This literature review summarizes: (a) evidence on the impact of forced displacement on economic outcomes for refugees and internally displaced persons (IDPs); and (b) existing knowledge on jobs interventions for refugees and IDPs. The authors include both quantitative experimental and quasi-experimental studies (largely focused on refugees in high-income countries), as well as qualitative studies and ‘gray’ literature, particularly as a way to understand if and how research in high-income countries is relevant for low- and
Key points relating to the specific challenges for the labor market integration of refugees and IDPs include:
- Studies in high-income host countries consistently show that labor market outcomes (employment, wages) for refugees lag behind locals and economic migrants. Many studies in Europe and the United States show that refugees can close the employment gap over time, and might even perform better than economic migrants after six to ten years. However, results of quantitative studies in Norway and Denmark suggest the opposite—after five to ten years, social insurance dependency begins rising and employment rates begin declining.
- Descriptive statistics from representative, cross-sectional surveys in low- and middle-income countries point to large wage and employment gaps between refugees and hosts, consistent with the patterns found in high-income settings.
- Evidence on IDPs also shows a negative association between forced displacement, employment rates and wages.
- Poorer labor market outcomes (at least in the short- to medium-term) are a consequence of specific obstacles that refugees and IDPs face compared to local workers and economic migrants, linked to selection effects, impacts of the displacement experience and conditions at destination. The authors provide an excellent summary of these constraints in their Table 1. Obstacles include: loss of assets; lack of skills and language proficiency; psychological health and economic behavior; legal situation and discrimination; and lack of social networks, information
on the labor market and labor demand.
- Several studies in low- and middle-income countries show a negative association between forced displacement and the level of household assets. Negative effects of physical asset loss increase if households are separated from family members during displacement or experience the death of their primary income earner.
- Forced migrants often lack the skills or qualifications required in the new labor market. Long periods of economic inactivity or unemployment diminish human capital, discourage workers, and make it more difficult to find employment. Additionally, forced migrants may not speak the language of the host community and consequently may have difficulties finding employment or earning high wages.
- A nascent literature shows how violence and forced displacement have an impact on psychological health and economic behavior, which in turn impacts labor market outcomes. Refugees and IDPs are more likely than the host population to suffer from poor mental health. Poor mental health might prevent refugees and IDPs from working and successfully participating in jobs interventions. Experiences of violence and forced displacement might also lead to a negative outlook on life and lower hope and aspirations, which can have a negative impact on economic activities undertaken and create a vicious cycle. Additionally, experiences of conflict have an impact on risk-aversion, which in turn impacts the level of economic risks that people are ready to take. On the other hand, refugees and IDPs might also have a high determination to rebuild their lives, but evidence is missing.
- The time horizon of forced migrants will influence their willingness to make host-country specific investments. Forced migrants might also take the portability of an asset into consideration when thinking about an investment.
- A complex set of laws and regulations influences labor market access of refugees. Even if host countries grant refugees the right to work, refugees may also face de facto limitations on their ability to access employment due to: (a) protection issues; (b) restrictions on freedom of movement; (c) restrictions on ownership of property; (d) restrictions on opening a business; and (e) restrictions on opening a bank account, and accessing other financial services like insurance and loans. Forced migrants also struggle with lack of information on their rights and face discrimination.
- Social networks are important to integrate into the labor market and can help forced migrants overcome information asymmetries. Social networks with host
communities can, however, be difficult to establish for forced migrants. Contacts with certain groups of co-nationals or other refugees can be helpful for better labor market outcomes. However, others have suggested mixed or negative employment effects of contacts with co-nationals or other refugees, which might suggest that relying exclusively on these networks might hamper long-term integration with hosts. Forced migrants often face a lack of demand in the labor market at destination, as they usually do not choose their first destination based on available labor market opportunities, and tend to move together in large groups, suddenly increasing labor supply.
Overall, the literature shows that refugees and IDPs struggle more than other groups to integrate the labor market, and reveals the specific constraints that they face. How important these obstacles are in practice depends on the individual characteristics of those forcibly displaced as well as their country of origin and destination.
Existing literature on jobs interventions for refugees and IDPs is scarce in terms of experimental or quasi-experimental evaluations. The authors provide a useful summary of the available evidence by type of interventions in their Table 2. The emerging literature indicates the following:
- Repeated cash transfers, vouchers, and in-kind transfers: Emerging literature suggests that: (a) transfer programs reduce poverty and help cover basic needs, improving mental health and sometimes allowing households to save; (b) impacts on basic needs appear to be similar for cash, voucher or in-kind transfer programs but cash might have additional benefits; (c) repeated transfers do not seem to have a positive impact on adult employment rates and might allow refugees and IDPs to search for higher-quality jobs, but existing evidence is focused on Syrian refugees; (d) cash transfers may help low-income displaced people to afford education, which improves future labor market outcomes; (e) cash transfers might decrease negative coping strategies like child labor; and (f) transfers may indirectly increase social networks and decrease discrimination, which could help refugees and IDPs find jobs.
