The large influx of refugees and asylum seekers into the EU15 area has raised concerns about their integration into European labor markets and societies. The authors use repeated cross-sectional survey data to examine the labor market performance of refugees relative to voluntary migrants, across several EU countries and over time. The authors suggest several possible channels for poor labor market outcomes for refugees relative to voluntary migrants, including: (a) different selection and self-selection mechanisms; (b) different impacts of economic conditions on arrival; and (c) the role of asylum policies and uncertainty in the asylum process.
Compared with natives, voluntary migrants perform poorly in European labor markets along many dimensions (e.g. employment probability, likelihood of working in a skilled occupation, earned income). The authors find that labor market outcomes for refugees are consistently worse than those for voluntary migrants, and this “refugee gap” persists for about ten years after immigration. The gap remains sizeable even after controlling for observable individual characteristics (age, gender, education) and unobservables (origin area, entry cohort, and destination country fixed effects, and the interactions between them). Refugees are 11.6 percent less likely to have a job and 22.1 percent more likely to be unemployed than voluntary migrants with similar characteristics. Their income, occupational quality and labor market participation are also weaker. Refugees from Africa and the Middle East struggle the most. There is some evidence that worse health status and lower language proficiency of refugees may partly explain their poor labor market performance.
The authors also assess the role of asylum policies (dispersal policies) and uncertainty in the asylum process (refugee status recognition rates, and application processing time) in explaining the refugee gap. They find that refugee cohorts exposed to dispersal polices have persistently worse labor market outcomes, an effect seemingly related to inefficient refugee allocation upon arrival given that it diminishes over time as refugees are eventually allowed to relocate. Additionally, refugee cohorts admitted when refugee status recognition rates are relatively high integrate better into the host country labor market. The authors caution that short-term political considerations may induce policymakers to favor measures that minimize immediate costs rather than maximizing long-run benefits, leading to potential underinvestment in refugee integration, e.g. dispersing asylum claimants and refugees in relatively deprived areas justified by immediate budget savings from lower accommodation costs.