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The economics of the Syrian refugee crisis

17 May 20160 comments

Middle Eastern countries with large numbers of Syrian refugees have responded in differing ways to the problem with some interesting lessons for the rest of the world, according to new research.

Turkey and Jordan have done the most to integrate Syrians and reducing government barriers to legal employment and entrepreneurship have made the situations better in those destinations, a new study by the Washington DC-based Cato Institute shows.

Lebanon has done the least and is struggling to cope.

In Jordan, the influx of Syrian refugees is equal to about eight per cent of the nation’s population and refugees are not evenly dispersed across the country with about 90 per cent living in the north of the country, the study says.

Better labour market outcomes could stem from the Jordanian Government’s deregulation of the labour market in the face of the refugee surge.

Since March 2016, Jordanian authorities have expanded work permit access to refugees using Jordanian Ministry of the Interior identity cards and UNHCR-issued asylum seeker cards allowing many more Syrian refugees to work in the legal market.

This new policy is expected to expand work permit access to 78,000 Syrians in the short term and thousands more in the future.

The crisis is placing strain on Jordan’s finances with 8.8 per cent of the nation’s budget spent on services, including health and education, spent on refuges.

The report recommends the Jordanian government could maximise the benefits from welcoming refugees by reducing fees and employer sponsorship requirements as well removing restrictions to bring Syrians out of the informal labour market.

It says this would lower the fiscal cost of supporting refugees.

“Turkey is currently hosting 2.7 million Syrian refugees, more than any country in the world. Turkey has a much larger population base than other countries hosting Syrians and has a more robust and developed economy,” the study says.

Lower-skilled Syrian workers in the informal market have displaced some Turkish workers and increased unemployment in some areas.

“Since January 2016, Turkey has taken steps to allow Syrians to work legally and they are now allowed to comprise a maximum of 10 per cent of the employees of any individual firm and are also subject to minimum wage requirements,” the study says.

It says some Turkish politicians have recognised the benefits of Syrian entrepreneurship and a  growing labour market.

“Overall, the Syrian refugees have had a modestly positive impact on Turkey’s economy. Turks have responded to the population shock through occupational upgrading, as the expanded consumer base has created new opportunities for higher wage formal jobs,” the study says.

It recommends Turkey remove the ten per cent cap on Syrian employment in firms, eliminate minimum wages for refugees and should request the removal of trade barriers from the US and EU to boost exports.

In Lebanon, Syrian refugees are 24 per cent of the population–the highest Syrian refugee to population ratio in the world.

However, neither the Lebanese government nor the United Nations has established official refugee camps in the country and registration of new Syrian refugees stopped in May 2015.

International NGOs provide humanitarian aid that benefits more than 126,000 destitute Syrians, but significant funding shortages have left some Syrians living on less than 50c a day.

In response to the constant inflow of Syrians, the Lebanese government established a new visa system for students, businessmen, and those sponsored by Lebanese citizens. Missing from their visa reforms, however, is a humanitarian visa.

The report says that Lebanese government policies have exacerbated the problems around accommodating the refugees.

It recommends immediately granting work permits to all Syrian refugees and promoting Syrian entrepreneurship.

“Syrian entrepreneurship will help alleviate unemployment and wage stagnation problem. The Lebanese government should immediately stop punishing Syrian entrepreneurs,” the study says.

It says these differing approaches carry lessons for Europe – where restrictive labour regulations are exacerbating the problems faced by refugees – and for the rest of the world.

“Significant and costly European labor market regulations prevent non-EU immigrants from economically integrating,” the study says.

“The fear of immigrant labor market competition is misplaced as most of them are complimentary to European workers, not substitutable,” it says.

The study recommends lifting bans on work and self-employment for Syrians in Europe.


Laurie Nowell
AMES Australia Senior Journalist