Putting Refugees to Work: The Greatest Challenge in 2017

Last year, a combination of mass migration, the largest refugee crisis since World War II and stagnant living standards proved to be an explosive cocktail for political elites in Europe and the US.

In 2017, middle-income countries are facing even stronger headwinds. They house the majority of the world’s 21m refugees and are struggling with depressed global markets and lower remittances. In this context, donors and governments must rethink how they respond to global displacement. Instead of focusing on providing refugees with short-term handouts, they must expand employment opportunities both for those fleeing their homes and for the communities that host them.

The seeds of this new approach have been planted. For example, in Jordan — the country that hosts the highest per capita population of refugees in the world — a Compact was agreed with the European Union that aims to provide 200,000 jobs for refugees by offering trade access to the single market in return for recruiting a quarter of the workforce from the refugee population. The World Bank has launched a Global Concessional Financing Facility that provides access to cheap finance. A set of corporations has made substantial commitments to supporting refugees. While the initial focus has been on Jordan, the approach is designed to be extended to other countries.

The International Rescue Committee’s research in Jordan suggests that more action is needed if the benefits of such deals are to be exploited. Like many emerging markets, the country’s economy has stagnated over the past 10 years, with little job growth and challenging underlying conditions. Despite structural incentives provided through the Compact to employ refugees in support of export generation and economic growth, there has been little movement. Indeed, these incentives are not sufficient and require additional intervention.

Action is required both to stimulate demand for employment and to address the barriers to refugees taking up work. On the demand side, companies are uncertain about their competitive advantage in the European market and the potential size of the market opportunity. Yet to enter new markets they have to make investments — in building relationships with new buyers and recruiting and training refugees. In the eyes of many companies, the risks and uncertainties outweigh the prize of EU market access.

On the supply side, getting refugees into jobs has been difficult. Refugees themselves are often unaware of how to access formal employment opportunities and an onerous work permits regime has deterred many from trying. Fears and misinformation that participating in the formal economy means losing benefits or the potential to apply for asylum are a further deterrent. And concerns over workplace safety and exploitation are particularly salient for refugees who face uncertain futures and feel unable to access any form of legal support.

The practical interventions and policy changes required to address these challenges are not hard to discern in general terms. Companies require support in capturing the benefits provided by new financial instruments to create new jobs. And refugees must be given the right to work and the support necessary to access these jobs. Each will require rapid trial and error. At the Helsinki conference to support Syrian refugees in January, and at the G7 and G20 meetings next year, there are opportunities for world leaders to make progress.

Yet the biggest challenge is not in designing practical interventions or policy instruments but in managing the political tensions from extending opportunities to refugees. Despite the academic evidence suggesting low-skilled and high-skilled migrant labour can benefit host communities and countries, the last year shows that zero-sum politics is a formidable opponent. If the momentum is to be broken, policy instruments must be designed and communicated to ensure host populations feel the tangible benefit of integrating refugees into their markets.

Co-authored by Ravi Gurumurthy & Grant Gordon. Ravi Gurumurthy is vice president for strategy and innovation and Grant Gordon is associate director for research and development at the International Rescue Committee. This article was first published in the Financial Times on January 6th, 2017.