IMF: States should allow refugees to be paid below minimum wage

EPA/ARMIN WEIGEL

Refugees walk in the snow at a police clearing station in Passau, Germany, 16 January 2016. The train will tranport these migrants to live in federal state North Rhine-Westphalia. Destinations change daily to distribute refugees all over Germany.

The International Monetary Fund (IMF) recommended the European countries accepting most of the refugees (Austria, Germany, Sweden) to pay the refugees less than the minimum wage.


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The EU countries accepting most of the refugees should give wage subsidies to firms to hire refugees or allow them to hire the people in need with wages below the minimum wage.

According to the IMF report ”the Refugee Surge in Europe: Economic Challenges,” the EU countries will help the refugees to integrate in the EU societies (in the long-run) by giving wage subsidies to firms to employ refugees or adopting “temporary exceptions to minimum or entry level wages,” for the newly hired refugees.

The controversial organization suggests that low-paid refugees will better integrate in the societies, because “international experience with economic immigrants suggests that migrants have lower employment rates and wages than natives, though these differences diminish over time.”

The IMF economists acknowledge that their proposal will “raise legitimate concerns among native workers that they will face lower wages and higher unemployment,” but still they said that “past experience indicates that any such adverse effects are limited and temporary.”

IMF also highlighted that the impact of the refugees on medium and long-term growth depends on how they will be integrated in the labor market and therefore it suggested that legal constraints on work during the asylum application period should be mimized. Moreover, it said that the refugees should be able to be flexible regarding their place of stay as they need to go where labor demand is high.

IMF economists concluded that rapid labor market integration is the key for EU countries to reduce the net fiscal cost associated with the current inflow of asylum seekers. “Indeed, the sooner the refugees gain employment, the more they will help the public finances by paying income tax and social security contributions. Their successful labor market integration will also counter some of the adverse fiscal effects of population aging,” the IMF report said.

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