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Economic integration into host communities in times of Covid-19: How to ease the impact of Covid-19 on displaced populations in low- and middle-income countries

by Jana Kuhnt, Kirsten Schüttler

Mann mit Warnweste und Mundschutz arbeitet an einem PC

Access to the labour market plays an essential role in allowing displaced populations to sustain their livelihoods and integrate into their host communities. Long-term displacement situations and a decline in resettlement have spurred the quest for local integration (UNHCR, 2019). The majority of displaced populations are hosted by neighbouring low- and middle-income countries (LMICs), where the Covid-19 pandemic places additional strain on scarce resources.

However, evidence shows that displaced people face specific challenges in integrating into the labour market of host countries. In many countries they do not have the unrestricted right to work, move freely or access financial services (Zetter and Ruaudel, 2016). Additionally, they are more likely to lack the assets, skills, language, social networks and information required in the host labour market (Schuettler and Caron, 2020).

The Covid-19 pandemic further aggravates these challenges. Most displaced work in the informal economy without job security, health insurance or access to social safety nets. They are more often than the host population employed in sectors that are highly impacted by the pandemic, such as manufacturing, accommodation and food services (Dempster et al., 2020). Early evidence from Syrian refugees in Jordan and Lebanon shows that they are more likely to lose their jobs due to Covid-19 than nationals (Kebede et al., 2020a; Kebede et al., 2020b). Covid-19 is therefore likely to lead to widespread loss of livelihood and an increase in poverty among this population. In addition, Covid-19 is likely to undermine policy reforms which facilitate labour market access. However, precisely due to the adverse impact of the current situation on their lives, efforts to expand economic participation and inclusion for displaced populations are of utmost importance and more relevant than ever.

Phase 1: Immediate protection of the displaced from negative impacts of Covid-19

Cash and in-kind transfers to displaced households can avoid further spiralling into poverty, by reducing the need to sell assets and deplete savings. They also reduce the pressure to work in precarious and hazardous conditions and improve mental health outcomes. Furthermore, they allow beneficiaries to invest in education and health. Overall, transfers have hence, been proven to indirectly also impact employment outcomes (Lehmann and Masterson, 2014; Giordano et al., 2017; Chaaban et al., 2020).

Labour-intensive public works and cash-for-work programmes can be scaled up and adapted to counter the job impacts of Covid-19. Public works have become popular in the context of displacement and can be adapted to Covid-19 by taking “social distancing” into account within existing activities, developing virtual activities (such as digitisation of physical assets) and contributing to public health through the types of work selected (e.g. production of face masks) (Carranza et al., 2020). Rigorous evidence confirms that they can confer important short-term benefits comparable to cash or in-kind transfers. However, medium- to longer-term effects on employability and income appear less promising (Lombardini and Mager, 2019; Gehrke and Hartwig, 2018). Benefits need to be weighed against costs, which are usually higher for public works than for cash transfers or training alone. However, the social benefits (such as building networks or the feeling of being of value) and the higher social acceptance compared to simply handing out cash need to be considered.

Phase 2: Adapted training and mental health measures foster employability

Training needs to adapt to the specific constraints of those displaced, taking Covid-19 into account. While the track record of “skills only” interventions is not promising, activities that simultaneously address other labour market barriers, such as economic inclusion programmes, seem more promising (Ayoubi and Saavedra, 2018; McKenzie, 2017). Particularly, IT and language skill trainings should be explored while both types of training could be provided virtually during restrictions linked to Covid-19 (Hatayama, 2018; Capps et al., 2008).

Interventions addressing the psychological and mental health effects of forced displacement are very promising and – if infrastructure allows – can continue to be implemented virtually during Covid-19 (Knaevelsrud et al., 2015). There is also evidence that the use of lay counsellors with limited training can be effective in environments with a lack of professional counsellors and psychotherapists (Neuner et al., 2008; Bolton et al., 2014).

Phase 3: During economic reopening, support (self-)employment within the changed economy

Larger one-off grants or credits specifically supporting the start of a new economic activity or to expand existing activities are promising in displacement contexts (Blattman and Ralston, 2015; von der Goltz and Mavridis, 2020). Such grants or credits can be used to support new economic activities or adjust existing ones in light of Covid-19 (e.g. face mask or sanitizer production, virtual products, retail and delivery services) Evidence is, however, scarce in the displacement context. Often combined with larger transfers and training, interventions aiming to develop or strengthen links along value chains and facilitate access to markets seem promising and could help ease disruptions due to Covid-19 (Nutz, 2017). However, rigorous evaluations are needed.

Additionally, job search subsidies, the building of social networks and individualized coaching are worth further testing. Interventions such as transport and housing subsidies which allow the displaced to move or commute to where economic opportunities exist seem promising and should be investigated further (McKenzie, 2017; Caria et al., 2020). The displaced also need support to build up social networks. During restrictions linked to Covid-19, innovative virtual formats need to be explored to help build networks between the displaced and their hosts.

The way forward: Use existing evidence base for interventions, adapted to Covid-19 and extend research in promising areas

It is important that new interventions are designed taking into account the existing evidence and adjusted to ease the impact of Covid-19. In light of the current pandemic, it is particularly relevant to assess if and how existing interventions need to be adjusted.

Throughout all phases, the specific displacement context including the socio-economic characteristics of the displaced, their location, and the legal situation need to be taken into account. Interventions relying on digital tools will only be successful if access to needed equipment and the internet is ensured. Integrated approaches that tackle several constraints (such as lack of skills, mental health) are key. With regard to growing nationalist and xenophobic tendencies, projects should also aim at fostering social peace and cohesion.

Overall, more rigorous quasi-experimental or experimental evidence is needed on jobs interventions for displaced populations and how they can be adapted to the Covid-19 context. In particular, evidence on larger transfers, innovative forms of matching, and value chains is urgently needed to support (self-)employment. Digital formats, particularly relevant in the context of Covid-19, should be tested and evaluated across the board for interventions.


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