Unformatted text preview: EU Enlargement and Labor Migration: A Big Concern? Expansion of the EU 1957: Founding Members 1973: First Enlargement
Belgium, France, Italy, Luxembourg, West Germany Denmark, Ireland, UK, Greenland (left in 1985) 1981: Second Enlargement
Greece 1986: Third Enlargement
Portugal, Spain 1995: Fourth Enlargement
Austria, Finland, Sweden 2004: Fifth Enlargement Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia Future Expansion of the EU 2007: Sixth Enlargement
Bulgaria, Romania Candidate Countries
Turkey, Croatia, FYROM Potential Candidate Countries
Albania, Bosnia and Herzegovina, Montenegro, Serbia, Kosovo Expansion of the EU Declaration of the European Council in Copenhagen "Accession will take place as soon as an associated country is able to assume the obligations of membership by satisfying the economic and political conditions required." Official EU Website Copenhagen Criteria Political Criteria Respect for democracy Human rights Protection of minorities Functioning market economy Ability to handle market competition in a single market Ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union Economic Criteria Acquis Communautaire Accession Treaty of 2003 Freedom of Movement for All Workers Integral component of the EU Freedom of Movement Refers to the abolition of legal frontiers that interfere with intraCommunity labor migration Little or no encouragement of migration Migration Flows: How Are They Determined? Neoclassical approach:
Decision to migrate is individual's choice Supply factors (push factors) HOS Model HOS Model Demand factors (pull factors) Most important motive= wage differential Equilibrium for EU wages Supply Factors (Push Factors)
1. 2. 3. 4. 5. Income/Wage Differentials Costs of Migration Expected Growth for GDP Access to Social Security Benefits Unemployment Rates Unemployment Rates Demand Factors (Pull Factors) Migration Flows: How Are They Determined? New Economies of Migration: Household considered to be the core decisionmaker Concerns of the EU Disparities in income and unemployment between EU15 and EU10 > mass migration of workers Concerns that entering workers will: Depress wages Increase unemployment Exploit welfare benefits Response of the EU-15: Transnational Agreements Cypress and Malta Offered full access to EU labor markets Transnational agreements restricted movement for EU8 Old member states Allowed to defer EU law concerning free movement for up to 7 years 2+3+2 scheme Three historic periods Period One: May 1, 2004 to April 30, 2006 Open to migration:
UK, Ireland, Sweden Requiring working permits and/or institute quotas:
All other EU15 countries Restriction of access to welfare benefits: All EU15 countries Period Two: May 1, 2006 to April 30, 2009 No restrictions maintained:
UK, Sweden, Ireland Future eradication of restrictions:
Greece, Portugal, Finland, Spain Italy lifts restrictions in July 2006 Some restrictions maintained: Belgium, Denmark, France, the Netherlands, Luxembourg All restrictions maintained: Austria, Germany Period Three: May 1, 2009 to April 30, 2011 All restrictions must be lifted, unless: Country can demonstrate that labor migration has/will cause serious labor market imbalances Percent of total working age population 0.5 1.5 2.5 0 1 2 Be lg iu m D G er m an y G re ec e Sp ai n Fr an ce Ire la nd en m ar k Foreign nationals from the EU-10 residing in the EU-15 Enlargement Results Country Lu xe m bo ur g N et he rl a nd s Au st ria Po rtu ga l Fi nl an d Sw ed en U EU K -1 5 2005 2004 2003 Destination Countries: EU-15 EU15 countries consist of:
Ireland, Sweden, UK, Denmark, Netherlands, Germany, France, Belgium, Finland, Austria, Greece, Luxembourg, Spain, Italy, Portugal Common fears/concerns: Migrants drive down wages Migrants take jobs from native workers Migrants drain resources from home social security systems Migrants Drive Down Wages?
Minimal effect on average earnings Migrants Take Jobs from Native Workers? Continual strong demand for labor Complementary vs. Competitive labor force Relatively similar migrant education levels as in EU15 High percentage of medium education level migrants Complement EU15 labor market needs Migrants Drain Social Security Systems? Overall, EU10 migrants not overrepresented in social welfare systems Ambiguous data: Higher percentage of migrants on welfare in Austria, Belgium, Denmark, France, the Netherlands, Switzerland Lower percentage of migrants on welfare in Germany, Greece, Portugal, Spain, UK Benefits of Labor Migrants to EU-15 Real GDP Growth Especially with skilled immigrants If Incoming Labor is Complementary... Increase productivity of native workers Positively influence wages Sending Countries: EU-8 EU8 countries consist of:
Poland, Slovenia, Hungary, Czech Republic, Estonia, Latvia, Lithuania, Malta, Cyprus EU10 countries consist of: Common fears/concerns: All of the above plus Malta and Cyprus Significant outflow of young, educated labor Labor shortages in key sectors Accelerating wage growth "Brain Drain" vs. "Brain Gain" effects Outflow of Labor? Most notably in Lithuania and Latvia Mostly young, educated workers Introduces other complications 3.3% 2.4% Labor Shortages in Specific Sectors? Accelerating Wage Growth? "Brain Drain" Effect? Better opportunities and higher wages = emigration of educated workers from EU8 Most notable in the health sector Ministry of Health estimates 50% of Polish health care professionals left for EU15 countries Benefits for EU-8 "Brain Gain" Effect Returning migrants bring capital, skills, education, and new ideas back home Since 2004 enlargement, unemployment rates have fallen in nearly all EU10 countries Countries with high unemployment rates Workers remittances Gains for migrants themselves Higher income Better use of skills Emily's Slide Pertinent U.S. Issue: Illegal Immigration
Sans Politics... Benefits suggested from allowing immigrants to work in U.S.: Foreign workers complement, rather than compete with, domestic workers Little/no evidence of "welfare tourism" Increase in tax revenues More beneficial for U.S. than for Mexico Free domestic workers for higherskilled jobs with higher pay U.S. Policy Increased border control Especially with reference to preventing terrorism Little or no real enforcement Many illegal immigrants continue to be hired Nearly 7 million illegal aliens estimated in U.S. (January 2000 figure) What Should the U.S. Do? ...
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This note was uploaded on 04/14/2008 for the course ECON 327 taught by Professor Ge during the Fall '06 term at Bucknell.
- Fall '06