Assessing east-west labour migration after EU-enlargement

Table of Contents

I. Introduction

II. East-West Labour Migration: Pre-Enlargement Assessments and Fears
II A. Pre-Enlargement Assessments and Sentiments in Germany
II B. Pre-Enlargement Assessments and Sentiments in the United Kingdom

III. Post-Enlargement Labour Migration to Germany and the United Kingdom
III A. Post-Enlargement Labour Migration to Germany
III B. Post-Enlargement Labour Migration to the United Kingdom

IV. The Economic Impact of EU-10 Labour Migration
IV A. The Economic Impact: A short-term Consideration
IV B. The Economic Impact: A medium-term Consideration

V. Conclusions

VI. Notes

I. Introduction

On May 1, 2004, ten new countries^[i] joined the European Union (EU). Besides the Mediterranean countries of Cyprus and Malta, eight Central and Eastern European Countries (CEEC/EU-8) became members of the EU. The developments that lead to the enlargement in 2004 were accompanied by concerns in the fifteen old member states (EU-15) regarding the potential inflow of workers from the EU-8.

The Free Movement of Workers is a fundamental pillar of the EU’s internal market and is legally defined in Article 39 I of the Treaty of the European Community.^[ii] According to this principle, every citizen of the EU is entitled to take up employment and to answer to job-offers EU wide. Some countries of the EU-15 feared that their labour markets were going to be flooded by Eastern European workers. Polish plumbers and Czech pavers, taking over the jobs of the EU-15 citizens, became symbols of the fear that was spreading in some EU-15 countries.

When the enlargement finally took place on May 1, 2004, only three countries of the EU-15 fully applied the EU rules on the free movement of workers – Sweden, the United Kingdom (UK) and Ireland, the latter two are only restricting certain welfare benefits for Eastern European workers. The thirteen others made use of the Transitional Arrangements (TA) that were annexed to the Accession Treaty^[iii] - it allows to restrict the free movement of migrant workers from the EU-8.^[iv] Most of these states feared an increase of domestic unemployment rates and pressure on their wage levels due to an unrestricted labour migration from the new member states.

Soon and exactly two years after the accession of the EU-8, these thirteen states have to decide until May 1, 2006, whether they continue to impose the restrictions or to lift them.

This essay will focus on two aspects: Firstly, it will examine whether the estimated migration scenarios prior to enlargement have been able to picture the current migration flows correctly. In a second step, the short- and medium-term impacts of EU-10 migration on the economies of the UK and Germany will be assessed. Whereas the former decided to allow migrant workers access to its labour market from the very beginning, the latter had chosen to restrict the free movement of workers and is currently considering extending these restrictions until 2009. It will be argued that the fears concerning negative economic effects in the UK were irrational – at least concerning the short-term impact. In regard to the German case, it will be argued that extending the restrictions until 2009 will have only a limitedly harmful effect on the economy. To develop these positions, it will be shortly drawn on studies that were conducted prior to enlargement and were aimed at estimating the impact that enlargement would have on East-West labour migration within the EU. In the next part, the actual scale of East-West labour migration and its impact on the economies of the host countries will be analysed. In both parts, the focus will be put on the UK and Germany. Before ending the paper with a conclusion, the short- and medium-term impacts of EU-10 migration flows to the UK and Germany will be assessed.

Since enlargement took place less than two years ago, neither the literature concerning post-enlargement migration nor the amount of data is exceedingly substantial. However, there are enough sources to conduct an accurate analysis. Considering the short period of time since the enlargement, most of the sources that will be used can only be found in the Internet.

II. East-West Labour Migration: Pre-Enlargement Assessments and Fears

This chapter aims to illustrate the basic sentiments that were present in the UK and Germany prior to the enlargement of the EU in May 2004. Further, it will shortly address studies that estimated the numerical impact, which EU enlargement would have on the UK and Germany.

