Migration and jobs: Is Europe’s labour market adjusting?

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The question of whether or not migration, and in particular free mobility within Europe, can play a role in reducing unemployment is a highly topical one. In the EU, harmonised unemployment rates rose between 2007 and Q3 2014 from 7.2% to 10%.

However, not all countries were equally affected. Whereas the unemployment rate rose in Greece and Spain over the same period by about 18 and 16 percentage points, respectively, it actually declined in Germany, by almost 4 percentage points. At the larger regional level, by 2012, disparities were even more pronounced, ranging from 1% in the Finnish region of Åland to 30% in the Spanish region of the Canary Islands, and are unlikely to have changed much since.

The Canary Islands were also the region which experienced the largest increase in unemployment rates during the crisis, by more than 18 percentage points, whereas the unemployment rate declined in the five eastern Länder of Germany by seven to nine percentage points.

In the United States, the spread of state-level unemployment rates was much smaller, ranging from a low of about 3% in North Dakota to a high of 13% in Michigan in 2012. In terms of unemployment at the larger regional level, the variation is more than twice as large in Europe as in the United States.

One way these variations in regional unemployment adjust over time is through migration. This has long been the case in the US, and with free labour mobility being an EU objective, should also apply to the euro area as well. How has migration reacted to the crisis? Has labour from high unemployment regions in Europe actually moved to low unemployment regions?

The answer is yes, though with caveats. An OECD working paper finds that in Europe, people are moving in significant and growing numbers from high to low unemployment regions. If all of these migration movements were employment-driven (leading to an actual job), then up to a quarter of the crisis-related differences in unemployment would be reduced within a year, the authors believe. Obviously, factors other than work also drive migration, including accompanying family and studying. Such factors may reduce the size of the equalising effect, but it is nonetheless clear that the scale of such inter-regional mobility in Europe has increased sharply with the crisis. By contrast, in the United States, the crisis and subsequent sluggish recovery have not been accompanied by greater inter-regional labour mobility, even if the level of that mobility remains higher than in Europe.

The increase in employment-driven mobility in Europe is good news for the labour market’s ability to adjust, but a closer look reveals a more complicated picture. Labour market adjustment in Europe during the crisis was driven primarily by citizens moving from outside the euro area, such as the most recent EU accession countries and people from non-European countries. Indeed, the mobility of nationals from the new EU member states is considerably larger than those from Europe as a whole and also larger than that of nationals from southern Europe. Immigration from Romania or Poland alone to other EU countries has been larger than that of Spain, Greece, Portugal and Italy taken together.

Moreover, migrants with citizenship from a country in southern Europe who moved to another country within the euro area often face difficulties in integrating well into the labour market: fewer than 6 out of 10 of these migrants are in employment within the year following the move, compared with more than 7 out of 10 for migrants from newer EU countries such as Poland, Hungary and the Baltic republics.  

Most intra-EU movers from the new EU member countries, in particular from Romania and Bulgaria, saw a strong improvement in their employment positions at destination compared with their home situation–something that is not systematically observed among movers within the United States.

Moreover, intra-EU migrants tend to be younger and better educated on average than their compatriots who did not move–a phenomenon that is also observed with respect to inter-regional mobility in the US, but to a lesser extent. Nationals from southern Europe stand out with respect to their relatively high education level, with the majority having a tertiary degree. This is particularly true of Greece and Italy, where over 60% of migrants are highly educated, compared with just a quarter of migrants from Portugal.

The exodus of such talent has raised concerns about a possible “brain drain”, though the limited scale of the flows concerned, and the fact that one can expect significant return mobility if the situation in the origin country improves, tempers such risks. In any case, such effects have to be weighed against the easing of the labour market (and possible social welfare) in the origin countries.

In addition, many migrant Spaniards, Greeks, Italians and Portuguese were previously immigrants themselves, having become citizens in their host country. About 17% of the movers from southern Europe are in this group, who are about three times more likely to migrate than native-born co-nationals.

In short, labour mobility in the euro area appears to be on the rise, which is positive for the EU single market project. Maintaining momentum requires a continued effort in encouraging movement and removing obstacles. Some of these are tricky to tackle, such as the issue of language. And it is not certain that public opinion in many countries would favour moves to increase migration for employment. The evidence on the economic side is rather clear: more mobility within Europe and in particular within the euro area would improve the European-wide labour market, and that means the economy too.
Jauer, J., et al.  (2014), “Migration as an Adjustment Mechanism in the Crisis? A Comparison of Europe and the United States”, OECD Social, Employment and Migration Working Papers, No. 155, OECD Publishing, Paris.

See also:


©OECD Observer No 301, Q4 2014

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