Early Access to the Labour Market is Key for Refugee Integration

Employment bans across Europe and their long-lasting consequences

Part of the difficulties refugees face trying to integrate into host societies is inherently associated with the consequences of the traumas they suffered and with the forced and unplanned nature of their migration. Host countries can nevertheless affect the speed and quality of refugee integration by implementing adequate and effective asylum policies.  Determining which specific features of asylum legislation can accelerate or hinder refugee integration lies at the very core of the current policy discussion.

A common and highly debated asylum policy is to impose temporary employment bans that prevent asylum seekers from working during the application process. Unless the duration is statutorily limited, these bans are often lifted only after the applicant is granted refugee status. In Europe, though such employment ban policies have become less strict over time, most countries still implement some form of temporary ban for asylum seekers.

In a recent paper, we assess the medium to long-term effects of employment bans on the labour market outcomes of refugees. We do so by gathering almost 30 years of data on the presence and length of employment bans across 19 European countries and combining them with cross-sectional information on refugees who arrived from 1985 onwards from the EU Labour force Survey. Our empirical approach exploits the geographical and temporal variation in employment bans generated by the staggered introduction or removal of bans, together with frequent changes of the bans’ durations. These policy changes deliver variation in ban exposure both across refugee entry cohorts within the same destination country and within entry cohorts across destination countries. Using this empirical approach, we derive two major findings.

First, the detrimental effects of the ban are large. Being banned from employment at entry reduces refugee employment probability in the medium run by 8.9 percentage points, or 15.2 percent: this negative effect is explained primarily by a 9.2 percentage point lower labour market participation than by a higher unemployment probability (see blue diamonds in Figure 1). To get an idea of the quantitative relevance of the impact, we calculate it is equivalent to about a 4-year delay in the integration process. Our second key result is that the negative effects of employment bans are highly persistent, with employment gaps remaining sizeable up to 10 years post arrival for refugees exposed to bans, despite growing smaller over time.

To ensure that our results can be interpreted as causal, we present several tests in the paper. Among them is a placebo analysis on a sample of non-refugee migrants that closely resemble the refugees but were not subject to the employment ban, which delivers a precisely estimated zero effect (green dots in Figure 1).

To identify which mechanisms may be at work, we first document that the detrimental effects of employment restrictions concentrate among less-educated refugees, suggesting that bans mainly harm migrants whose employability in host countries is already relatively limited. Then, by considering a broader range of outcomes, we observe that banned refugees also experience lower occupational quality (lower likelihood of employment in a high skilled occupation and higher probability to have a temporary job), report lower proficiency in the host country language, and have more health issues as well as a greater likelihood of receiving benefits.

Figure 1: Effect of employment bans on labour market outcomes

What is the cost for Europe of employment bans?

Employment bans on asylum seekers, even when they are meant to be temporary, have long-lasting effects on the labour market integration of refugees. This is not only problematic for refugees’ welfare, but it also translates into a sizable economic loss for host countries. We use our estimates to quantify the cost of imposing employment bans on asylum seekers who arrived in Europe during the crisis years of 2015−2016 in terms of both potential output loss for the EU economy and forgone earnings for the asylum seekers who remained as refugees. We estimate that the ban imposed on over 1 million new refugees may have resulted in an overall output loss of EUR 37.6 billion over eight years, equivalent to about EUR 4,100 per banned refugee per year.

Policy Implications

Evidence from past refugee waves suggests that the socio-economic integration of forced migrants is often difficult and slow, partly because of difficulties inherent to the forced, unplanned and traumatic nature of refugee migration. Yet what happens after arrival is at least partially in the hands of the host government. Asylum policies might indeed produce long-lasting effects on the assimilation trajectory of refugees. Whereas allowing asylum seekers some months to recover physically and psychologically may benefit their long-term integration, forcing them out of the labour market seems an ill-conceived approach. Granting immediate labour market access to those willing to search for a job – while offering income support to those unable to do so – seems a far more preferable approach.  Removing barriers rather than adding hurdles is the way to go when integrating refugees in host countries.

In 2015, at the peak of the previous “refugee crisis” in Europe, only four European countries (Greece, Norway, Portugal and Sweden) allowed asylum seekers immediate access to their labour markets, with most other countries imposing bans of between 2 and 12 months, or even an indefinite restriction in the case of Ireland and Lithuania. Luckily, the EU approach on the matter has changed in response to the ongoing crisis in Ukraine. On the 3^rd of March, the European Commission has adopted a proposal to activate the Temporary Protection Directive to offer assistance to Ukrainian citizens (and third-country nationals legally residing in Ukraine) who fled the country after the Russian invasion. Granting temporary protection status will provide immediate protection and rights – including the right to labour market access – to all eligible individuals, avoiding the congestion of asylum systems of the Member States and damaging delays for the asylum seekers.

To learn more, please read the original research paper: Francesco Fasani, Tommaso Frattini, Luigi Minale. "Lift the Ban? Initial Employment Restrictions and Refugee Labour Market Outcomes", Journal of the European Economic Association, Volume 19, Issue 5, October 2021, Pages 2803–2854.