Germany faces costs of more than €21bn ($22.5bn) this year to house, feed and educate hundreds of thousands of refugees, the Munich-based Ifo institute said on Tuesday.

The new estimate, which assumes 1.1 million people will seek asylum in Germany in 2015, represents a sharp increase on a previous projection from late September which put the cost at €10bn.

That estimate had assumed 800,000 arrivals and did not include costs related to education and training, which the Ifo said were necessary to ensure refugees, many of them fleeing war in the Middle East, were successfully integrated.

“Training and access to the labour market are key in terms of both costs and integration,” Gabriel Felbermayr of the Ifo institute said.

The German government has not published an official estimate for how much the influx of refugees would cost it this year, but it has boosted funding to the country’s 16 regional states by €4bn.

For next year, German states and towns have said they could face costs of up €16bn. The finance minister, Wolfgang Schäuble, has said the federal government would invest roughly €8bn in 2016 to shelter and integrate asylum seekers.

Ifo also reiterated its call for a flexible interpretation of Germany’s minimum wage, saying a majority of businesses saw the €8.50 ($9.10) floor as a hindrance to employing refugees.

Some members of chancellor Angela Merkel’s conservative camp have also called for flexibility on the minimum wage, but her coalition partner, the Social Democrats, have ruled out changes to one of its flagship reforms.