Germany's Refugees Could Cost $22.5 Billion: Think Tank

The refugee crisis could cost the German government 21.1 billion euros ($22.5 billion) in 2015 alone, according to a leading think-tank, which has called for a "complete abolition" of the minimum wage in Germany to deal with the rising costs.

The Ifo Institute, a Munich-based, not-for-profit economic research group, previously estimated in September that the cost to the state would be 10 billion euros ($10.7 billion), based on local government estimates covering accommodation, meals, pocket money, health and administrative expenses for the 800,000 people the government predicted would arrive by the end of the year. The figure did not take into account costs related to education and training, which the group now says are essential elements for successful integration into the German workforce, and it also did not account for the cost of family members joining those granted asylum in the country.

The institute has now revised this figure, assuming that closer to 1.1 million people will have arrived in the country by the end of the year. The new figure "includes accommodation, food, creches, schools, German courses, training and administration," Gabriel Felbermayr, the institute's director said in a statement. "The keys to costs and integration are qualifications and the labor market," he added.

The group says that the figure reflects the fact that many asylum seekers are poorly educated. More than 40 percent of western German manufacturers surveyed by Ifo say that asylum seekers could only be employed as unskilled labourers.

Across all branches of manufacturing, 29 percent of companies see the minimum wage—set at 8.50 euros per hour ($9.10)—as a major constraint. In eastern Germany, around 60 percent of firms in distribution and construction see the minimum wage as a barrier to recruiting refugees.

The group therefore believes that the minimum wage should be abolished completely, "not only for refugees, but for all young employees without qualifications at the very least," according to the report statement. Ifo also proposes that asylum seekers be able to work immediately and to attend German language courses at the same time.

While the German government has not published an official estimate for the cost of asylum seekers in the country, it agreed to provide six billion euros ($10.7 billion) to the country's 16 regional states in September to help with the influx.

A poll conducted last month by the German business newspaper Handelsblatt found that a majority of German business executives believe that the country cannot cope with the current numbers of people entering the country.The poll showed that 73 percent of managers thought Germany would struggle with more than half a million refugees a year, while only four percent of the 669 managers surveyed agreed that more than one million new arrivals would be sustainable over the medium term.

Ifo also recommended more support for refugees in Syria's neighboring countries as well as more effective entry checks on Germany's borders and those of the Schengen zone.