This article was originally published by News Deeply and is republished with permission.

Three years after record numbers of asylum seekers came to Germany, jobs remain the biggest challenge for post-2015 arrivals. Researcher Swati Mehta offers four ways to make financial integration work.

THREE YEARS AFTER Germany received record numbers of asylum seekers, there is still more discussion of Chancellor Angela Merkel’s famous exhortation that “we can do this,” than there is clear understanding of what happened next. Meanwhile, asylum seekers’ focus has moved from securing food and shelter to finding jobs and gaining financial self-sufficiency.

Most refugees have a place to live, basic German-language skills, some local contacts and a place in the asylum process. Germany’s integration systems have responded rapidly to the emergency demands and have improved in the process. This is partly because local authorities have been allowed significant discretion in interpreting and implementing the integration policies defined by central government. It’s meant that local municipalities, employment agencies and civil society organizations could tailor integration measures to local demands and resources. While this is great in terms of flexibility, it can also add to the confusion created by Germany’s complex administrative rules and systems.

The newcomers have learned, to some extent, how to navigate Germany’s complex systems, in the process understanding their rights and duties, which institutions are responsible for what and where to turn for help. However, these skills vary significantly depending on their ability in German and English, their age, education, location and gender, as well as their emotional situation.

They are now at a stage of integration where their biggest priority is to find a stable job. There is a clear yearning to regain control of their financial lives, to earn enough income to preserve their dignity, and be able to support themselves and their families. They want to break free from dependence on state benefits. Access to support from employment agencies comes with obligations: not to travel outside the state, to provide clarification on any money that comes into their account, and a cap on savings.

An end to dependence on financial assistance is also critical from the political perspective, where a rising anti-immigrant discourse exploits the perception that refugees are a burden on taxpayers. Recent allegations by Alexander Gauland, a member of the right-wing AfD party, that refugees get money for nothing from the state is a warning.

However, labor market integration remains complex and slow. Current estimates suggest it may take up to five years for newcomers to find jobs, and even then, those jobs are likely to be unstable. Nine out of ten asylum seekers who arrived in 2015 are out of work, while two-thirds of those who arrived as far back as 2013 are still unemployed. Those who choose self-employment or want to start a business are unable to raise capital to cover start-up costs and risks.

Newcomers receive financial assistance from the public employment agency until they get work or are enrolled in training. This amounts to 918 euros ($1,048) per person per month, plus rent support and health insurance. Despite the political outcry, this means that refugees earn less than 60 percent of the average German income.

A side effect of the long, slow road to a good job is that refugees themselves are losing hope. Their financial demands are rising: Their savings have been depleted, some need to pay back loans they took to finance their travel to Europe, and many have to send money to their families still outside the E.U. This is making them uneasy and stressed, hampering their decision-making and compromising their ability to think long term. In such situations, they are more likely to make economic choices that may turn out to be subpar for their future.

Therefore, it is imperative that economic integration takes account of refugees’ financial priorities and equips them to overcome the financial challenge. Four areas of action are recommended.

First, there is a need to improve transparency and communication about how monthly unemployment allowances are calculated and to what extent bank accounts are monitored. Most refugees have bank accounts but prefer not to use them beyond just receiving their financial assistance and withdrawing it. The majority of their financial transactions, including savings and cross-border remittances, are done in cash. The preeminent reason is to shield their money from the employment agency and protect their monthly allowance.

Without banking activity, there is no financial history and therefore a reduced access to credit. Perceptions of the risk from monitoring financial transactions are exaggerated. It is true that accounts are monitored, but only on the basis of statements provided by the holder. Like any other unemployed German, refugees are also allowed to save up to 3,000 euros ($3,450) per person. This is not officially communicated to the refugees, resulting in confusion and rumors.

Secondly, more counseling services must be offered to improve refugees’ familiarity with German financial systems and their confidence in personal financial management. This should cover financial planning, banking services, tax planning, contract management, social and labor market systems and entitlements, as well as fees and fines. This role could be entrusted to neutral institutions such as nongovernmental agencies and banking associations, rather than state authorities, due to the newcomers’ preference for privacy.

Thirdly, the implementation of federal policies at the local level could be improved by accounting for behavioral insights. State officials need to better understand how the newcomers feel, what they want and what influences their economic and financial choices. Since it may not be realistic for decentralized, overstretched state systems to innovate and meet the diverse needs of the newcomers, this could be supported by private-sector and nongovernment institutions. Banks and technology start-ups could build on these behavioral insights to offer ways for refugees to build savings and credit history, receive customized financial advice, transfer money in an affordable manner, raise funds for their business ideas, and organize in self-funded community groups. Similar products have been proven to work in Jordan, Lebanon, Spain and Belgium.

Finally, it is important that any such solutions are available uniformly across the country. Due to the decentralized programming approach in Germany, it might happen that a regional bank extends microcredit to refugee entrepreneurs in their state but not in others. Overall, it is critical to improve the financial confidence of the newcomers and empower them to be active participants in the German economy as they integrate. This requires early intervention, building trust on both sides and programming that accounts for their behavioral biases.

By Swati Mehta


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