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EU Enlargement in 2007: No Warm Welcome for Labor Migrants

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EU Enlargement in 2007: No Warm Welcome for Labor Migrants

As millions of revellers across Europe celebrated New Year's Eve 2006, Bulgarians and Romanians had something else to celebrate. On January 1, 2007, their countries became the 26th and 27th members of the European Union (EU), bringing the EU's population to 493 million. For the two newcomers, membership will bring immense rewards in terms of economic growth, trade, cultural exchange, and global diplomatic clout.

For the existing Member States, especially the 15 "old" EU states who were members before 2004, the arrival of Romania and Bulgaria heralds yet another round of anxieties about a different sort of impact: the movement of people.

Worried about the potential of being overwhelmed by workers moving from poorer, new Member States to richer old ones, the treaties governing the accession of new members have a "transitional" clause that allows existing Member States to restrict the free movement of "accession" workers for up to seven years.

This is the same provision that enabled 12 of the then-15 existing EU members (EU-15) to place limitations on workers from eight eastern European accession countries that joined the EU in 2004 (the A-8). There were no restrictions for nationals from Malta and the Greek-controlled portion of Cyprus, the two other countries that joined in 2004.

As in 2004, the majority of the EU-15 have placed short-term limitations on the number of new eastern European accession nationals they will allow into their labor markets (see Table 1). Of the EU-15 who chose restriction in 2004, only Finland has decided to allow free access in this round of enlargement. Sweden, which had a liberal regime in 2004, will again be open to labor migrants.

The UK and Ireland, which allowed free movement to A-8 workers, have announced restrictive measures.


Table 1. EU Labor-Market Access for Nationals of Accession Countries in 2004 and 2007

2004 approach 2007 approach EU-15 Member State
Restricted Restricted Austria, Belgium, Denmark, France, Germany, Greece, Italy, Luxembourg, Netherlands, Portugal, Spain
Restricted Unrestricted Finland
Unrestricted Unrestricted Sweden
Unrestricted Restricted UK, Ireland

Source: IPPR

The centrality of migration in discussions about EU enlargement, coupled with the overwhelmingly restrictive approach to the free movement of workers, highlight some inherent policy tensions within the EU around mobility and migration. In almost every Member State, political anxieties about the impacts and particularly the scale of likely immigration from new Member States seem to come up against the principle of free movement.

The 2004 Experience

In 2004, fears of massive flows of immigrants from an unprecedented eight new eastern European countries (with lower wages and higher unemployment than in the EU) were prevalent. These fears played a crucial role in debates that led to four-fifths of the EU-15 restricting access to A-8 workers.

Although anxieties still abounded in the UK, Ireland, and Sweden, liberal decisions were possible because the scale and impacts of A-8 migration were estimated to be small. For example, research commissioned by the UK's Home Office concluded that the likely net flows of migrants from new Member States into the UK would be between 5,000 and 13,000 per year between 2004 and 2010.

In the UK, unrestricted access was also implemented to address critical low-skilled labor shortages at a time of low unemployment, and in doing so to reduce the demand for illegal workers. Yet, in the months leading up to accession, Prime Minister Tony Blair's government did address concerns that A-8 nationals would abuse the UK's welfare system, and made it more difficult for all EU nationals to obtain benefits. The UK also decided that A-8 workers would need to register in order to work legally.

The experience since the 2004 enlargement has not been of large movements of people across the continent. However, the size and impact of migration flows does vary from Member State to Member State and is not necessarily determined by the degree of restrictions imposed.

In the main, restrictions have meant that fears of mass influxes of migrant workers have not been realized. For example, in 2005, accession migrants (including nationals of Cyprus and Malta) made up 0.1 percent of the resident working-age population in the Netherlands and 0.2 percent in Belgium.

Even in Sweden, where free movement was permitted, accession migration has been low. Only 4,500 A-8 nationals were issued work-related permits during 2005. There was little labor demand in what is a tightly regulated Swedish labor market, and A-8 migrants may have sought greater employment opportunities in English-speaking Ireland or the UK.

In some countries, restrictive policies appear not to have stemmed A-8 migration. Flows to both Germany and Austria, where substantial levels of historic migration meant restrictions were keenly imposed, have increased nonetheless.

Between 2003 and 2005, the proportion of new Member State nationals in Austria's working-age population doubled from 0.7 percent to 1.4 percent. Many A-8 migrants in these countries have arrived on temporary or permanent work permits (nearly 900,000 during the first year in Germany), but suggestions of migration through less formal routes are appearing in recent analyses of transitional arrangements, including a report from the European Commission in 2006.

