Ifo expects higher refugee costs

The Munich-based Ifo institute released a new cost estimate on Tuesday, showing German government expenditures on refugees soaring to 21.1 billion euros ($22.5 billion) in 2015 - up from a previous estimate of about 10 billion euros.

The new calculation was based on the assumption that 1.1 million people will flee to Germany by the end of the year, Ifo said in a statement, which was about 300,000 refugees more than previously expected.

"That figure includes accommodation, food, crèches, schools, German courses, training and administration," said Gabriel Felbermayr, the author of the study at Ifo Institute, adding that the institute's previous estimate had covered only food and accommodation.

Felbermayr also said that costs were rising because many refugees were "poorly educated," and that acquiring qualifications ensuring access to the German labor market were "key to costs and integration."

Ifo institute polled a number of German industrial companies to find out that 40 percent of them said refugees could only be employed as unskilled laborers. The percentage is lower in the construction and services sectors where skills and qualifications play a less important role.

The survey also found out that 29 percent of the companies polled saw that national minimum wage of 8.50 euros an hour, introduced at the beginning of this year, as an impediment to hiring refugees.

Therefore, Ifo called for the abolition of the minimum wage not only for refugees, but for all young employees without qualifications. In addition, refugees should be allowed to work immediately and to attend German language courses at the same time.

New debt for refugees

The news came a day after international consultancy E&Y published a survey of local and municipal governments in Germany stating that one in four would have to raise new debt to cover the costs for refugees.

Chancellor Angela Merkel's center-right government has repeatedly ruled out fresh borrowing for the central government, stressing it would strive to achieve a balanced budget in spite of the refugee influx.

According to the E&Y survey, however, local and municipal administrations expected fresh borrowing to increase by a total of 1.1 billion euros this year and an additional 1.2 billion euros in 2016. Budgets at that level of administration are already saddled with debt to the tune of 140 billion euros.

uhe/hch (Ifo Institute, E&Y)