap between migrants with refugee backgrounds and the native population increases instead, and the refugees become more dependent on welfare support.”

To continue the landscape analogy, the refugees’ employment graph looks more like the North Cape plateau:

The diagram shows how employment for refugees start at a low level before growing rapidly during the first five years. It then falls for men, while women stabilise on a slightly lower level. Comparisons are made between how things develop for refugees and for other groups for migrants. 

Researchers do not know the reasons for this, but one explanation could be that after five years refugees have worked for long enough to be entitled to unemployment benefits, and see that this could make as much economic sense as keeping a low-paid job. Or is it because of market fluctuations which mean refugees are the first to loose their job?

The Norwegian result is repeated in Denmark. Marie Louise Schultz-Nielsen from the  Rockwool Foundation presented a similar graph for refugees aged 17 to 36, plus people on family reunion joining a refugee between 1997 and 2011. The graph is slightly less pronounced than the Norwegian one, and only reaches a peak after nine years. The employment level among refugees as a group never top 43 percent, compared to ‘native’ Danes whose employment level is more than 80 percent. 

Schultz-Nielsen has also looked at the pay gap between native Danes and refugees. Two years after they have arrived in Denmark, refugees earn 200,000 Danish kroner (€27,000) less than native Danes.

Pay gap not narrowing

Somewhat surprisingly there is no narrowing of this pay gap even ten years after the refugees arrived in the country, despite the fact that employment by then has risen considerably. The explanation is that native Danes have jobs with wages that increase more year on year than the jobs which refugees typically get. At the same time, refugees receive more welfare support than native Danes.

“It is important to remember that the refugees didn’t come here to get benefits, but because they had an urgent need for humanitarian protection. Yet it remains relevant to ask how high employment rates for refugees needs to be in order to achieve a neutral net effect.”

According to the Danish Rational Economic Agents Model (DREAM), refugees need to reach a 65 percent employment rate in order to reach that goal. This is somewhat lower than what native Danes need to reach, 76 percent, in order not to contribute more than they take out of the public purse over a lifetime. The difference is explained by the fact that the refugees are on average 28 years old when they come to the country, and do not need schooling as children.

“Backwards integration”

There is, in other words, a great risk that refugees become a burden on public finances, while the “backwards integration” makes it less likely that they can contribute to reducing the problem of an ageing Nordic population. In Sweden too, refugees only reach a 45 percent employment rate. 

“Sweden has long had ambitious political initiatives to increase immigrants’ and refugees’ employment rates, but despite this there are no success stories. It is difficult to point to a single initiative which would change that development,” said Anders Forslund. He presented a study from the Institute for Evaluation of Labour Market and Education Policy, IFAU, which he had done together with Olof Åslund and Linus Liljeberg.

“But there are some measures that do have an effect, like helping job centre case workers who are responsible for refugees by cutting the number of unemployed people they are responsible for from 100, the most common number, to 20. This gives them more time to contact employers and to be that network which the refugees need. 

“Targeted wage subsidies also seem to work for this group, and various job training programmes have a better effect on people born abroad than on unemployed Swedes.”

Validation helps the most?

“But we don’t see any obvious ‘low-hanging fruit’, except for validation,” says Anders Forslund. 

Validation is when migrants can have occupational skills from their home countries recognised, which improves their chances in the labour market. 

“Validation has not yet been studied, however. But from what we know about it, it can be effective. To conclude, we recommend a clearly defined and balanced integration policy aimed at refugees. You should not depend on only one type of measure,” said Anders Forslund.