Improving Syrian Refugee Inclusion in the Turkish Economy: How Can the International Community Help?

World Refugee & Migration Council Research Report

M. Murat Erdoğan, Kemal Kirişci and Gökce Uysal

This research report was produced by the authors above with the IGAM Academy for the World Refugee & Migration Council’s Syrian Refugees in Jordan and the Region project with support from the International Development Research Centre.

Thinking Long-term about Syrian Refugees in Jordan, Lebanon and Turkey

• Summary Report — Thinking Long-term about Syrian Refugees in Jordan, Lebanon and Turkey (PDF)
• Summary Report — Arabic Version (PDF); Turkish Version (PDF)
• Moving beyond Humanitarian Assistance: Supporting Jordan as a Refugee-hosting Country — Rasha Istaiteyeh, Belal Fallah and Yusuf Mansur 
• The Economic Impact of the Syrian Refugee Crisis in Lebanon: What It Means for Current Policies — Cathrine Brun, Ali Fakih, Maha Shuayb and Mohammad Hammoud
• Improving Syrian Refugee Inclusion in the Turkish Economy: How can the International Community Help? — Murat Erdoğan, Kemal Kirişci and Gokce Uysal 

In the span of less than a decade, Turkey has become host to the largest refugee population in the world (UNHCR Mid-Year Trends, 2020). Currently, there are close to 3.7 million Syrians under temporary protection (SuTP) status with another 320,000 individuals under international protection (Republic of Turkey Ministry of Interior, 2021) (UNHCR Turkey Operational Update, 2021). Additionally, Turkey over the last few years has apprehended a growing number of irregular migrants, who are not accounted for by traditional durable solutions through local integration, resettlement, and repatriation.^[1] In the meantime, refugees in Turkey, especially Syrians, are by default becoming increasingly self-settled and self-integrated. The process is multifaceted, complex, and mostly driven through the acquisition of Turkish language skills, interaction with local community members, sending their children to Turkish schools, inter-marriages, and employment.

This picture is leading to a growing recognition among local, national as well as international stakeholders of the need to move international support from humanitarian to more development-focused assistance. Key to this approach is improving the self-reliance of refugees and the resilience of their host communities in Turkey. Employment and the possibility of becoming self-reliant is recognized as the most important driver of integration and is also seen as an important vehicle for mainstreaming migration to development (Ager and Strang, 2008). In recent years, the Facility for Refugees in Turkey (FRIT), funded by the EU and UN’s Regional, Refugee and Resilience Plans (3RP), have increasingly expanded their livelihood projects to draw away refugees from precarious informal employment to more sustainable, formal employment options. These projects have ranged from those focused on improving life skills, provision of language and vocational training for refugees to enhance their employability in the labor market, as well as provision of tax subsidies to employers. These have been accompanied by numerous projects to encourage self-employment and the creation of small businesses. 

As much as these projects may have increased the “employability” of their beneficiaries, they have not, in fact, been translated into sustainable formal employment and job creation in any significant manner. Instead, most refugees in Turkey are employed informally, with all the accompanying problems of exploitation, precarity and threats to social cohesion. This is further complicated by the fact that the Turkish economy is nowhere near its level when Syrian refugees first began to arrive in 2011. Its GDP per capita has plummeted from its peak at almost US$13,000 in 2013 to a little above US$8,600 in 2019. Furthermore, the country’s macroeconomic outlook is not expected to recover soon, following major fluctuations in economic growth as well as the onset of the COVID-19 pandemic.

The performance of the Turkish economy is volatile and demand-driven in its growth. Periods of strong credit growth are followed by widening current account deficits and high inflation. As the economy is highly dependent on capital inflows, it remains susceptible to sudden stops. Such exchange rate shocks translate into higher inflation rates because of a relatively strong pass-through.^[2] The economic picture has been further aggravated by the COVID-19 pandemic. According to the IMF, Turkey’s relief strategy stands out as one with one of the lowest rates of direct transfers, and the one of the highest rates of credit expansion (IMF Fiscal Policies Database, 2021). 

In such a setting, improvements to the labor market, with its chronic structural problems — such as high informality, low skill sets among the labor force, and low labor force participation rates for women — becomes particularly challenging. It is estimated that currently 3.3 million workers in Turkey earn the minimum wage and that 4.1 million workers earn less than the minimum wage, excluding Syrian refugees for whom no comparable data exist.^[3] Formal jobs are more difficult for the workers with relatively lower skill sets to secure, such as young people, women, and Syrian refugees, who face additional restrictions such as meeting residency requirements and obtaining degree equivalence. Furthermore, policies that might protect workers with lower skill sets, such as increasing the minimum wage, provoke shifts from formal to informal employment, resulting in worse working conditions for the very workers for whom these policies are aimed (Bakis, İlhan, Polat, and Tunali, 2020). 

