22/8/17: Focus Economics on Refugees Integration Challenge

Focus Economics posted a neat and timely blog post on the topic of potential economic impacts of mass forced migration that has been sweeping across Europe in recent years, driven by the civil war in Syria and botched 'democratization' efforts in Iraq and Afghanistan, as well as the less-discussed dismantling of Libya.

The link to the post is here: http://www.focus-economics.com/blog/impact-of-refugees-on-european-economies.

In my opinion, the key here is the following issues:

"In the longer term, the picture becomes far murkier. This isn’t just because little is known about the current cohort of refugees, such as their average level of education or how long they will remain in their host countries. It is also because the long-term economic impact of refugees rests largely on how successful countries are at weaving them into the economic fabric of their societies."

Yes, long term viability of all positive assessments of the current migration crisis is questionable. And the problem rests on both sides, the migrants' quality of human capital, and the host countries quality of labor markets.

End result, so far, is that history offers only ominous assessments of the success rates that can be achieved in integrating refugees into active members in the host societies. "If past experience is anything to go by, the full economic integration of refugees will prove an arduous task. Studies from many developed countries have repeatedly shown that refugees tend to earn less, have worse employment prospects and hold lower occupational status than native workers or economic migrants. Even in Sweden, a country with a relatively strong track record of integrating refugees, a study of those arriving between 1997 and 2010 found that fewer than 20% had found employment after one year. Ten years down the line, only between 50% and 60% were working, significantly below the corresponding figure for Swedish natives."

This is not to say that attempts to integrate refugees are a waste of scarce resources. Quite to the contrary, both humanitarian and socio-economic dimensions of the current crisis suggest that we should be doing more (and doing it better) to develop policies and institutions to provide refugees with more open and more efficient access to work-related training, language skills acquisition and general education, including avenues to complete unfinished degrees and pursue higher degrees. As the  Focus Economics post stresses, positive incentives and pro-active systems for engagement should be put forward. One question, however, remains unasked and unanswered, as is common with this analysis: what should be done to identify early and correct any negative choices that some of the refugees might make following their arrival in the host societies. While we have an idea as to how we can help those who want to integrate (note: having an idea is yet to translate into deploying actual policies), we don't really have a good understanding as to how we can prevent adverse choices.

05/09/2011: Euro area governance indicators: evolution or decline?

In recent years, the EU has embarked on a set of institutional reforms and unveiled a number of institutional platforms for reforming the core principles of governance, transparency and accountability. These reforms are rooted in 2000-2005 processes that accompanied direct evolution of the Euro area and the EU enlargement.

In this light, it would be instructive to take a closer look at the dynamics of EU governance evolution, focusing on the specifically more integrated group of countries – the Euro area. Using data from the World Bank Governance Indicators for 1996-2009 (latest available) we can draw some interesting conclusions on the topic.

Before we begin, however, note that WB data is lagged in some cases up to 2 years. In addition, many variables are "sticky" - in a sense that they do not change dramatically year on year as institutional reforms take time to feed through to actual delivery on metrics. Hence, the period from 1996 through 2002 is really covering a period of data closer to 1985 through 2001, on average. Thus, I separate the data into 2 periods: the period prior to the Euro area creation (1996-2002) and post Euro area creation (2003-2009). In addition, note the following two facts: that help support this division:

1. I tested the results for the period split 1996-2001 against 2002-2009, for split 1996-2000 vs 2001-2009 and for split 1996-2003 vs 2004-2009. All came back with very similar, qualitatively, results.
2. A number of Euro area states were in a mode of EU accession prior to 2004, thus splitting the sample at 2002-2003 makes some logical sense to capture better the average effects of governance reforms coincident with the euro period.

Now to the results: charts below plot changes across two periods for the countries members of the euro area, plus euro area as whole (simple average), the new accession states and the old (core) euro area member states. The plots capture all 6 core components of the World Bank Governance Indicators in terms of change in each indicator score (higher score implies better ranking in the league tables).

So to summarize - a table

What the above clearly shows is that Governance scores improvements across the euro area were driven primarily by improvements in the Accession States. In 4 out of 6 criteria, Core euro area member states have, on average, posted deterioration in the scores. Thus, overall euro area scores improved in 3 out of 6 criteria, remained unchanged in 2 criteria and deteriorated in 1 criteria.

Pretty poor performance for the group of states that set out as their core agenda to achieve transparency, good governance, government effectiveness, etc. And even worse for the idea that more integration yields better policy outcomes. Clearly, in the case of governance at least, it does not.