Time for a rethink on labour restrictions

Date: 21/06/01

Despite fears in many member states that free movement of workers will lead to a deluge of cheap labour, Dick Leonard asks if the Union is being overcautious

IS THE EU being short-sighted and unduly restrictive in its approach to free movement of labour from the applicant states of central and eastern Europe? So far only Hungary has accepted the proposed terms put to them by the EU negotiators, and the chapter is still causing difficulties with the other nine candidates from the region.

The relatively hard line laid down in the negotiating mandate agreed by the Commission in April, and then slightly softened by the Council of Ministers, was in response to fears in some member states that a tidal wave of immigrants would flood in from the former Communist East, undercutting wage rates and pushing up unemployment among the native population.

These fears are particularly strong in Germany and Austria, which border several of the applicant states and have hitherto been the front-line targets for would-be immigrants not only from the candidate countries, but also from further east - from Belarus, Ukraine and Russia.

The EU is proposing that full freedom of movement should be postponed until seven years after the admission of the new members.

The mandate lays down a general transition period of five years, during which time the member states will continue to operate their own national measures on accepting workers from the new member states.

This means that they can apply their own restrictions, or decide to go further than others in opening their labour markets, according to local needs and circumstances. The transition period would be reviewed after no more than two years, but it would require a unanimous vote of the member states to shorten or lift the transition, or to agree particular safeguards for exceptional circumstances.

In any event, individual member states would be able to continue with national measures.

The general transition would end after five years, but any member state would be able to maintain its national provisions for a further maximum of two years.

Parallel to the restrictions on freedom of labour, the German and Austrian governments are pressing for comparable curbs on the provision of services in sectors such as construction and industrial cleaning.

The assumptions behind the EU approach have been challenged by a recent report from a consortium of five leading economic think-tanks, led by the German Institute for Economic Research (DIW). This strongly suggests that the EU may have overestimated the likely level of migration of workers from the East if the present stringent restrictions were to be removed, and proposes a different approach to the negotiations.

The study found that the accession countries have a gross domestic product per capita of less than 50 of the EU average, and a wage level which is 10-15 of the EU average. Such income differentials, it concedes, are an important determinant of migration, in addition to the levels of unemployment.

The core of the research was a study of migration flows of southern Europeans to Germany between 1967 and 2000. A particular focus was on migration from Portugal and Spain, when free movement was conceded following the end of a transition period after their accession. The numbers seeking entry proved to befar lower than had been previously predicted.

The authors of the report conclude that - given freedom of movement from all ten eastern European accession states - some two-thirds of the migrants would be likely to settle in Germany. In the first year around 200,000 might come to Germany.

Not all of them would be workers, so some 100,000 jobs might be filled. In the long-run - until 2030 - between 2. 2 and 2. 6 million people could be expected to emigrate to Germany. This would amount to 3. 5 of the German population, and 2. 5 of the total population of the exporting states. The long-run impact on the labour market would, the authors argue, be negligible.

They acknowledge, however, that it could have a larger impact - either positive or negative - on specific areas and employment sectors, and that adjustments would be necessary in particular cases.

The report suggests that postponement of accession for five or ten years would not reduce the migration potential. Accession by waves would, however, lower initial flows, especially if Bulgaria and Romania (where the wage differential with Germany is very high) were excluded, as seems highly probable, from the first wave.

Transition periods with suspension of free movement would just postpone the flows, not alter the potential.

An alternative approach to the Commission's is proposed - that quotas should be established during the transitional period, rather than the effective ban currently in force. This would, they argue, smooth the migration flows and also give more information on how large the migration potential actually was. Initially, they suggest, 100,000 work permits could be issued in Germany.

It was actually the Commission which financed this major research project.

It may be too late to expect it to seek major modifications to its negotiating mandate, but it might at least encourage the member states to be more liberal in their own polices.

The use of quotas has long been the foundation of US immigration policy, and it is more in tune with the labour market needs and long-term demographic trends of the member states than the current effective ban on new immigrants from the East.

Despite fears in many Member States that free movement of workers will lead to a deluge of cheap labour, columnist asks if the Union is being overcautious.