What are the Economic Benefits of Refugees? | LIRS
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What are the Economic Benefits of Refugees and How do they Grow the Economy?

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Since the passage of the Refugee Act of 1980, which established the refugee resettlement process, more than 3.1 million people have found safety and a sense of home in the United States. Welcoming and supporting refugees in any country will come with initial costs to cover vitally important social services in order to position them for successful integration. While some studies show that resettling refugees in the U.S. can cost up to $15,000 per person, they also indicate that the long-term economic benefits of admitting refugees far outweigh these initial costs. 

While there are compelling moral reasons for welcoming refugees, this article will explore how these newcomers are also an investment in the economic well-being of the nations that embrace them.

What Are the Economic Advantages and Disadvantages of Refugees?

Here’s a snapshot of the pros and cons of accepting refugees in any country:

Pros

  1. Refugees bring productivity to their host countries, where they are integrated across various communities.
  2. They help enrich their local communities, creating a cultural diversity within the local population and helping nurture understanding and appreciation for social diversity.
  3. Years after their settlement, refugees continue to stimulate the economy, often boosting economic activity and increasing wages.
  4. They also complement the job market in the cities and states where they settle, boasting high rates of entrepreneurship and creating jobs.

Cons

  1. There is an initial cost incurred by the host country, which in the U.S. context is usually financed through public-private partnership. 
  2. While no fault of those displaced from their homes, the idea of accepting refugees is often a politicized topic, which may lead to resentment among certain subsections of the local population.

These issues, along with how refugees affect the economy, will be discussed in greater detail below. 

How Refugees Affect The Economy

Understanding refugees’ economic impact is important to any nation that receives them. There is an initial cost to cover basic necessities and services to those starting over in a new country, such as housing, career navigation, language classes, and healthcare. 

After this initial investment, however, the host country receives far greater economic benefits from these refugees. As they find their footing, refugees contribute significant tax revenue, stimulate the economy, raise productivity, improve local worker wages, boost innovation, and often generate international trade because of their connections to various countries.

Economic Costs and Considerations of Refugees

The cost of resettling a refugee can number in the thousands of dollars over the course of the first several months. However, a comprehensive 2017 U.S. government study shows that refugee contributions far exceed the initial cost. For example, from 2005 – 2014, the federal government spent approximately $206 billion on refugees – and yet, over the same period, refugees contributed more than $269 billion in tax revenue to federal, state, and local entities. That represents a net positive economic tax contribution of $63 billion.

Research also shows that refugees boast high rates of entrepreneurship, outshining even that of other immigrants and U.S.-born citizens. The United States was home to more than 180,000 refugee entrepreneurs in 2015. That means that 13% of refugees were entrepreneurs in 2015, compared to just 11.5% of non-refugee immigrants and 9% percent of the U.S.-born population. The businesses of refugees also generated $4.6 billion in business income that year.

From a labor standpoint, refugees step up to fill jobs in key industries like the agricultural and service sectors. Many worked through the pandemic, particularly in meatpacking facilities, risking their own health to make sure Americans had food on their table. Additionally, refugees tend to contribute to other particularly vital sectors, like manufacturing, health care, retail, transportation, and education.

Economic Benefits of Refugees

While we have touched on the $63 billion net positive tax contributions of refugees over a period of 10 years, the gains aren’t just observed in the US alone. Other countries across the world also report an increase in their gross domestic product (GDP) and the country’s median income. Many refugees have technical skills and entrepreneurial spirit that benefits the nation they transition to in the next stage of their lives.

Here, we outline additional economic benefits of refugees:

  • They bring unique trade knowledge and skill sets

Every country has something that makes its people unique. Refugees bring with them exceptional skills like culinary arts, trade, and technical skills that will help improve the overall abilities of the local labor force. These skills can be shared and help boost the country’s economy.

For example, when LIRS resettled more than 11,000 Afghans beginning in the Summer of 2021, we turned to former and newly-arrived Afghan refugees to staff our new resettlement office in Northern Virginia. Watch the video about our incredible team and their unique skills and experience.

  • They complement the job market.

It’s a common misconception that refugees tend to take away jobs from the local populace. In reality, a U.S. State Department report shows that refugees actually fill gaps in the country’s job market. Some of the top industries they tend to work in include manufacturing, health care, retail, tourism, transportation, and education, among others. This is critical as countries grapple with labor shortages – as of January 2022, there were 11.3 million job openings in the U.S.

Learn more about our career mentoring program for refugee youth.

  • They stimulate the country’s economy.

An increase in economic activity is one of the reasons why countries take in refugees. In countries with an aging workforce, these refugees help balance the age gaps and cover the jobs that need to be filled. In addition, they pay taxes, establish small and medium enterprises and stimulate the economy.

  • They enrich the local culture.

Studies by the International Institute in St. Louis show that refugees help improve cross-cultural understanding. It helps locals appreciate cultural diversity and see the shared values and beliefs in different cultures. 

  • They increase local productivity.

By stimulating the job market and eventually starting new enterprises in the years after their integration, refugees tend to increase productivity. Experts estimate that when refugees start at least a thousand businesses, these enterprises can potentially generate up to $100 million each year, thus benefiting their host countries. 

So how do refugees grow the economy? These figures provide some valuable insights.

USA Refugee Employment Statistics

Around 77% of refugees that enter into the U.S. are of working age. Compare that to the U.S.-born population, which only has 49.7% in working age. Back in 2015, refugee families contributed as much as $77.2 billion in household income, a notable refugee employment statistic for the U.S.

In the same year, over 181,000 refugee entrepreneurs generated $4.6 billion in business income. These businesses provide jobs, goods, and services for thousands of Americans, both foreign and native-born.

One compelling example of refugees revitalizing towns and labor forces can be found in Utica, New York. After decades of decline, the city lost a third of its population when its factories closed. But Utica is growing again thanks to its embrace of refugees, who now make up one out of every four residents.

How Do Refugees Grow the Economy?

As a whole, accepting refugees and helping them build a new life in safety will come with initial costs. However, in the long term, refugees tend to grow the host country’s economy. These benefits provide compelling incentives for policy makers to welcome these newcomers, not only for humanitarian reasons, but also for their significant long-term economic benefits.

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