Host Communities Shape Refugee Welfare, But Jobs Remain Out of Reach in Ethiopia

A World Bank study reveals that in-camp refugees in Ethiopia face significantly higher poverty and lower consumption than host communities, primarily due to limited employment opportunities and aid dependence. Despite progressive legal reforms, true economic inclusion remains elusive without practical job access and host community development.

A new World Bank working paper, authored by Takaaki Masaki, Nitsuh Mengist Nega, and Christina Wieser, provides an in-depth exploration of the economic challenges faced by in-camp refugees in Ethiopia. Produced by the Poverty and Equity Global Practice and supported by the World Bank-UNHCR Joint Data Center on Forced Displacement, the study draws from the 2023 Socio-Economic Survey of Refugees in Ethiopia (SESRE). This pioneering dataset enables a comparative analysis of refugees and host communities across 24 refugee camps in Ethiopia, presenting a rare window into the enduring disparities and systemic constraints facing displaced populations.

A Widening Welfare Gap Between Refugees and Hosts

The study highlights severe welfare disparities between in-camp refugees and neighboring host communities. Despite decades of Ethiopia’s commitment to refugee protection and a relatively welcoming policy framework, economic integration remains elusive. Refugees living in camps report per capita consumption that is 60 percent lower than that of nearby host communities. Poverty levels among refugees are nearly 40 percentage points higher, making them one of the most economically vulnerable groups in the country. These stark inequalities remain even after controlling for baseline socioeconomic characteristics and geographical differences. Limited employment opportunities lie at the core of this disparity. With restricted access to formal labor markets and movement, refugees are largely dependent on humanitarian aid, a lifeline that is insufficient to meet basic needs or offer a path out of poverty.

Host Communities Influence Refugee Welfare

While camp-based refugees remain institutionally and economically marginalized, the paper uncovers that host community characteristics do play a role in shaping refugee welfare, albeit indirectly. Refugees living near more prosperous host communities with better access to electricity, water, and sanitation services, as well as more inclusive social attitudes, exhibit better welfare outcomes. The study finds positive correlations between host community living standards and refugee consumption and poverty rates. In particular, when hosts exhibit higher tolerance and positive perceptions toward refugees, it leads to better refugee well-being. However, this influence appears limited to consumption and service access; labor outcomes for refugees, such as employment rates or wage earnings, do not show significant improvement regardless of host community economic strength. This points to the structural constraints placed on refugee labor participation, constraints that even favorable host environments cannot override.

Working Outside Camps: Autonomy Over Income

Faced with limited opportunities within the camps, a significant number of refugees are finding ways to work outside, often informally and without permits. About 40 percent of working refugees reported being employed outside the camps during the previous year. While such employment does not necessarily lead to higher household welfare and may, in some cases, be associated with lower consumption, it does bring with it a heightened sense of autonomy and self-determination. Refugees working outside camps tend to report greater control over their own lives, an important psychological benefit that transcends monetary measures. Yet, the jobs found beyond the camps are often low-paying, precarious, and in sectors such as agriculture or informal labor. Formal employment is actually more accessible within the camps due to the presence of humanitarian organizations. Thus, working outside offers emotional empowerment but not necessarily economic advancement, illustrating the complex trade-offs refugees face.

Who Are the Refugees Taking Risks?

The study further examines the socio-economic profile of refugees who pursue employment outside camps. These individuals tend to come from poorer households, are more likely to be male, and have lower literacy levels. Women and literate individuals are less likely to engage in such employment, possibly due to social norms, safety concerns, or lack of mobility. Interestingly, access to services or proximity to urban markets does not significantly influence the decision to work outside. This suggests that the motivation to leave the camps for work stems more from necessity than opportunity. Refugees are not necessarily seeking better jobs; they are escaping the trap of stagnation, even if the alternatives are equally, if not more, difficult. The willingness to work outside the camps, despite legal and physical risks, underscores the urgent need for policies that match rights with viable, safe, and meaningful opportunities.

A Policy Promise in Need of Realization

Ethiopia’s recent Directive No. 1019/2024 offers a promising shift by formally granting refugees the right to work in sectors like agriculture, services, and manufacturing across rural and urban areas. This development, aligned with global frameworks like the Comprehensive Refugee Response Framework (CRRF), marks a crucial turning point. However, as the study underscores, legal reforms alone are insufficient. Without the creation of real employment avenues, infrastructure development, and mechanisms for fair labor participation, the welfare gap between refugees and host communities is unlikely to narrow. Moreover, any policy aimed at improving refugee welfare must also address the persistent poverty in host communities themselves. Many hosts still lack access to quality public services, and investments that target both populations could generate mutual gains, fostering social cohesion and inclusive economic growth.

Ultimately, the study calls for an integrated, area-based approach that considers the welfare of both refugees and hosts as interlinked. Policies that support mobility, access to services, and inclusive labor markets can help unlock the potential of refugee populations while simultaneously strengthening the resilience of the regions they inhabit. Ethiopia stands at a critical juncture: with the right mix of political will, institutional capacity, and economic investment, it could set a precedent for refugee self-reliance and host community prosperity in Africa and beyond.