One of the notable observations of the 2004 enlargement has been the effect that restrictive policies have had on diverting larger-than-predicted flows of A-8 migrants to the unrestricted labor markets of the UK and Ireland. For example, between May 2004 and September 2006, around 487,000 A-8 nationals registered to work in the UK; some of those who registered had been there illegally and were able to become legal thanks to the accession.

These flows have boosted the UK and Ireland's economies. Studies from academia, government, and business have shown that employment has risen; skill shortages are being filled; and inflation is being kept low.

Other EU-15 countries, such as Greece, Portugal, and Spain, noted the economic growth in the UK and Ireland and opened their labor markets during 2006. However, proximity and traditional migration meant that Germany and Austria were still wary of entirely opening their labor markets, although recent economic upturn means that this could change before the end of the seven-year transitional arrangement.

The disparity between net and gross flows in both countries indicates that around half to two-thirds of A-8 migrants have already returned home. For example, in the two years since accession, 205,000 Personal Public Service (PPS) numbers (necessary to take up employment) were issued to new Member State nationals in Ireland, compared to just under 65,000 who immigrated on a more permanent basis according to Ireland's National Employment and Training Authority (FÁS).

Economist Martin Ruhs finds that the increase in the stock of A-8 migrants in the UK is 212,000 — far lower than the inflow data presented above. The temporary and economic nature of accession migration means that new arrivals seem to be placing little pressure on welfare systems or public services.

The circularity could also assuage some fears in both sending and receiving countries of a "brain drain" from eastern Europe. There is evidence that A-8 countries are losing their university-graduate workers to better wages and opportunities elsewhere. Indeed, in the EU-15, accession nationals are more likely to have medium-level qualifications than EU-15 nationals. While many skilled professionals have undoubtedly moved westwards permanently, it seems that some are returning with the knowledge and financial capital to fund enterprises or study at home.

More recently, there have been concerns that the benefits of accession migration are not being distributed evenly. In other words, some have argued that migration is good for employers but bad for employees.

In the UK, wage growth rates have slowed and unemployment has increased, fueling more anecdotal claims that migrants are "undercutting local wages" and "stealing local jobs." These have been joined by assertions that some more rural areas that were previously unused to migration are experiencing difficulty providing public services. However, no statistical research documents these phenomena.

Decisions in 2007

For the EU-15 Member States that restricted at both rounds of accession, some of the same concerns over pressure on labor markets and welfare systems still held or were perhaps more acute. Bulgarian and Romanian economies are far weaker than A-8 countries, meaning the incentive to migrate toward higher wages could be greater. In addition, the "diversion effect" meant no EU-15 country wanted to risk opening its borders for all others to close theirs. These concerns have been thinly veiled by justifications of consistent policymaking or diplomatic fairness.

Yet the decision that has undoubtedly attracted the most attention has not been one of consistency but one of change. The policy reversals in the UK and Ireland from liberal in 2004 to restrictive in 2007 may have served to confirm concerns over potential negative effects that large-scale, low-skilled labor migration can have. Given that the evidence shows that accession migration has been generally positive, this policy U-turn merits a more detailed explanation.

Numbers have played a central role in decisions toward Bulgarians and Romanians. In the UK, statistics on A-8 migrants that were collected with the intention of reassuring the public have had the opposite effect. As discussed above, the actual numbers of the increase in A-8 migrants are indeed far higher than government predictions, but the way in which the media and politicians have quoted the numbers out of context has exacerbated public tensions and led to allegations that the government does not control immigration.

These accusations came precisely when the UK government was trying to get back in control of immigration after a year marred by scandal and ministerial resignations. An open EU migration policy toward Bulgarians and Romanians did not sit easily alongside the UK government's new, tougher stance toward immigration.

Higher-than-expected levels of migration can also be seen as persuading Ireland to place limitations on Bulgarians and Romanians in 2007. In addition, the limited level of migration enforcement between the UK and Ireland (as part of the Common Travel Area) means taking a similar approach to the UK in this matter could be viewed as sensible.

There were also some genuine social concerns that accompanied the benefits of A-8 migration. Despite there being little evidence to confirm that migrants are displacing native workers and causing wages to decrease, policymakers have been keen to appear responsive to such allegations.

Another explanation for the continuation of or reversal to restrictions in 2007 could be that Bulgarians and Romanians are less favorably perceived than A-8 nationals. Publicly held beliefs about Bulgaria and Romania's inclinations toward organized crime and corruption were reinforced by the EU Commission's delay in confirming the 2007 accession date for those very reasons.