- One-off transfers and complementary interventions: One-off transfers aim to directly help refugees and IDPs overcome the loss of assets to become selfemployed or start a business. One-off cash or asset transfers can increase income from self-employment, but uncertainty about length of stay and restrictive legal frameworks for refugees might lower impacts. Using micro-finance or other forms of loans instead of grants faces additional challenges in the context of forced displacement. Combined approaches such as graduation-type programs (i.e. cash
grants in combination with business or entrepreneurship training, intensive coaching and financial inclusion) provide better prospects for vulnerable populations like refugees and IDPs.
- Vocational, business and other skills training and recognition of skills: The literature suggests that: (a) training programs could help address the lack of skills
that refugees and IDPs might face in destination labor markets, but the track record of “skills only” interventions is not promising; (b) training programs in displacement contexts have the additional challenge of tailoring training to skills that are appropriate and marketable in view of the legal framework and location of forced migrants; (c) training programs need to take constraints to participation into account and focus on those that need to change occupation after displacement; (d) positive results have been found for skills like coding and IT skills but the potential for scaling up needs to be proven; (e) combining skills training with other interventions could lead to better results but must demonstrate cost-effectiveness; and (f) assessment and recognition of skills and qualifications could be helpful, notably in more formalized labor markets and for those middle- or high-skilled, but more evidence is needed.
- Language training: Language training, combined with other measures, may be helpful for employment, as evidence from high-income countries shows. Language classes should be linked to work opportunities and not delay labor market entry.
- Mental healthcare and psychosocial support: Mental healthcare and other psychosocial support have important positive impacts on the mental health of refugees and IDPs. More evidence is needed to understand which type of psychosocial support works best in which context and how to best implement it in low-resource settings in a cost-efficient way and in environments with a lack of professional counselors and psychotherapists. Evidence on which type of support can facilitate labor force participation and how it can be best integrated into broader jobs interventions is scant.
- Changing the legal framework for refugees: Legal frameworks are especially important in determining refugee and IDP relationships with the labor market, and any kind of program aimed at these populations must take legal obstacles into account. Evidence from OECD countries shows that the length of waiting periods before entry into the labor market is associated with employment gaps that take many years to fill, due to scarring effects, deterioration of human capital and lower motivation. Faster certainty about prospects of stay and permanent residency status can have a positive impact on labor market outcomes. Allocating asylum seekers and refugees taking labor market opportunities into account or allowing them to move freely improves their economic outcomes.
- Anti-discrimination laws and communication about rights of the forcibly displaced for employers and refugees themselves: Such policies and
interventions aim to address discrimination against refugees and IDPs, but there is a lack of rigorous evaluations.
- Job search assistance or matching programs and coaching: Job search assistance or matching program are associated with positive effects on employment in high-income countries, but the available evidence on low- and middle-income countries seems less promising. Matching services cannot replace private networks
and refugees and IDPs might benefit from support to build up such networks. Case management, intensive coaching and individualized assistance can have positive impacts on labor market outcomes but tend to be more costly. Interventions aiming to overcome spatial mismatches seem promising and need to be further evaluated.
- Wage subsidies: Wage subsidies for employers of refugees and IDPs show promising results, but evidence is limited to high-income countries. Other monetary
benefits for employers need to be adapted to the firms’ profiles.
- Cash for work, labor-intensive public works and other subsidized public sector employment: Public works programs can have important positive short-term impacts in displacement contexts, even in very fragile and poor environments, but the medium- to longer-term impacts appear to be less promising.
- Value chains and other market-based livelihood interventions: An increasing number of interventions for refugees and IDPs aim to improve access to markets.
Interventions aiming to develop or strengthen links along value chains and provide information on markets, often combined with other measures, seem promising, but rigorous evaluations are needed.As refugees and IDPs usually face multiple barriers to enter the labor market, the evidence for integrated interventions that tackle several constraints at once seems promising.
Such interventions range from the combination of training with cash injections or work experience to full-fledged graduation-type of approaches. More evidence is needed to understand which program elements are most effective. Future evaluations should not only include more low- and middle-income countries and interventions for IDPs, but also longer-term impacts.