## Investing in Refugees

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**Canonical URL:** [Investing in Refugees](https://www.imf.org/-/media/files/publications/fandd/article/2022/june/cafe-economics.pdf)

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### Overview and scale
- More than 4.5 million people have fled the war in Ukraine.
- Poland, Romania, Moldova, Hungary—the closest countries—are receiving at least 3 million of the 4.5 million and they could be strained.
- There has been significant prior migration from Ukraine: in Poland, more than 1 million Ukrainians migrated; numbers in Germany, Italy, France were in the hundreds of thousands.
- There is a significant diaspora of Ukrainians in Canada and in the US, over 1 million.
- In Italy, France, and in part Germany, migration of women has been very significant—sometimes 70 percent—working largely in hospitality, assistance for the elderly and disabled, and personal services.

### Short-term costs and fiscal implications
- Short-term costs for hosting refugees may be significant and potentially strain neighboring countries.
- For the European Union, refugees may have a cost of $8,000 to $10,000 per person in the first year in terms of housing and support.
- Many refugees arrive with trauma, uncertainty about duration and destination, and immediate unplanned accommodation and basic needs.

### Integration, labor market access, and human capital
- An unusually decisive and coordinated response by the European Union has allowed Ukrainian refugees to:
  - move freely in the European Union to access jobs; and
  - have their children allowed in schools.
- Integration policies can turn refugees from a cost into an investment and an asset.
- If refugees access the labor market and receive early support (job search assistance, language training), studies show they become productive assets by the second, third, fourth years, generating income much larger than initial costs.
- There are labor shortages in sectors such as personal assistance, hospitality, and food industries where refugees can be matched to jobs.
- Some policies (example cited: Denmark in the last five to six years) match refugees with sectors experiencing hiring shortages, increasing job-finding probabilities and minimizing competition with natives.
- Immigrants tend to do somewhat different types of jobs than natives, reducing direct competition and stimulating local economies by allowing companies to hire, grow, and benefit from refugee spending.

### Risks of insufficient investment
- Not investing early and with policy support risks:
  - refugees remaining at the margin of employment;
  - harder long-run integration;
  - increased long-run costs in terms of unemployment, lower employability, higher probability of marginalization, of crime, of addiction.
- The difference between investing early and not investing could be large in the long run for those who stay.

### Post-war scenarios for Ukraine and diaspora effects
- Scenario 1: War ends and Ukraine maintains a level of independence and economic activity that encourages return migration. Time abroad may be beneficial through trade, investment, higher skills, and entrepreneurship.
- Scenario 2: War lasts a long time and many will not return; split families will reunify in the country where migrants are, intensifying the drain.
- Professionals continuing to leave would generate brain drain; the diaspora could become an asset if they return under favorable conditions or deepen the drain if conditions remain adverse.

### Effects on Russia’s human capital
- Russia entered the war with existing brain drain and flight following the collapse of the Soviet Union and continuing into the early 2010s.
- Hundreds of thousands of Russians reportedly want to leave; those most likely to leave include engineers, mathematicians, scientists, and regime-averse critical voices.
- Loss of skilled and critical populations is very worrying and could be very damaging to Russia’s economy in the longer term.

*Source: Interview with Giovanni Peri, Finance & Development, June 2022.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2022/june/cafe-economics.pdf_