As opposed to the UK and Ireland, the relatively small scale of migration experienced by Sweden and Finland (even after it ended its restrictions in May 2006) can be seen as the basis for their decision to allow free access to Bulgarians and Romanians.

Implications

As a result of near-unanimous restrictive policies across the EU-15, legal flows of Bulgarians and Romanians toward the older Member States are likely to be limited.

However, it is not a case of doors slammed shut. Certain routes are still accessible. For example, the UK will allow unlimited numbers of highly skilled workers and an annual quota of 19,750 lower-skilled workers for specific sectors. Italy has also announced a similar sector-specific migration scheme.

Bulgarians and Romanians will be allowed to work in Spain if they have been contracted to do so before arrival. And, of course, students and self-employed workers face no restrictions in any EU country.

Bulgarians and Romanians are also free to travel anywhere in the EU. But restricting labor-market access to EU citizens who can move freely could promote irregular migration. In EU-15 countries that have placed restrictions, there have been suggestions, from the European Commission among others, of A-8 nationals being subcontracted to get around the restrictions as well as working illegally, either in the informal economy or as supposed "self-employed" workers. Irregular migration from Bulgaria and Romania could lead to the undercutting of local wages, tax avoidance, and exploitation of irregular workers.

The tightening of national migration policies across Europe seems to be winning out against the policy of free movement: The instinct is to restrict first and open later. What does this constant rejection of one of the principal freedoms of the EU mean for future enlargement? At this time, only Croatia is the next serious contender for membership (though the EU has not offered a possible accession date), while Macedonia has only been a candidate country for a year and talks with Turkey have slowed down.

Will Croatia face the same restrictions as Bulgaria and Romania? Will EU candidacy be determined by population size and migration potential? Will there be a permanent, second level of EU citizenship where goods can travel but people cannot? And, given recent debates over faith across Europe, what would be the stance over the mobility of non-Christian migrants from Turkey?

The restrictive decisions of the majority of the EU-15 Member States are reminders of the broader challenges of balancing free movement and national labor-market protection. In the end, public anxiety over large-scale migration causing competition for jobs and wage depression seem to have prevailed.

These concerns have meant that, instead of moving toward a common migration policy and external border, EU-15 Member States in the short term are resurrecting internal barriers to protect themselves against the arrival of newer EU citizens.

However bleak this seems now, the EU mobility project is not entirely ill-fated in the long term. Free movement of people is not a case of "if" but "when," and seven years is a very short time in European history.

Sources:

Anderson B., M. Ruhs, B. Rogaly, and S. Spencer (2006). "Fair Enough? Central and East European migrants in low-wage employment in the UK." Oxford: COMPAS. Available online.

Bank of England (2006). Inflation Report: August 2006 London: Bank of England. Available online.

Brücker H et al (2003). Potential Migration from Central and Eastern Europe into the EU-15 – An Update, Berlin: DIW for the European Commission. Available online.

Dustman C., I. Casanova, M. Preston, and C. Schmidt (2003). "The Impact of EU Enlargement on Migration Flows." Home Office Online Report 25/03 London: HMSO. Available online.

European Commission (2006). Report on the Transitional Arrangements set out in the 2003 Accession Treaty (period 1 May 2004 – 30 April 2006), Brussels: COM (2006) 48 Final. Available online.

FÁS (2006). Quarterly Labour Market Commentary, Third Quarter 2006, Dublin: FÁS. Available online.

Gilpin, N., et al (2006). The Impact of Free Movement of Workers from Central and Eastern Europe on the UK Labor Market, Department of Work and Pensions Working Paper no 29, London: Department of Work and Pensions. Available online.

Home Office, Department for Work and Pensions, Inland Revenue and Office of the Deputy Prime Minister (various years). Accession Monitoring Report, London: HMSO. Available online.

ippr (2006a). EU Enlargement: Bulgaria and Romania – Migration Implications for the UK London: ippr. Available online.

Portes, J. and S. French (2005). The Impact of Free Movement of Workers from Central and Eastern Europe on the UK Labor Market: Early Evidence, Department of Work and Pensions Working Paper no. 18, London: Department of Work and Pensions. Available online.

Ruhs M. (2006). 'Greasing the Wheels of the Flexible Labor Market: East European Labor Immigration in the UK', Working Paper No. 38, Oxford: COMPAS. Available online.

Tamas, K. and R. Münz (2006). "Labor Migration Unbound?" Copenhagen: Institute for Future Studies