Cost of refugees for Germany to reach 10 bln, says Ifo
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If a total of 800,000 asylum-seekers do indeed come to Germany this year, as forecast by the Federal Ministry of the Interior, it would cost the state around 10 bln euros, according to the Munich-based Ifo Institute. This figure does not take into consideration family members joining the refugees or any educational measures; and is therefore a conservative estimate, the research centre said.
The qualification structure of immigrants from the crisis-afflicted states of Syria, Iraq, Nigeria and Afghanistan is probably poor. According to data from the World Bank, the illiteracy rate even among the 14-24 year old age group is 4%, 18%, 34% and 53% in these countries, respectively. Even in the most developed of these countries (Syria) only 6% of the population has a university degree, which is not equivalent to a German diploma in many cases.
Although refugees tend to be male and younger than the demographic average age, one thing is still clear: they are poorly prepared for the German labour market. In addition to language courses, Germany will also need to invest in training, which will generate extra costs.
Many refugees will remain in Germany in the long-term and bring their relatives into the country. Migratory pressure from North Africa and the Middle East will remain high purely due to the demographical situation in these countries.
To avoid the refugee crisis becoming a long-term financial burden for German taxpayers, refugees have to get paid employment as fast as possible, so that they can meet their own living costs. There are fears, however, that many of them will not be able to find a job with a minimum wage of 8.50 euros in place because their productivity is just too low. It would be, therefore, a good idea to lower the minimum wage across the board to prevent unemployment from rising.
Raising Hartz IV standard rates in the present situation is a very bad idea, as this would reduce incentives for refugees to look for work and generate an additional fiscal burden.
Model simulations by the Ifo Institute show that even in the case of a suspension of minimum wage legislation and Hartz IV rates remaining stable, the supposed immediate integration of immigrants into the German labour market does not stand to benefit the German economy. Although there are some labour market advantages, they are outweighed by higher unemployment rates and net transfers to immigrants.