Cost of refugees for Ger­many to reach 10 bln, says Ifo

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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