The Economic and Fiscal Effects of Granting Refugees Formal Labor Market Access

By Michael Clemens, Cindy Huang, and Jimmy Graham

Many of the world’s 25 million refugees spend years unable to provide for themselves or contribute to their host economies because they are legally barred from working or owning businesses. Granting refugees formal labor market access unlocks a range of benefits—for refugees, hosts, and global businesses.

For refugees, formal labor market access and the freedom to leave camps would lead to:

  • Higher rates of employment, as they would be able to search for work outside camps
  • Higher incomes, as they would be able to work in higher-paying formal jobs and better apply their skills
  • More productive refugee businesses, as they would no longer have to remain small to avoid detection and could take advantage of services that facilitate growth
  • Increased investment in skills and education, given a greater likelihood of using their skills
  • Greater workplace protections, as they could benefit from labor laws
  • A lower risk of deportation or harassment for working without the right to do so
  • A lower prevalence of prostitution, child marriage, and child labor — activities that some refugees engage in as a result of economic hardship

For host communities, providing refugees with formal labor market access and freedom to leave camps would lead to:

  • Less competition in the informal sector, as some refugees would shift to formal work. This could lead to employment opportunities for low-skilled hosts in the informal sector
  • More productive formal businesses, as refugees could fill labor shortages and expand the labor supply
  • More formal employment opportunities as the result of the increase in productivity
  • Hosts upgrading to higher-paying positions over the medium term. With refugees filling manual-intensive jobs, hosts would be encouraged to “upskill” and fill more skill-intensive jobs
  • A fiscal stimulus, as refugees would earn more and thus spend more in the economy
  • An increase in tax revenues, as refugees would earn/spend more and thus pay more in taxes

Read the full paper to learn more about the potential benefits associated with giving refugees the right to work, along with key policy recommendations that amplify benefits while mitigating potential costs.