If properly integrated, Ukrainian migrants can bring economic benefits to their host country
IN AN INTERVIEW Along with F&D’s Bruce Edwards, economist Giovanni Peri argues that refugees from Ukraine can be a boon of human capital for host countries like Poland, Romania, Moldova and Hungary. He also suggests that the war further undermines Russia’s human capital. Peri, originally from Italy, is a professor of economics at the University of California, Davis and director of its Global Migration Center. He has spent 15 years studying the economics of migration, which he sees as an important driver of change, evolution and growth.
F&D: At this point, more than 4.5 million people have fled the war in Ukraine. Can neighboring countries afford to host all these people?
PERI: The capacity of European countries to deal with this type of emergency will certainly be tested. Poland, Romania, Moldova, Hungary – the closest countries – receive at least 3 million of the 4.5 million and they could be put to the test. There is a potentially significant short-term cost.
F&D: At least some of the past migration flows to Europe were economic migrants. How does that compare to these Ukrainian refugees?
PERI: A refugee leaves in an emergency with much less planning. At first, they will need accommodations that they have not planned for and they will have basic needs that economic migrants normally plan ahead and have covered. A second important difference is that they come from trauma, which could affect their physical and mental health in the short term. Third, there is a large amount of uncertainty. They don’t know how long the war will last. They do not know their final destination. And finally, the refugees suddenly arrive in relatively large groups.
F&D: Much of your work has focused on the economic drivers of migration. An important factor is the salary. Was this happening in Ukraine to a large extent before the war?
PERI: There had certainly been a significant migration of Ukrainians. In Europe, the largest numbers are in Poland then in Germany, Italy and France. In Poland, we are talking about more than a million Ukrainians who have migrated. The numbers in Germany, Italy, France were in the hundreds of thousands. There is in fact a large diaspora of Ukrainians in Canada and the United States, over one million. Especially in Italy and France and partly in Germany there is a very high migration of women, sometimes 70%. They have worked largely in the hotel industry, assistance to the elderly and disabled, and personal service sectors which employ a large number of women.
F&D: Do host nations simply provide shelter while the war unfolds? Or do they help refugees integrate?
PERI: One remarkable thing about this crisis is the very decisive and coordinated response from the European Union. In the shorter term, housing and basic assistance are certainly a need that some of these countries will have to face. But immediately — and this is very unusual — Ukrainian refugees were allowed to move freely within the European Union to access jobs. Their children are admitted to schools. This approach is certainly to deal with the emergency in the short term, but also to learn the lessons of the past and to recognize the importance of the integration of refugees from an economic point of view. This then transforms refugees from a cost into an investment, into an asset. Many Ukrainian refugees are extremely uncertain about their future and unwilling to go too far. But countries like Germany, France, Italy, Switzerland are beginning to encourage refugees to come to these countries. I think that’s encouraging. And as long-term economists believe, this could be an interesting approach to integrating refugees.
F&D: What are the fiscal implications of supporting refugees at this level? There is also a political aspect: a public perception that immigrants represent a burden on public finances.
PERI: In the short term, there will be costs. It’s not super easy to quantify them, but for the European Union, refugees can have a cost of $8,000 to $10,000 per person in the first year in terms of housing and support. It’s not trivial. However, all the studies show that in the second, third, fourth year, especially if refugees enter the labor market, especially if in the first year, they have also been accompanied and accompanied in certain policies to find a job, learn the language — they become productive assets. They can be employed and the income they generate is far greater than the cost. It is possible to invest in the human capital of refugees. Many economists argue that these refugees are an opportunity for several European countries because they arrive at a time when there is a significant shortage of workers for many jobs they would accept. For example, in personal assistance, in hospitality, in food industries – the right policies can match some of these refugees to these jobs and turn the short-term cost into a return for the host economy – very soon, in fact.
F&D: What happens if the investment is not made to help the refugees?
PERI: The difference between investing early and with this kind of political support and not investing could be significant in the long run. Many of these people could remain on the margins of employment and find it more difficult to integrate; their children’s future could be much more risky. It is therefore clear that for those who remain, there will be a long-term cost without this investment – in terms of unemployment, lower employability, even higher likelihood of marginalization, crime, dependency.
F&D: Is this likely to increase competition for jobs and even drive down wages?
PERI: It will depend on how many of these people are actually looking for a job, but also on the types of jobs they hold. There is a way that this refugee contribution can really be more positive than negative. Some very interesting policies for refugees have been adopted, for example in Denmark, in the last five to six years: one of the services links refugees to sectors experiencing a shortage of employment. This would increase the likelihood of them finding a job and minimize competition, as these jobs clearly don’t have people available to fill them.
Immigrants tend to do somewhat different types of jobs than natives. The competition with the natives is therefore not so strong. Instead, they have a stimulating effect at the local level, allowing businesses to hire, to grow. They spend and grow the economy.
F&D: The war will end at some point and Ukraine will have to rebuild the country. What will it mean to have lost so many people to migration if they decide to stay in these host countries?
PERI: One scenario is that the war ends and Ukraine maintains a level of independence, a level of economic activity that will encourage many people to return. The time they have spent abroad may not be a bad thing. They can help their local economy through trade, investment, skills upgrading and entrepreneurship.
But there’s also a scenario where the war lasts a long time and people won’t come back. In this case, the flight of people would be even greater because separated families will reunite in the country where their migrants are.
The brains, the professionals will continue to leave. This will clearly generate a brain drain. This diaspora could be an asset if they return and the situation is good, or it could generate even more of a drain if things continue to go wrong in Ukraine.
F&D: I assume that Russia will suffer the same consequences. Will Russia also have lost valuable human capital at the end of all this?
PERI: Russia is already entering this war with a remarkable brain drain and drain. Everyone knows that when the Soviet Union collapsed, many scientists and engineers left for the West, but fewer know that this brain drain has continued. In the early 2010s, when Russia invaded Crimea and became a particularly strong authoritarian state, many Russians left. And now we learn that hundreds of thousands of Russians want to leave.
This is very worrying for Russia: on the one hand, those who are most likely to leave are those whose skills can be easily employed in the West: the engineer, the mathematician, the scientist. These people are essential to building an economy. Also likely to leave are those who are particularly opposed to the regime, who would be the critical voices. In the longer term, this war could be very detrimental to their economy.
F&D: How did you specialize in migration?
PERI: When I finished college, I was in Italy, and you had to do either military service or civic service. I chose to do civic service and was sent to a center for refugees. It was the 90s, so Italy was getting people from Eastern Europe. I found the stories of these people and their personalities incredibly fascinating. I was also struck by the disconnect, how alarmed the media was at this invasion and, on the contrary, what interesting, valuable and incredible assets these people were, both personally and economically. Then I myself came to the United States as a migrant to do my doctorate, and that only reinforced my idea that migration was such an important driver of change, evolution and growth.
The war in Ukraine has triggered one of the biggest refugee crises of modern times. So, can Europe afford to welcome the millions of people crossing its borders?
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.