Germany's refugee crisis: A job-creation package in disguise?

Mayor Erich Spamer is under no illusions about the popularity of this town's new refugee center among some of his constituents.

Just a few weeks ago, some 10 percent of Büdingen's residents voted for the allegedly neo-Nazi NPD party in local elections. A clear anti-refugee protest vote, he says.

But strolling through the grounds of a sprawling former American military base, now refurbished to house 600 newly arrived asylum seekers, Mayor Spamer points out that the new center is not just good for the refugees. It's good for Germans, too.

Nine years after US forces left, the refugee center is bringing jobs and businesses to this town of 21,000 people. And just like similar projects across the country dedicated to accommodating the hundreds of thousands of migrants coming to Germany, it amounts to a miniature stimulus package for natives, even those opposed to the new arrivals.

“We have 100 new jobs here, and that’s an important boost” for the community, Spamer says. “Take the caterers, the security people and doctors: they’re all from here.” 

'Gold rush atmosphere'

Housing, feeding, and integrating 1.1 million newcomers, mostly from Iraq, Syria, and Afghanistan, is a gigantic challenge – and an expensive one, estimated at 22 billion euros ($25 billion) this year. The crisis has strained Germany's social services and created populist revolts.

But at the same time, economists note, the money being spent is not disappearing into the ether. It is going back into German pockets as the government pays for the services required to accommodate the migrants.

“Every euro spent by the government is somebody else's income, from construction companies building refugee shelters to language schools and shops where refugees buy food,” says Tobias Hentze of the Cologne Institute for Economic Research. “It acts as a small stimulus package.”

Since last summer, the nongovernmental humanitarian groups that provide the lion's share of support for refugees have hired hundreds of social workers and doctors. Virtually all sectors linked to the emergency housing sector – from manufacturers of prefabricated homes to interpreters and security guards – have also been big winners.

Prices have shot up as a consequence of the higher demand for services, resulting in a “gold rush atmosphere,” says Till Steinberger, owner of an independent security firm in Offenbach, near Frankfurt. “The number of hours that need to be covered is gigantic,” Mr. Steinberger says. “Some firms have won absurd profits.”

Until last summer, Berlin-based Paranet made its inflatable tents only for swimming pools and sports facilities. Now it delivers one “housing tent” per week somewhere in Germany to shelter some 200 refugees, says Paranet CEO Erika Wowra.

In Munich, Friedemann Holland says his translation business, Lingoking, is in huge demand. "We are getting calls from local authorities from around the country every single day," he says. "If they need an interpreter fast, the price isn’t a problem.”

From hotel to refugee housing

The hotel industry has particularly benefited from the influx of refugees, giving struggling hotels "a chance to make a profit again,” says Olivia Kaussen, head of hotels for the real estate consulting company CBRE in Munich.

In 2014, Peter Killian Rausch's four-star hotel in Bautzen, a small town near Dresden, was near bankruptcy. So he turned the hotel into a refugee center – an unusual choice at the time. The regulations he had to follow then to make the change were strict. He borrowed €350,000 to install security cameras, a special fence, and unbreakable windows, renovating the building in order to accommodate new clients: 250 asylum seekers.

Now he receives 13 euro ($15) per guest per night from the government, putting his business back on its feet. He now employs eight full-time workers, including a former Syrian refugee-turned interpreter. Bautzen Mayor Alexander Ahrens says Mr. Rausch's hotel is by far the region's "best-managed."

In Bautzen alone, five sites, including a former hotel and a hospital, have converted or are planning to convert into refugee centers. And more hotels across the country are following this path. 

“Now the government is so desperate for beds that they take everything they can grab,” says Rausch.  “Everybody in the industry or private people are trying to get a piece of the cake."

The seamy side of the boom

But the "gold rush" has led to shady dealings and abuse as well.

From Bavaria to Saxony Anhalt, the need for quick housing led to opaque deals between local governments and hotel owners. In Berlin, the city allegedly tried to cut a deal with Grand City Hotel for 10,000 hotel rooms at inflated prices: 50 euros ($56) per night. When news got out last month, the government backed down, saying they judged the price too high. Negotiations are ongoing over the use of 93 rooms in only two hotels at less inflated prices, officials say.

The job boom has also exposed a shortage of properly trained workers. Last month in the Karlhorst neighborhood of Berlin, a security guard hired to guard a gym housing 200 refugees was filmed throwing a metal object at the facility manager, severely injuring him.

The incident and others like it have led industry lobbyists to push for more regulation. Pond Security, the Germany’s best known security businesses, says it has spearheaded a move to require more training for employees, including intercultural understanding courses.

Thousands of new jobs

But regardless of the cost, the labor market will remain tight as government expenditure on refugees grows. This year, refugee-related public spending is expected to reach €14.3 billion ($16 billion), according to the Council of Economic Experts, an independent academic body, and raise Germany's GDP to 1.6 percent, rather than the 1.4 it would be without the refugees.

While experts disagree on how lasting the job boom will last, they do say the refugee crisis will lead to an estimated 40,000 new public-sector jobs this year, including 20,000 teachers, 14,000 social workers, 3,000 police officers, and 3,000 administrative personnel. “Civil servants are reaching their limits,” says Klaus Dauderstäd, head of the German Association of Civil Servants.

And the construction boom will continue as well. Authorities anticipate that 100,000 housing units will be built for refugees alone in 2016. That will also mean thousands of new jobs to create new kindergartens, schools, and roads.