II A. Pre-Enlargement Assessments and Sentiments in Germany

Surveys to assess the citizens’ perceptions and sentiments prior to enlargement were conducted in Germany. In September 2002, German citizens were asked to give their opinion on the effects that the accession of the EU-10 would have on their economy.^[v] German citizens affirmed, with 53% of the sample, the statement that EU enlargement would lead to higher unemployment in their economy.^[vi] Asked whether Poland, sharing a border with Germany and having a population of 40 million, should become a member of the EU, 45% of the sample negated this question – only 40% affirmed it.^[vii]

The public opinion in Germany was further shaped by unions and political representatives^[viii] that voiced fears about uncontrollable migration flows to the labour market, which was already in a bad shape with an unemployment rate of almost 10%.^[ix]

Several studies in regard to the potential inflow of EU-10 labour migrants into Germany were conducted in the years prior to enlargement. In this chapter, the focus will be put on the estimated migration flows only. The particular estimation procedures will not be discussed. However, it is to note that all studies based their estimates on the assumption that Germany would fully apply the principle of free movement of workers.

The German Institute for Economic Research (DIW) estimated that the inflow of EU-10 migrants to Germany would at the beginning amount to 220,000 annually and would decrease until the end of 2010 to approximately 95,000 a year.^[x]

Another study estimated figures that were considerable lower than those from the DIW. According to Herzog, immediate post-enlargement migration flows would amount to 135,000 per year.^[xi] Over time, this number would decrease. Due to these developments, Herzog predicted potential pressure on the German labour market that could cause negative effects in the immediate aftermath of enlargement. Particularly, lower wages and an increase of the unemployment rate are named as possible negative consequences.^[xii]

Considering the pure numbers of EU-10 migration, the ifo Institute presented in its study the highest estimates.^[xiii] The ifo study expected in the first five years after the enlargement annually between 220,000 and 240,000 migrants from the CEEC. Between 2011 and 2019 the figures would decrease to an annual rate between 100,000 and 160,000.^[xiv]

II B. Pre-Enlargement Assessments and Sentiments in the United Kingdom

In April 2002, Gallup Europe conducted a survey^[xv] in the UK to quantify the perceptions and sentiments of UK citizens towards the upcoming EU enlargement. Asked whether EU enlargement would cost jobs British jobs due to the inflow of labour from the CEEC, 59% of the sample affirmed this question – 32% negated.^[xvi] Further, 59% affirmed the statement that due to the enlargement too many people from the CEEC will be free to come to the UK – here, 34% of the sample negated.^[xvii] Concerning the economic dimension of enlargement, it can be said, analogue to the results in Germany, that a majority of UK citizens perceived the accession of the EU-10 as having negative consequences for the UK economy.

In order to have available numbers in regard to the potential migration flow to the UK, the UK Home Office ordered a study^[xviii] to assess the extent of labour migrants from the EU-10. The study concluded that the expected migration flows to the UK would amount to between 5,000 and 13,000 immigrants per year up to 2010.^[xix] The study was based on the estimated growth of the Gross Domestic Product (GDP) in the accession countries as well as on variables concerning distance, historical links and language. At that time, it was already becoming clear that Germany, the country with the closest socio-cultural ties with the CEEC, would from May 2004 on impose restrictions on the free movement of labour. The Home Office report, however, drew the conclusion that even if Germany would impose restrictions, only a small fraction of those who originally intended to migrate to Germany will decide to move to the UK instead.^[xx] According to this study, migration to the UK was expected to be in line with the then-current migration movements.^[xxi]

Based on the estimates and sentiments that were outlined in this chapter, the next part will focus on the actual migration flows to the UK and Germany since May 2004.

[...]

