Costs of Accommodating the Most Ukrainian Refugees Per Capita in the EU: The Czech Case (Part Two)

*Click here for Part One

Over 475,000 Ukrainian refugees have sought asylum in the Czech Republic as of January 1, 2023 (Unhcr.org, January 1). As such, with a population of 10.7 million, the Czech Republic continues to host the most Ukrainian refugees per capita in the European Union. Only Poland comes close on a per capita basis.

The magnitude of this migration is reflected in the labor statistics of several Central European countries. The Czech Republic and Poland were expected to each increase their labor markets by over 2 percent by the end of 2022, a historic change in less than one year. By comparison, Germany, Austria, Greece and Sweden—the countries most affected by the 2014–2017 migration crisis—had respective labor increases between 0.5 and 0.8 percent during that three-year period (Oecd.org, July 27, 2022). Thus, the changes to the labor force in the Czech Republic and Poland are roughly three of four times larger in the span of less than a year.

Despite the Czech media’s focus on the costs of housing refugees, recent indicators reveal that public services will not be as expensive as initially estimated, only half as expensive according to the Czech Minister of Industry (iDNES.cz, September, 12, 2022). One reason for the diminished costs is that Ukrainian refugees have been able to find work faster than expected and in larger numbers than anticipated. By June 2022, 70,000 Ukrainian refugees were employed in the Czech Republic (Ec.europa.eu, June 28, 2022). The ancillary benefit of employment is the shifting of healthcare costs from the state to employers. In addition, private charities, churches and individuals provided free or low-cost housing, which further lowered government expenses (Seznam, September 12, 2022). Finally, many Ukrainian refugees had previous ties to the Czech Republic and prior exposure to the Czech language, with over 200,000 Ukrainians living in the country at the end of 2021. Thus, new refugees were able to better integrate into pre-established Ukrainian networks and the existing Ukrainian Orthodox churches.

Although large-scale immigration brings immense short-term costs (see Part One), the economic potential that the infusion of young, motivated people bring into the Czech Republic’s workforce cannot be discounted. Similar to most developed European countries, the Czech Republic is facing a demographic crisis brought on by low birthrates compounded, in the Czech case, by low long-term immigration rates. While birthrates in the country have been increasing since their precipitous decline in the late 1990s, they are still well below replacement levels (Czso.cz, accessed January 9).

Declining birth rates coupled with more retirees leave a continually diminishing pool of working-age people paying for a proportionally ever-expanding dependent population. In just 20 years, the Czech Ministry of Labor projects that retirement costs will grow by 50 percent, while the number of employed people will fall. Labor Minister Marian Jurečka said this increase would be untenable for the federal government, which already spends nearly a third of its budget on pensions (Seznam, October 12, 2022; Mfcr.cz, November 11, 2022).

This demographic development leaves two extremely unpopular cost-cutting options: either increase the retirement age, which has been capped at 65 until 2024, or decrease pension payments, as the Czech government did in 2009. To avert these two third-rail policy options and to avoid an untenable financial situation, Prague must raise its federal revenues—and one permanent way to do so without increasing taxes is by expanding the workforce.

As of October 2022, the Czech labor force is fully employed with an unemployment rate of 2.3 percent (Ceicdata.com, accessed January 9). Moreover, youth unemployment stands at 6.5 percent as compared to the EU-wide average of 15 percent (Novinky.cz, January 19, 2022). In this light, there is an acute need in Czech Republic for young workers, particularly in the construction industry, which has faced damaging shortages as many Ukrainian workers who were well-qualified, fluent in Czech and often certified have returned to fight in the war.

While the construction industry and certain manufacturing sectors are facing labor shortages, the labor market is also quite tight in many service sector jobs. The spokeswoman for the Czech Ministry of Labor and Social Affairs was quick to note that many available positions in the Czech Republic are “suitable for women,” who make up the majority of the refugee population (Prague Morning, July 26, 2022). The industries she referred to include nursing—which has experienced extensive shortages since the onset of COVID-19—and teaching, which has reached unprecedented demand in part due to the large-scale immigration of Ukrainian children. According to a Czech survey, the vast majority of refugees have either tertiary education or professional qualifications. Not only does the Ukrainian refugee population have higher educational credentials than the mean in Ukraine, but, on average, they also have stronger credentials than many in the main host countries, including the Czech Republic (Oecd.org, July 27, 2022).

While the Czech Republic has hosted many foreign workers, their stays have traditionally been short-term and seasonal. A large body of academic literature characterizes Czech immigration policy as short-term in nature and primarily built to suit employers’ labor needs (Chytramigrace.cz, accessed January 9). While having access to variable labor supply has been advantageous for the Czech Republic, it does not address the country’s underlying demographic problems. Moreover, in the case of Ukrainian refugees, many qualified workers cannot unlock their high potential without first developing language skills (iROZHLAS, September 7, 2022). In addition, many new arrivals find the over-licensing, registration and unionization of industries a barrier to entry.

The key variable for Czech demographic success is whether Ukrainian refugees will settle in the country long-term. Short-term stays are more likely to result in unemployment, lack of language proficiency and costly up-front social services. Long-term residency will result in a demographic boom fueled by an injection of young people into the economy, which will make language- and job-training courses pay off. Given the historical anomaly of refugees displaced by war returning to their country of origin, the permanent residence scenario appears more likely (Unchr.org, accessed January 9).

While Ukraine has seen a large return of expatriates during the war, most have been men of service age (18–60). As the war continues to drag on, and children assimilate and become more integrated into local schools, the probability of return declines. Furthermore, we can expect many more Ukrainian men will join their families in the Czech Republic when the mandatory draft statute is terminated. What appears clear is that, at some point, the Czech government will have to decide whether it will translate the temporary refugee status of nearly half a million people into long-term residency. If Prague’s immigration policy is as short-sighted as critics allege, then this vital decision will hinge on the country’s unemployment rate at the time of policy enactment.