Europe’s labour mobility. When east meets west

The evidence argues in favour of lifting all restrictions on labour migration from the new members of the European Union

THE headlines around Europe in the run-up to May 1st 2004 were depressingly similar. That was the day when ten new countries, mostly from central Europe, joined the European Union. Yet rather than celebrate, newspapers were filled with dire warnings of a flood of migrants who would steal jobs or sign up for welfare benefits. Under pressure, 12 of the 15 existing EU members imposed "transitional arrangements"--Brussels-speak for restrictions on labour from the east. Britain and Ireland stood alone in opening their markets to all, though even they adopted rules to stop benefit-seekers, and Britain created a registration scheme. Sweden also kept its labour market open, after its parliament rejected restrictions.

These transitional arrangements must be reviewed at the end of two years--ie, by April 30th. They can be extended for a maximum of five years. On February 8th the European Commission published a report on experience so far. It might be read as a controlled experiment, setting the 12 that chose restrictions against the three that did not. The commission's conclusions are unequivocal: all the evidence comes out strongly in favour of the three. They have had faster growth and more employment; the 12 either saw no effects or negative ones, notably more undeclared workers. The three's openness may not be the cause of their better performance, but it has not damaged them either.

The commission argues that the curbs are not merely unfair (freedom of movement is supposedly a fundamental right of all EU citizens). They also do not work. Those countries with the tightest restrictions seem not to have appreciably fewer migrant workers. Indeed, the country that saw the biggest jump after 2004 was Austria, the fiercest believer in restrictions. What seems to have happened is that the restricters got the highest numbers who work illegally, declare themselves as self-employed, or say they are posted abroad from their home countries. As the report concludes, "there is no direct link between the magnitude of mobility flows...and the transitional arrangements in place."

The fear that migrants from the east might push up unemployment also looks empty. For a start, too few have come to have much impact. In most EU 15 countries, workers from the new members make up less than 1% of the workforce: only in Ireland is the number as big as 3.8%. And far from stealing jobs from locals, most incomers have taken jobs that locals shun. That means better business, higher profits--and, ultimately, more employment. A striking finding is that, across the EU 15, migrant labour from the EU 10 has tended to be associated with rising employment rates, even for local workers.

Nor is there evidence of migrants taking up welfare benefits in large numbers. The overwhelming reason for their moving is to work, usually with an eye to returning home later, not to go on the dole.

This is not to deny that there are some pinch points. Irish seamen went on strike last year over their employers' use of cheap, non-union Latvian labour; Irish unions now want some restrictions. The two countries most chary of opening their labour markets, Germany and Austria, are the two that directly border the ex-communist east--Austrians point out that their wages are five times Slovakia's. Yet overall, says the commission, labour flows from the EU 10 have been too small to affect either job security or wages in the EU 15.

That finding is echoed by the World Bank's Ali Mansoor in a forthcoming study of migration in the post-communist world. He concludes that labour flows will tend to "unwind naturally". Most people who move do not want to settle abroad, but to get cash and skills for a better life at home.

Yet such results remain sensitive. Comparing the final version of the commission's report with earlier drafts seen by The Economist, there was much watering-down, surely inspired by commissioners from countries keen to keep restrictions. A reference to the "extremely positive" experience of liberalised labour markets has become "generally positive". A comparison with the bigger problem of illegal migration from outside the EU has been largely excised. Even this week, the (Czech) employment commissioner, Vladimir Spidla, would not come out with a firm recommendation to scrap restrictions.

Yet the commission's arguments seem to be hitting home. In December, the European Trade Union Confederation changed its line on labour mobility. With only its German and Austrian members dissenting, it voted to back the ending of all intra-EU restrictions. It now says it is better to have workers from the east as legal employees, who can be brought into collective bargaining and will pay taxes, than in dodgy, exploitable self-employment or outright illegality.

This suggests that the domestic debate may also be tilting in favour of liberalisation. Finland, Portugal, Spain and perhaps Greece now seem all but certain to ditch their transitional arrangements in May. Others are considering whether to liberalise a little (see table on previous page).

Greater labour mobility, whenever it comes, will be beneficial. The competitive challenge that lower-cost workers, whether from the EU 10 or elsewhere, will pose for the pampered, inflexible workforces of the old EU 15 will exist anyway. Those who would keep out workers from the east will find their efforts as vain as attempts to fend off globalisation.

Article argues that all the evidence available argues in favour of lifting all restrictions on labour migration from the new members of the EU.