Migration and EU enlargement

OECD Directorate for Employment, Labour and Social Affairs

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The adhesion of 10 new members to the EU is good news for business. After all, with 25 instead of 15 countries, it ushers in an even bigger market for goods and services, capital and labour to move about in. Well, perhaps not quite yet.

One of the great dreams of European integration since the Treaty of Rome has been to create a completely unified labour market, though this has proven hard to achieve in reality. Even among the present EU 15, while free movement of persons and labour market access for workers is possible, obstacles continue to exist, like recognition of qualifications and access to social welfare benefits.

In addition, there are obvious language barriers which slow down mobility, as well as the reduction of wage differentials between immigrants and nationals. In most cases, workers from Poland or Hungary or any of the other new members will not be free to seek work in another EU country under normal conditions for several years.

This is because a majority of member states have introduced transition periods ranging from two to seven years, in order to stem a possible increased inflow of new migrants from eastern Europe and the pressures this would entail. Some countries, such as Ireland, Sweden and the United Kingdom, will not be imposing transitional arrangements, while the Netherlands and Portugal will impose a quota. Is their prudence worth it?

Would immigration from new accession members suddenly rise if a transition phase were not introduced?

Not necessarily. In the past, immigrants into European countries, except for Germany and Austria, came predominantly from countries outside Europe, from Asia and North Africa, for instance. Flows from eastern Europe also concern non-European OECD countries, for example, Poles and Hungarians to the United States, Canada and Australia. For historical reasons, countries have received immigrants of different origins. Moroccans and Algerians are common in France, Turks and former Yugoslavians in Germany and the Netherlands, and Pakistanis and Indians in the UK, to cite some well-known examples.

During other periods of EU enlargement to include Greece (1981), and Spain and Portugal (1986), migration did not rise. In the case of Spain, return migration had occurred before accession. The bulk of immigration from southern Europe occurred mainly and massively during the 1950s and 1960s. These migrants built communities that then acted as a draw on new immigrants. The links between EU accession countries and existing EU member states are probably more diffuse. Flows from the east might grow in importance, but probably not from the accession countries; other countries such as Romania, Moldavia and the Ukraine may be more important sources.

The renewed interest in labour-related migration in many OECD countries in the last decade, as well as the predominance of family reunification and the great number of asylum seekers, counters criticism of what is termed ”Fortress Europe”. As our chart shows, the number of immigrants, including from outside the EU, has risen far more sharply in Europe over the last decade than in the United States.

One reason for policy prudence towards foreign workers is that immigration can raise social costs, in education and healthcare, for instance. But can migrants alleviate these costs, too? The immediate costs are in healthcare and social protection, especially for humanitarian immigration. Educational costs are high also, especially in cases of accompanying dependents or family reunification. One of the most hotly debated questions is whether a large increase in immigration flows would help OECD countries pay for their future social spending, especially on pensions. The argument is that more young immigrants mean more young workers and so more revenue for social services and pension funds. In this hypothesis, the focus is mainly on employing high-skilled immigrants who will come for a temporary period rather than on recruiting more lowskilled workers.

However, this thinking has its flaws. The most obvious is that immigrants are frequently not temporary and may wish to settle and retire in the host country themselves. And their population is ageing too, to become tomorrow’s pensioners. Furthermore, not all legal immigrants join the workforce. In Australia and Canada, countries which operate selective immigration policies based on labour market needs, only a quarter to a third of annual entrants are active workers; the rest being family dependents, including school-age children.

Another limit is whether the immigrants actually find work. The unemployment rate among foreigners in some European OECD countries is twice that of their percentage in the total labour force. Those who do find work are often paid less than native workers. Indeed, some OECD countries have begun focusing more energy and finance on training and supporting new arrivals, in part to help them to integrate more rapidly into the labour market or to retain those who might otherwise move on to competitor countries. But while such policies can help integrate foreign populations and overcome certain labour shortages, immigration alone cannot generate sufficient funds required to finance the increasing demands of ageing populations.

References

OECD (2003), Trends in International Migration, Paris.

OECD (2001), Migration Policies and EU Enlargement, Paris.

©OECD Observer No 243, May 2004




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