Thought leader: Friedrich Schneider, professor of Economics

‘Refugees should work in the shadow economy’

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Published in Refugee Challenge by

One of the major recurring issues regarding refugees is integration; both the integration of refugees into society and vice versa. As a political and economic issue, this debate is one in need of a fresh point of view. In this post we take a look at the ideas posed by Friedrich Schneider, professor of Economics at the Johannes Kepler University of Linz.

By Laurens Peek

Shadow economy

Schneider’s idea is simple though unorthodox: allow (genuine) refugees to be employed in the ‘shadow economy’. The shadow economy, according to Schneider, ‘includes all market-based legal production of goods and services that are deliberately concealed from public authorities’ in order to avoid payments or having to meet set standards. As such, the shadow economy is not equal to the black market, the activities of which fit ‘classical crimes’.

In an interview with Dutch newspaper NRC, Schneider connects the notion of the shadow economy with the refugees coming to Europe. According to Schneider it is a good idea to let refugees be employed in the shadow economy. Contrary to what one would think, this would actually increase economic growth rather than decreasing it, since almost all of the money that refugees make in a host country is also spent there. Schneider calculates the following: when 50.000 refugees all work in the shadow economy for €400-, a month, €240.000.000 will be put back into the ‘real’ economy every year.

More benefits

Apart from the economic benefits, there is also a more qualitative effect of the speedy employment of refugees. Schneider claims that it would drastically increase the rate of integration as refugees would experience the culture of the host country on a daily basis. Furthermore, it could provide a cheap and efficient way to learn the language. Even the claim sometimes made by host communities that jobs are ‘taken over’ by refugees would only be a problem early on. The distortion of the labor market would straighten itself out, says Schneider.

 

Shadow economies as % of GDP; 2009. Source: Policy Research Working Paper 5356/ Shadow Economies All over the World, Friedrich Schneider, Andreas Buehn, Claudio E. Montenegro

Shadow economies as % of GDP; 2009. Source: Policy Research Working Paper 5356/ Shadow Economies All over the World, Friedrich Schneider, Andreas Buehn, Claudio E. Montenegro

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