Net economic benefits from refugees?

I noticed an odd story in the Dominion-Post this morning.  In the hard copy it is headed “Economic benefits to compassion”, while on Stuff it goes under the title “Refugees are good for NZ’s economy, say economists”.  The first heading seems like a category error, while the second is almost certainly wrong.

Let’s take the category error.  Surely we exercise compassion for its own sake, not looking out for what is in it for us?     We might, reasonably, count the costs and consider the risks.  In some sense, no doubt, the Good Samaritan did.   But if an act –  personally or nationally –  is about compassion, it is somewhat sullied by attempting to tot up what is in it for us.  Perhaps some see a refugee programme as an “economic lever” too, but I doubt there are many.

An economist then suggests that we should think of the money spent on resettling refugees as an investment.  But he lost me when he started talking about the economic benefits of other areas of government spending such as sport.  Does anyone really think that governments (central and local) spending money on the Rugby World Cup had a net economic benefit?  Or the America’s Cup?   The absence of economic benefits isn’t necessarily a reason not to spend the money:  there is nothing wrong with a party from time to time, so long as we recognise that it is a party, not an investment opportunity.

Perhaps even more egregious, a refugee advocate compares the cost of new refugees with the new flag proposal, noting that people have talked of billions of dollars of possible benefits from a new flag and that we should, similarly, be thinking about the opportunities the refugees create.  In fact, only the Prime Minister has mentioned such benefits, and no one else seems to agree with him.  But again, to change the flag, or not, shouldn’t be primarily a matter of economic costs and benefits.

But if we do want to do the economic calculations, how likely is it that new Syrian refugees will prove to be of net economic benefit to New Zealand (ie improving economic outcomes for New Zealanders)?  Professor Paul Spoonley is confident, but it is not clear what he bases his confidence on.    He notes that the average migrant to New Zealand is estimated to have made a positive fiscal contribution, but:

  • That is an average across all migrants, and everyone recognises that there are far higher upfront costs for refugees than for most migrants
  • The one careful study on fiscal contributions was a snapshot done a decade ago, and not looking at the lifetime fiscal costs and benefits.
  • That study was also done when the government was running very large surpluses (ie taxes on everyone were higher than they needed to be)
  • Fiscal costs/benefits are not the same as economic costs/benefits.

Spoonley recognises that refugees start at a disadvantage, but still believes they are “likely to make a net positive contribution”, albeit over a longer timeframe.

But reading the article reminded me of a table I had seen in the immigration papers MBIE released to me.  For those granted residence approvals between April 2001 and March 2009 it showed the proportion (of those 18 and over) who were on welfare benefits, and the proportion earnings wages and salaries as at 31 March 2011.  These new residents had, on average, been in New Zealand  for six years by this time.

For those who came under the skilled/business streams (about half the total), only 1.5 per cent were on welfare benefits and 71.8 per cent were earnings wages and salaries.  Even that latter number seemed surprisingly low, but let’s treat it as some sort of benchmark for now.

The table does not show the figures separately for refugees.  But it does report the numbers for those under the combined “International/humanitarian” stream, which includes 750 refugees per annum, and around 1500 people under the Samoan quota and Pacific Access category.  These latter are people who do not meet our skilled migration requirements, but who all come from countries where English is widely used (Samoa, Kiribati, Tonga).  It is a lot easier for them to adjust than for refugees from most countries.

And yet for the combined “international/humanitarian” stream, after six years in New Zealand  only 50.9 per cent (of those 18 and over) were earnings wages and salaries and 25 per cent were receiving welfare benefits.   I think it is reasonable to presume that figures will have been worse (perhaps materially worse) for the refugee quota alone.   Why would the Syrian refugees be different?.

Between coming from a non-English speaking environment, from a country whose economic institutions have been moribund for decades, and which had managed no convergence with the advanced world over the 50 years before the conflict, the chances are simply not good that these refugees, as a group, will end up making a net economic contribution to New Zealand.  And it is most unlikely that they will even make a positive fiscal cost.

None of which is an argument for not taking refugees.  Doing so is mainly a humanitarian choice, not something we do because we benefit from doing so.  I don’t have a strong view on how many refugees New Zealand should take [1], but I don’t think possible economic benefits to us should be a factor one way or the other.

UPDATE: A commenter correctly notes that we might reasonably consider the most effective way in which to provide assistance, and “most effective” would include a whole variety of possible costs.  In principle, benefits to us may reduce the net costs of some forms of assistance.  But my wider point holds, that the decision to assist shouldn’t be driven materially by any expected benefits to us.

[1]  Subsequent to writing this post, I have written a post on refugees and migrants on my Christian blog.

11 thoughts on “Net economic benefits from refugees?

  1. I’m puzzled by this:

    “I don’t think possible economic benefits to us should be a factor one way or the other.”

    If the decision is on humanitarian grounds, even then we should take account of the *net* cost of accepting refugees. It might turn out that accepting refugees, once taking into account *net* costs, could be a far more cost-effective humanitarian programme than foreign aid. Or, the opposite could be true.

    The only way to know this is to try to assess the possible economic benefits to us, surely?

    (I think the real problem is that the articles reflect the fact that even the economists quoted have not thought about the issue seriously, and are simply saying what they hope to be true).

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  2. I note that I do not agree with the headline in the piece where I was quoted as I don’t think there’s an evidence base to support it at this point. I do like approaches like the ones used in Canada where civil society members can commit to sponsoring a refugee.

    The full notes I sent Richard are up on my blog.

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  3. Hi Michael, thanks for your thoughts.
    I think the point Shamubeel and Murdoch were making is that people do indeed try to argue that events such as the RWC have a net positive impact.
    Usually they’ll spend even more taxpayer cash on consultancy reports invariably focused on intangibles.
    So they are merely exposing the double standard in the public framing of this discretionary spending.
    In the online version of the story, Eric makes good points about where money could be best spent if our aim is simply ‘doing good’. I’m not sure if it made it to print.
    Please forgive the headline which is not mine!
    Best regards,
    Richard

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  4. Given that we are talking about 4 million refugees and growing. The only realistic scenario is to fix the problem at source. The world needs to get realistic, start talking peace with the Assad regime rather than continuing to arm/support the rebels. Taking a few extra refugees is not going to solve the rising humanitarian issue. Weather we take 1,000 or 10,000 or even 100,000 refugees does not solve the humanitarian crises. All it does is help sooth our guilt and makes us feel better.

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  5. The Abbott government is talking about 12,000 refugees at about NZD65k per person taxpayer cost in the first 4 years. I am not sure how they intend to spend all that money, but if true it would seem to be less effective than other forms of altruism. Of course with all the public outcry over the photo of that poor little boy you can hardly blame them for feeling the need to do something.

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