Locked Down and Left Behind: The Impact of COVID-19 on Refugees’ Economic Inclusion

Review

This paper examines the economic impacts of the COVID-19 pandemic on refugees in low- and middle-income hosting countries. It highlights the expected disproportionate effect of the pandemic on refugees in terms of employment and wider socio-economic outcomes.

Key points:

  • The economic impact of COVID-19 will have a severe effect on low- and middle-income refugee-hosting countries, as they will continue to grow at a lower rate than other low- and middle-income countries. Refugee-hosting countries are facing severe economic crises, characterized by declining incomes, increases in poverty and extreme poverty, and declining economic growth, which are leading to decreasing working hours and earnings, and increased informality. Major hosting countries were growing slower than other low- and middle- income countries before the pandemic and are projected to experience almost equal declines in growth in 2020.
  • The economic effects of COVID-19 are expected to have a disproportionate effect on refugees, due to de jure and de facto restrictions on their economic inclusion. Restrictive laws and limited economic inclusion frequently push refugees to work in specific industries and in the informal sector. Data from eight hosting countries (Colombia, Ethiopia, Iraq, Jordan, Lebanon, Peru, Turkey, Uganda) before COVID-19 suggests that refugees are 60 percent more likely than host populations to be working in sectors highly impacted by COVID-19 and the economic downturn—manufacturing, accommodation and food services, wholesale and retail trade, and real estate and business activities. Data from five hosting countries (Colombia, Iraq, Jordan, Lebanon, Turkey) shows that refugees are more likely to work in the informal sector, which is expected to be hit harder by the economic downturn.
  • Refugee women face a double disadvantage in the labor market, due to their gender, and their refugee status. Women are over-represented in the informal economy and within highly impacted sectors.
  • COVID-19 will cause widespread loss of livelihoods and an increase in poverty among refugees, affecting their self-reliance and increasing protection concerns. Many
    refugees may suffer from increased food insecurity, inability to pay rent, debt arising from health care costs, and an inability to cope with shocks.
  • Humanitarian aid will become increasingly important for refugees, however, COVID-19 has made it increasingly difficult for international donors and NGOs to deliver assistance, especially with border closures and social distancing requirements. Consequently, refugees’ access to aid and livelihoods support has been threatened, affecting primarily urban refugees.
  • Social protection programs typically do not cover refugees. In many low-income countries, social safety nets only cover a small proportion of the poor due to fiscal and capacity constraints. Additionally, some safety net programs may not be available to the most vulnerable, particularly those working outside the formal economy. Refugees excluded from government programs are also excluded from the formal economy and are therefore among the hardest hit. Without protections to fall back on and with limited
    access to aid, refugees have little choice but to risk exposure to the virus or resorting to negative coping strategies to make ends meet including skipping meals, exploitative work, or child labor.
  • The health and economic crises are likely to increase xenophobia and racism. As COVID-19 increases xenophobia and discrimination, possibilities for refugees to find
    decent jobs decrease, further increasing their income precarity and undermining their economic inclusion. Negative attitudes towards refugees could also drive policies that further limit the resources available to them as well as their rights. Even if perceptions do not shift policy, they are likely to undermine social cohesion and integration, further marginalizing refugees and reducing their ability to achieve economic inclusion.
  •  Host countries can reduce the spread of the pandemic, provide more “essential workers”, and stimulate economic recovery by expanding the economic inclusion of refugees. Excluding refugees from national health and livelihood response plans increases their risk of contracting the virus and spreading it to others. Expanding refugee’s economic inclusion can help to create a more resilient community that is less dependent on aid and better able to cope with future economic shocks. Greater economic inclusion would also enable refugees working in essential industries to exercise their skills. This requires eliminating work restrictions for refugees in essential industries, and promoting the recognition of their professional credentials. Greater economic inclusion benefits both refugees and host populations, as refugees’ economic activity boosts the opportunities for others.

The authors outline several recommendations to ensure and extend economic inclusion for refugees, improve economic outcomes, combat xenophobia, and build an inclusive labor market to support economic recovery. These include:

  • Ensure refugees can access social safety nets and health care: With the support of donors, host countries should ensure refugees are included in national COVID-19
    response plans and expanded social safety nets, and that public health care is accessible to refugees.
  • Ensure refugees can contribute to the response: Host countries should fast track the credentials of refugees. Refugees should be supported with access to finance to enable them to pivot their skills to essential industries. Governments, donors, and international organizations should enable refugees to support their own communities by allocating
    resources to refugee-run and -serving NGOs. In the long-term, host countries should explore ways to expand economic inclusion for refugees, including by eliminating work
    restrictions and promoting credential recognition.
  • Continue ongoing economic inclusion initiatives: The benefits of the economic inclusion of refugees—raising productivity and wages of refugees and host populations,
    increasing purchasing power that boosts local businesses, increasing tax revenue, and reducing crowding into the informal sector—represent potential sources of stimulus for
    host communities during the recovery.
  • Combat misinformation and xenophobia: For example, by implementing messaging campaigns to demonstrate the added economic, social, and cultural value of refugees.
  • Support multi-year, flexible livelihoods programming, including through digital livelihoods programming and virtual service delivery.
  • Collect better data and evaluate interventions: Before allocating funds, donors should require cost-efficiency and -effectiveness analyses based on the expected impacts from
    the empirical literature where possible. Donors should also require and fund evaluations, including randomized controlled trials that measure the program’s effects against a control group and against a cash alternative whenever feasible. Additionally, improved socio-economic data on refugees is critical to improving programming over the longterm. Donors should invest in, and host countries should facilitate, detailed longitudinal datasets on displaced populations.

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