Why are so few refugees finding work?

Where there are jobs there are few refugees, and where there are refugees there are few jobs.

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For this weekend’s newsletter I set about trying to understand one of the most emotionally charged questions in German today: why are so few refugees finding work?

For the far-Right, the answer is easy. The people arriving here are just scroungers trying to leech off the German welfare system. In their worldview, these people will never contribute to German society and should be deported en masse.

The notion that many migrants will never work unless they are forced to is starting to catch on. The Association of German Municipalities has called for refugees to be put to work doing manual labour. “If you are healthy and not disabled, you have to work," the association’s head, Reinhard Sager, told Bild Zeitung.

One CDU-run municipality in Thuringia is now putting that into practice. The mayor of Saale-Orla, who recently won a close-run election against the Alternative for Germany (AfD), confirmed that he will put refugees to work cleaning the streets for 80 cents an hour.

Those decisions have led to horrified reactions from NGOs, who’ve accused municipalities of advocating forced labour.

Putting these extreme reactions to one side, there is a serious issue here that needs addressing. Roughly half of working age refugees who arrived in Germany in 2015 are still to find a job. And Ukrainians, despite being given immediate access to the job market, are doing even worse. Less than one in five of them have found work.

It’s not as if there is a lack of opportunities out there. The latest official statistics show that there are 1.7 million unfilled positions across the country. That is about double the figure of a decade ago and reflects the fact that far too few young Germans are entering the job market to replace retirees.

As one baker who is desperate for workers told Der Spiegel: “Bring me two dozen people who want to work and I'll hire them. It doesn’t matter where they’re from.”

This should be a perfect opportunity for refugees. So what is going wrong?

Firstly, the uncomfortable truth. There probably is something in the claim that some people don’t feel the need to work. Anecdotally, this appears to be most pertinent to Ukrainians, who were given immediate access to the Bürgergeld welfare payment.

Depending on how many children one has, German welfare payments can quickly total up to over €2,000 a month. Employers have complained to the German press that Ukrainian women aren’t motivated to work and are waiting for the war to end so that they can return home.

Refugees from war zones in the Middle East and beyond have to make do with smaller payouts while they wait for their asylum case to be resolved. Even here, the state has started to put their money onto a voucher card so that they can’t transfer any money back home.

Employers looking to hire these people in their first months in Germany face a whole raft of bureaucracy. Migration authorities might grant them full asylum, might only consider them to be “tolerated,” or might reject their case entirely. Each instance has an effect on what type of work they are allowed to take up.

For those who do get full asylum, there are a whole bunch of obstacles to getting a job.

Many are simply unsuited to the German job market. It is estimated that a third of refugees don’t even have a secondary education; many can neither read nor write. Others have professional qualifications, it just takes a long time for German authorities to recognise them.

The government’s response has been to announce a “job turbo”. Back in October, Labour Minister Hubertus Heil said that he was “pulling on all levers” to ensure that refugees are linked up to the right employers. Essentially, this initiative means that refugees now have lots more meetings with the job centre. Heil will have to report to the Bundestag on how this programme is going by the end of this month.

The more I read into the problem though, the more I started to feel that something very obvious is missing from the public discussion: If you look at a map of Germany, there is an inverse correlation between refugees and job vacancies. The more refugees there are in a region, the less jobs there are - and vice versa.

Take Berlin for instance. The capital has one of the highest unemployment rates in the country, yet it is also taking in the most refugees. Around five percent of Berlin’s population is refugees. They are arriving into a job market that doesn’t need more labour: for every vacant job registered with Berlin’s employment bureau there are ten jobseekers.

It is a similar story in cities like Dortmund, Hannover and Bremen: all house lots of refugees, but have few jobs to offer them.

On the other hand, the parts of the country desperate for labour are taking in the fewest migrants. There are parts of Bavaria where the number of jobseekers is now almost even with the number of vacancies - yet hardly any refugees live there.

Why?

Partly, this is human nature. Birds of a feather flock together. Migrants move to places where they have family or where people speak their language. They think they can use these networks to find their first home and job.

What is astonishing though is the fact that the state is actually contributing to the problem.

When refugees arrive in Germany, they are distributed among the federal states according to something called the Königstein Key. This is a mechanism that has been used for decades to divvy up things like research funding. It is meant to fairly distribute the burden based on the tax intake and population of each state.

But, when it comes to dividing up refugees, the Königstein Key is totally counterproductive. That is because the Finanzausgleich - a subsidy that rich states pay to poor ones - is counted as a tax intake for the poorer states. This has the effect that refugees are distributed more or less according to each state’s population size.

The German Institute for Economic Research (DIW) has calculated that Bavaria would take in 20 percent more refugees if the Finanzausgleich were to be removed from the Königstein Key, while east German states would take in 20 percent fewer.

Economists are in agreement on the fact that this is making it much harder for refugees to find jobs, in particular jobs that they are trained for.

The left-leaning DIW has calculated that, for every additional percentage of unemployment a municipality has, the chance that a refugee finds work in a profession he is trained in drops by six percent. The conservative Ifo Institute has found that, for every additional percentage point of unemployment, the chance of a refugee finding a job drops by five percent.

Both institutes have called for refugees to be distributed according to the needs of the labour market. Such a reform would “benefit refugees, local employers and ultimately also the municipalities,” concludes DIW researcher Marvin Bürmann.

I would go further. It would counteract the establishment of so-called “parallel societies”, help tackle crime, and sow the first seeds of trust between ethnic groups.

The problem has been allowed to persist for too long. Just changing the Königstein Key won’t alter the fact that there are now hundreds of thousands of refugees living in parts of the country where they will struggle to find work.

The government should think about linking welfare payments to the job needs of individual districts. Ideally this would encourage people to move out of the inner cities of the north to smaller towns in the south where society needs them.