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2.4.2.2 Labor Markets and Migration


Academic Research paper and Study of the Economy of Romania and Romanian Business

The impact of Eastern European Enlargement on the labor market can be twofold. The first way is via movements of the Eastern European labor force towards the EU-15. The other way is via the relocation of economic activities from the EU-15 to Eastern Europe. The impacts from such a capital movement towards the Eastern European Countries will be dealt with in chapter (2.4.2.3), when it comes to FDI-flows. This chapter will cover the impact resulting from migration flows.

Labor Markets in the EU: Western Europe and Eastern Europe

Wage levels in the Central and Eastern European Countries (CEECs) differ remarkably from those of the EU-15. According to Boeri & Brucker (2001: 4) they range from 10 % to 40 % of the EU-15 average. Beside the nominal difference wages in CEECs actually fell beginning in the mid-nineties by 10 % and started to make up these losses only in 1999. They fell again in 2001 by over 15 % and started to recover in 2003 once more (cf. EC 2006 b: 56, Graph 23).[1] Although “in 2005, unit labor cost growth in the EU-10 is expected to have outpaced that in the EU-15” (ibid: 56) there are still strong incentives for westwards migration flows to be suspected. Breuss’ model (2002: 255f.) predicted over the years additional GDP growth for some OMS because migration surpluses would decrease the wage levels in the EU-15.[2]

Another strong incentive for migration from Eastern Europe to the EU-15 is the higher rate of unemployment, especially of the young, maybe partly hidden by a lower activity rate. The activity rate in the EU-15 has been about 73 % in the period from 2001–2005 but it was only about 65 % in the NMS (cf. EC 2006 b: 45). Structural unemployment in the OMS (measured by the NAWRU) decreased in the same period by some 0.75 % to about 7.75 % but it increased in the CEECs by 2.5 % to the total level of 13 %. Unemployment rates for the young amounted to 30.4 % in the Eastern European EU Countries in 2004, while the respective value for EU-15 reached only 16.7 % (cf. ibid: 54). This situation on the labor market is well captured in Figure 2.3:

Image 2.3:Employment and Unemployment in the EU-15 and the Central and Eastern European Countries
Labor markets in the EU – Eastern Europe vs. Western Europe

Source: Commission Services (Ameco); figure taken from EC 2006 b: 5

Migration after EU Enlargement

These unfavorable conditions in the CEECs seem to persist despite the strong growth recorded during the last years and correspond to the negative contribution of labor to growth in the EU-10. Anyhow, the available evaluations agree that migration of EU-8 workers westwards was “rather limited” (EC 2006 b: 81).

“Overall, the percentage of EU-8 nationals in the resident population of each EU-15 Member State was relatively stable before and after enlargement, with increases in the UK and, more conspicuously, in Austria and in Ireland … There is no evidence that migration flows from the EU-8 have caused significant labour market disturbances in the EU-15 countries.” (EC 2006 b: 81f.)

Concerning numbers the EC report seems much more cautious. Just the case of Poland is discussed and quantified (cf. ibid: 81ff.). In the first year of EU-accession about 407,150 Poles migrated according to Polish officials. Most of them (340,530) were seasonal workers. Main destinations were Germany and the three countries which did not restrict access to their labor markets. Informal short-term migration is estimated to some 600,000 – 700,000 annually (cf. ibid: 82, footnote 53). On the first sight the few numbers provided seem much higher the estimations by Boeri & Brucker as already migration from Poland exceeded the 335,000 persons projected for the first year by far. Then again, the high number of seasonal workers rather supports the EC’s point of view. Probably most of them would have come to the OMS anyhow as seasonal workers, since the respective opportunities existed already in the past and both, Germany and Austria did not grant additional access to their labor markets after 2004. Other estimations range between 50,000 and 175,000 new entries from the EU-8 for the UK in the first year (cf. ECAS 2005: 10ff.), maybe about 85,000 for Ireland (ibid: 12) and perhaps some 21,800 for Sweden (ibid: 13). The next ECAS report (2008: 4) accounted some 685,200 employees from the EU-8 in the OMS by the end of 2006, reaching shares of the local labor force between 0.6 % in Germany up to 2.4 % in Ireland. Similar results are given by Pohl (2006), who cannot observe disruptive impacts on the labor markets of the UK or Ireland either. The migration inflow was contrawise perceived as a successful measure to deal with shortages on the domestic labor markets (ibid: 30). These findings are in line with the conclusions from the EC’s Single European Market assessment (2007 e: 7), cited in chapter 2.3.2.

Footnotes

[1] These high changes in nominal wages are at least partly driven by inflation. The further costs of inflation and the uncertainty about future connected to it might be additional incentives for migration.

[2] This is because of the fact that “firms in the EU can produce more with more labor at lower wages” (Breuss 2002: 256).