Is The Hiring Of Refugees More Than Charity? Implications For Firm Performance

Prior research on the performance effects of hiring migrants has mainly considered skilled individuals. We shift attention to forced migrants (i.e., refugees) and study how hiring them can affect firm performance. We focus on refugees’ specific labor market conditions to theorize that firms hiring refugees experience an increase in performance. We explain this relationship based on two interconnected mechanisms that revolve around refugees’ limited outside options. First, because refugees have a strong incentive to secure employment, they put high effort into their jobs and work longer hours, reducing the hiring firm’s labor costs related to staff turnover (effort-related mechanism). Second, refugees are also willing to accept low pay, thus reducing the hiring firm’s labor costs related to salaries (remuneration-related mechanism). Moreover, we theorize that higher rates of job insecurity at the hiring firm reinforce both mechanisms by increasing refugees’ perceived risk of being fired and their fear of dealing with the difficulties of being unemployment. We find support for our theoretical predictions with a matched sample of 27,782 firms in Denmark over the period 2001-2016.