NEW HAVEN—One of the great accomplishments of European integration—the passport-free movement of people across borders—is now exacerbating a crisis that threatens the core of the European project. European states are announcing tighter border members this week as the continent struggles to cope with tens of thousands of refugees, with more expected daily.
The European Union is racing to devise a solution to the crisis, the centerpiece of which is a plan by which all member countries will share the refugee burden. The crisis has illustrated broader challenges that Europe must address if it is to devise a long-term solution.
Though politicians fret about the cost of refugees, the crisis is more political than economic. Housing and feeding one or even two million refugees would cost billions of dollars but the member states of the European Union, which constitutes the world’s largest economy, could easily foot the bill. The EU spends more than $50 billion per year on farm subsidies alone, and if leaders wanted, they could find similar sums for refugees.
Indeed, once refugees are allowed to find jobs and earn an income, their cost to society will decline rapidly. Though voters often fear that outsiders will steal their jobs or drive down their wages, much economic evidence suggests otherwise. Economist David Card, for example, collected data about Miami’s labor market in 1980, after a rapid influx of Cuban refugees increased the area’s labor market by a whopping 7 percent.
Crunching the numbers revealed that the refugees had little long-term effect on other workers. Unemployment did not increase nor did the increased supply of workers depress wages, even among low-skilled native workers who were ostensibly competing with the refugees for work. It turned out that businesses’ demand for workers was sufficiently elastic to accommodate a rapid increase in the size of the workforce.
