Refugee Crisis: Europe has no plan
Breaches of contract, solidarity and minimum wages

The flow of refugees is unabated, and in the EU Germany is still the preferred destination. It receives almost 40% of all refugees. Meanwhile, the burden of immigration leaves its mark. People, countries and policy reach their limits. Even countries with a “liberal“ refugee policy, such as Sweden, are in distress. They override “Schengen“ and close (temporarily) their borders. The political pressure from large parts of the population to sustainably curb the flow of refugees continues to build. There is a significant danger that the “welcoming culture“ will fall by the wayside. Xenophobic parties now have large followings, and tectonic shifting of the party structure is inevitable. The federal government now sees this as well, and is taking action, albeit somewhat reluctantly.

Protection, Schengen, and Dublin

All people worldwide should be free to choose where in the world they want to live. However, countries also have the right to select from among the people those who they are willing to take. There exists a conflict of objectives. From a liberal point of view there is nothing wrong with countries organizing “normal“ immigration based on criteria which they determine independently. Whoever meets these criteria may immigrate, and all others are turned away. However, things are different with the current influx of refugees. Most of the people come from regions where they were in fear for their lives. A smaller portion of them are pursued personally, but most come from areas where there is civil war. They are thereby entitled to protection against persecution in the countries of the EU.

The EU is not a country. The nation states still have a say in what occurs. Most of them have agreed with the Schengen Agreement that between their borders, free movement of persons shall prevail. To ensure that the security policy of all of these EU countries does not get out of control, it was also agreed that control of persons is to take place at the external borders of the EU. Thus, a settlement for refugees had to be found. In the Dublin Regulation, it was agreed that refugees are to be registered in the country where they first entered the EU. Only in this country is an application for asylum or for protection for civil war refugees possible, and at present the demand is particularly high in Greece and Italy.

The policy functioned tolerably, as long as the main flow of refugees arrived via the Mediterranean route into Europe. Italy managed, after a fashion. That changed when the refugees began primarily to take the way through the Balkans. Greece was neither willing nor in the position to effectively perform the duties assumed in the Dublin Regulation. When the refugees eventually ran aground en masse in Hungary, the German government in Berlin decided (once again) on breach of contract. It allowed the refugees to come to Germany and to apply regularly for asylum or subsidiary protection there. As virtually all Syrian refugees were offered the protection they desired, the stream of refugees into Germany spiraled out of control.

Costs, Distribution and Integration

The “modern“ mass migration presents Europe with three problems. First, the costs of adjustment are significant. This applies not only to the economic costs but also to those of social and political upheavals. The federal government is trying to alleviate the adjustment costs incurred by the flow of refugees. In doing so it is taking care to ensure that constitutional protection still applies. With the “Asylum Package I“ the attempt was made to stem the flow of refugees via an increase in safe countries of origin, reorganization of cash benefits into non-cash benefits, and regulations for more efficient deportation. It was not successful. The planned “Asylum Package II“ intends for incentives be reduced further. Registration centers, a more restrictive family reunification policy and more rigorous deportation rules are the core elements.

In the EU, Germany bears the main share of the burden of the refugee flows. In principle, however, these costs should be more or less “fairly“ distributed within the EU. This requires the otherwise much-vaunted European solidarity. Here, however, a second problem arises. Many EU member states are unwilling to adequately participate in managing the costs. Not all say it as plainly as Viktor Orbán, who sees himself only as an observer of the refugee situation. It is primarily the Eastern European countries who prefer to hitch a free ride on migration policy. The new Polish government has also made this preference quite clear. It refuses to support its share of the 160,000 refugees who are to be redistributed once within the EU in order to relieve Greece and Italy.

The experiences of traditional immigration countries show that integration is only successful when the people are quickly able to find employment. To achieve this, well-functioning labor markets and an incentive-compatible welfare state are necessary. This is the EU’s third problem. The persistent, high level of unemployment shows that the EU is far from having flexible labor markets. This is not only an issue of ailing institutions in the labor market which particularly favor insiders. It is also due to the fact that the welfare state still produces disincentives for the labor supply of unskilled labor. The flow of refugees not only costs us a large amount of money in the short term, but will also prove to be very costly in the long term without reform of the labor market and the welfare state.

Turkey, “Mini-Schengen“ and Minimum Wages

The EU is not succeeding in efficiently putting together the “Schengen-Dublin-Package“. The external borders can be made neither technically nor politically secure. Refugees will continue to flow into Europe. Germany could make it easier for itself. As nearly all refugees come from safe countries in Europe, they are not entitled to asylum or subsidiary protection. They could be refused entry. However, this can neither be justified from a humanitarian perspective, nor can it persevere politically. “Schengen“ would finally come to an end. The EU has hit upon the idea of outsourcing the costs of the flows of refugees. In exchange for political and financial concessions, Turkey in particular is intended to help seal the EU’s external borders. This will cost the EU dearly, both financially and politically.

Despite expanded regional on-site refugee camps and possible quotas in the EU, many refugees seeking protection will continue to come to Europe. Civil wars and climate change ensure replenishment of the flow. The distribution of the refugees in the EU remains on the agenda. Quotas are a red flag for some of the EU countries, and the EU has no plan for solving this problem. Jeroen Dijsselbloem has proposed a “Mini-Schengen“ for the willing. This would increase the incentive among the “objectors“ to take on some of the costs. In addition, Berlin is considering distributing the resources of the Structural Funds based on the countries’ acceptance of refugees. Finally, there is still the “Coase-Solution“: The “willing“ pay the “objectors“ so that the latter will take in more refugees.

Even if it were possible to solve the problem of refugee distribution in the EU, another difficulty remains. The refugees divided among the EU countries often have different country specific preferences. They want to go to a small number of countries, such as Germany or Sweden. If the borders of the EU remain open, they will migrate to these countries in spite of their original allocation elsewhere. This is a less of a (economic) problem when they migrate to the labor markets of the “desired countries“. Then they are not a burden on the immigration countries. A problem arises when they immigrate to the national welfare states. This could, however, be prevented if the individual claims on the welfare state could only be asserted in the country to which the refugees were assigned.

In order that the burden resulting from the flows of refugees doesn’t become too great for the EU, integration in Europe must be successful. Chances of this occurring are good if the refugees find work as quickly as possible. However, for this to occur, four conditions must be met: Bureaucratic obstacles, such as a waiting period to begin work or for a priority check, must be dismantled. Public investment in education and training programs must be increased in order to improve the often inadequate qualifications of the refugees. The minimum wage should be suspended for the refugees. Only then will most of them have any chance of finding employment. Finally, the unemployment benefit II must be redesigned so that the incentives to take up a regular job are strengthened.

Conclusion

The “modern“ mass migration into the EU is leading to a crucial test. The “Schengen-Dublin“ model no longer works. With the planned “Turkish valve“ the EU can at best temporarily buy itself some time. The massive influx of refugees cannot be stopped as long as the civil wars continue. Sooner or later the EU will introduce quotas. The dispute over country-specific quotas will divide Europe further. A “mini-Schengen“ will accelerate the process of a Europe of multiple speeds. The EU only has a realistic chance to avoid sinking into hostile dispute if it is willing to invest more strongly in human capital, keep goods and factor markets more open, and make the welfare state more incentive-compatible. Only then is there any chance at all of successful integration. This is, however, a prerequisite to prevent the EU from falling apart.

Hinweis: Das ist die englische Version des Blog-Beitrags „Flüchtlingskrise: Europa hat keinen Plan. Vertragsbrüche, Solidarität und Mindestlöhne“. Michael Labate hat den Beitrag übersetzt. Dafür herzlichen Dank!