^[i] Poland, Hungary, Czech Republic, Slovakia, Lithuania, Latvia, Estonia, Slovenia, Cyprus and Malta (EU 10)

^[ii] Vertrag zur Gründung der Europäischen Gemeinschaft (Stand: 01.09.2002), in „Europarecht“ (Baden- Baden: Nomos Verlagsgesellschaft, 2002)

^[iii] The Transitional Arrangements can be found here: http://europa.eu.int/comm/employment_social/free_movement/docs/transition_en.pdf (last access: 28.03.06)

^[iv] The Transitional Agreements cannot be applied to Cyprus and Malta

^[v] European Opinion Research Group, Eurobarometer 57 – Länderbericht, “Auf dem Weg zur Erweiterung – Image, Aufgaben und Zukunft der Europäischen Union“, 16. September 2002. The survey can be found at: www.eu-kommission.de/pdf/eurobarometer/Laenderbericht-D-572002.pdf (last access: 29.03.06).

^[vi] European Opinion Research Group (2002), p. 12.

^[vii] Ibid., p. 10.

^[viii] See for example representatives from the Social Democrats and the Christian Social Democrats, Der Tagesspiegel “ Zustimmung für Schröders Vorstoß zur Erweiterung - Freizügigkeit von Arbeitskräften in EU zunächst nur eingeschränkt? “, 27.12.2000.

This article can be found at: http://archiv.tagesspiegel.de/archiv/26.12.2000/ak-po-au-19432.html (last access: 30.03.06).

^[ix] Bundesanstalt für Arbeit, „Arbeitsmarkt 2002“, 51. Jahrgang, Sondernummer, Nürnberg, 18. Juni 2003., p. 57.

This report can be found at: http://www.pub.arbeitsamt.de/hst/services/statistik/000100/html/jahr/index.shtml (last access: 29.03.06)

^[x] Herbert Brücker/Parvati Trübswetter/Christian Weise, “Osterweiterung – Keine massive Zuwanderung zu erwarten“, in DWI-Wochenbericht, 21-2000, Berlin, 2000. This study is available at: http://www.diw.de/deutsch/produkte/publikationen/wochenberichte/docs/00-21-1.html (last access: 29.03.06).

^[xi] Judith Herzog, “Das Migrationspotential der EU-Osterweiterung und dessen Folgen für den Deutschen Arbeitsmarkt“, Tübingen, 2003, p. 33.

This paper can be found at: http://www.sowi.uni-tuebingen.de/wip/public/WiPs/WIP-21.pdf

(last access: 30.03.06).

^[xii] Ibid.

^[xiii] Hans Werner Sinn/Gebhard Flaig/Martin Werding/Sonja Munz/Nicola Düll/Herbert Hofmann, “EU- Erweiterung und Arbeitskräftemigration. Wege zu einer schrittweisen Annäherung des Arbeitsmarktes“, ifo Beiträge zur Wirtschaftsforschung, München, 2001.

A short version of this study can be found here: http://www.cesifogroup.de/pls/portal/docs/PAGE/IFOCONTENT/BISHERIGESEITEN/IFO_INSTITUT/NE UE_UNTERSUCHUNGEN_X_RECENT_IFO_STUDIES/NEUE_UNTERSUCHUNGEN_2001/KURZFA SSUNG2.PDF (last access: 29.03.06).

^[xiv] Ibid., p. 4.

^[xv] EOS Gallup Europe, Flash Eurobarometer 124, „European Union Enlargement, UK opinion poll“ – April 2002. This survey is available online: www.eu.int/comm/public_opinion/flash/fl124_en.pdf (last access: 27.03.06).

^[xvi] EOS Gallup Europe (2002), p. 19.

^[xvii] Ibid., p. 20.

^[xviii] UK Home Office, „The Impact of EU Enlargement on Migration Flows”, Home Office Online Report 25/03, 2003. Source: www.homeoffice.gov.uk/rds/pdfs2/rdsolr2503.pdf (last access: 30.03.06).

^[xix] UK Home Office Online Report (2003), p. 58.

^[xx] Ibid., p. 57.

^[xxi] Ibid., p. 8.