Here is the full release from the Ifo Institute (emphasis in bold andcomments in italics are mine):
“Ifo Institute Expects Refugees to Cost Ten Billion Euros
Munich, 22 September – If a total of 800,000 asylum-seekers do indeed come to Germany this year, as forecast by the German Federal Ministry of the Interior, it would cost the state around ten billion euros. This figure does not take into consideration family members joining the refugees or any educational measures; and is therefore a conservative estimate. [here is a useful, albeit dated, link on family reunification framework in Germany showing significant potential impact. More current data is covered here. In addition, while educational expenditures can be significant, part of the costs will be carried through apprenticeships and training schemes that are covered by employers and that involve productive work, contributing to value added in the German economy.] The qualification structure of immigrants from the crisis-afflicted states of Syria, Iraq, Nigeria and Afghanistan is probably poor. According to data from the World Bank, the illiteracy rate even among the 14-24 year old age group is 4 percent, 18 percent, 34 percent and 53 percent in these countries respectively. Even in the most developed of these countries (Syria) only 6 percent of the population has a university degree, which is not equivalent to a German diploma in many cases. Although refugees tend to be male and younger than the demographic average age, one thing is still clear: they are poorly prepared for the German labour market. In addition to language courses, Germany will also need to invest in training, which will generate extra costs. [We do not know exact quality of education and skills attained by the refugees, but applying average population parameters in this case can be fraught with some problems. For example, refugees coming through trafficking channels are required to pay up-front fees that are substantial in size, relative to average incomes. This means that there can be a strong selection bias in terms of refugees who reach Europe, compared to the average population in the country of origin – biases that tend to select more educated / better skilled and more financially enabled migrants. If so, their literacy rates and educational attainment status can be well above averages. In addition, undergoing a refugee journey implies very significant hardship, that is most likely known (at least partially) prior to the journey start. This can imply that refugees arriving into Europe may have stronger aptitude to succeed in integrating into new host society than those who remain behind. These biases are relatively well known in the literature on migrants flows in large scale migrations in the past.]
This post was published at True Economics on September 22, 2015.