In an economy where informality is merely a reflection of the underlying structural problems of the national labor market and accessing formal jobs remains unreachable for a significant proportion of people in host communities, graduating refugees from an informal job market to a formal one will remain a major challenge.^[4] As such, the current policy of subsidizing formal employment does not address the underlying causes of informality. Thus, refugees are left to their own means once subsidies run out. As discussed below, the number of formal jobs created via this policy remains very limited. This report will argue that it might be more beneficial to adopt an economic development approach to address the underlying conditions that give rise to informality and explore ways in which labor markets can be restructured to minimize informal employment for refugees and host communities alike. One such policy, for example, would be to decrease taxes on labor for all workers. Such a policy would facilitate the transition from informal to formal jobs, with an added benefit of potentially easing public resentment toward the high labor taxes on formal jobs that increase the appeal of the informal labor market. 

This report will also advocate to improve the prospects of access to sustainable livelihood for refugees by emphasizing the role of the international community to help to create demand for refugee labor in Turkey in a manner that benefits the host community as well. One starting point would be to explore extending preferential trade arrangements for countries hosting a large number of refugees to help spur employment both for refugees and locals, as advocated by the Global Compact on Refugees (GCR) as well as the World Refugee & Migration Council (UNHCR Global Compact on Refugees, 2018) (WRC, 2019).^[5]

One challenge, amongst others, is that the implementation of these policies would imply a formal and public recognition that most of the Syrian refugees would not be returning to Syria and that they have become settled in Turkey for the long-term. How to mitigate this highly politicized issue, as well as the increasingly negative public sentiment against the ongoing presence of Syrian refugees, is a priority for the Turkish government. Hence, the economic gains to the host community as well as the prospective benefits to social cohesion between the refugees and the host community resulting from inclusion, as opposed to the sociopolitical problems that would emerge from the persistent exclusion of refugees, will need to be demonstrated effectively. 

This is where the other policy suggestions from the GCR become important, ranging from revamped resettlement, including advocacy for a “comprehensive plan of action” for resettling Syrian and Afghan refugees in substantial numbers, to exploring avenues of voluntary and safe return, as well as continued funding for humanitarian assistance for refugees in Turkey and for IDPs amassed on the Turkish border. This report will argue that incorporating these policies into developing an international response might best emerge in the context of a revision of the EU-Turkey statement of March 2016, as well as exploring the idea of establishing a “qualifying industrial zone” (QIZ) near the Syrian border for companies prepared to employ refugees formally in order to benefit from preferential trade to developed countries beyond the EU. 

The report is divided into four sections. The first section offers a brief review of the current state of the Syrian refugees in Turkey and the macroeconomic environment of the Turkish economy in which they find themselves. The second section surveys government policies towards refugees with respect to the legal status of refugees as well as access to public services and the labor market together with evolution of public opinion towards refugees. This section also discusses the impact that refugees have had on the Turkish economy (labor market, public expenditures, inflation, housing market, etc.). The third section discusses the impact of international assistance programs, such as FRIT and 3RP, on the government’s ability and willingness to support refugees, and pays particular attention to expanding their social and economic inclusion and efforts to support social cohesion. The final section assesses the long-term prospects for Syrian refugees in Turkey and offers policy recommendations for Turkey and the international community to improve the integration of refugees and provide support to Turkey with the increasing burden of hosting refugee populations. 

This report is based on primary sources of data as well as secondary sources of analysis. The primary sources are the latest data provided by Turkish state institutions, such as the Turkish Statistical Institute (Turkstat), the Directorate General of Migration Management (DGMM) and Household Labor Force Survey (HLFS) and UN agencies, such as the ILO, UNHCR and UNDP, as well as the European Commission’s regular FRIT monitoring reports. However, one important caveat is that data on refugees in Turkey remains limited. Furthermore, data from different sources can sometimes be incompatible. As such, we report the statistics and clearly indicate their sources, and further prioritize using official statistics whenever available. The scarcity of data makes it difficult to design evidence-based policies. Secondary sources include reports by Turkish academia, government agencies, and civil society. Analyses from these sources are supplemented by past interviews with government officials and representatives of civil society as well as international agencies held by the authors of this report. The report also benefits from the findings of the most recent as well as earlier public opinion surveys concerning Syrian refugees and the Turkish public published in Syrians Barometers (Erdoğan, M., 2020). One major caveat concerning Turkish government data is its limited nature especially with respect to local integration figures, work permits issued for refugees and labor force statistics for refugees. Therefore, data from other publicly available sources as well as expert estimates are also used to give a wider picture. 

^[1] Irregular migration: Movement of persons that takes place outside the laws, regulations, or international agreements governing the entry into or exit from the State of origin, transit or destination. The term is generally used to identify persons moving outside regular migration channels. (IOM- Key Migration Terms)

^[2] When the exchange rate deteriorates, prices of imported intermediate goods are directly affected, causing increases in the prices of the domestically produced final goods that use them. 

^[3] Authors’ calculations using the Household Labor Force Survey of TurkStat. 

^[4] Workers who are informally employed in Turkey are working without official labor contracts, and are not registered at the Social Security Institution. Therefore, they are not protected by labor market regulations, such as the minimum wage, retirement benefits, or health and safety measures. 

^[5] The World Refugee & Migration Council was originally known as the World Refugee Council (WRC).