Regional disparities, migration and
geographical mobility in the EU
Adnett ch.5.5,5.6,5.7
Employment in Europe ch.5
Mobility patterns in the EU
• Low geographic mobility within the EU both relative to the
EU population and compared to migration inflows from non
EU countries
• Regional mobility within EU member states is higher than
cross-borders mobility.
• Overall internal mobility rates in the EU are lower than in
the US; between 2000-2005 around 1% of the working age
population have changed residence each year from one
region to another compared to 2,8%-3,4% in the US
• Since the EU enlargement the mobility flows did not
increase much
• Mobile and migrant workers are usually younger and more
educated/skilled than the average sending country
population.
Variables which affect migration choices
• Economic determinants
– Differentials in income per capita, (un)employment rates,
social security systems
• Characteristics of the population:
– Age, education, female participation
• Distance
– Physical distance (km), border
• Cultural aspects
– Common language
– Networks
• Institutional aspects
− Regulations of flows
− Pensions’ portability
− Recognition of qualifications/educational degrees
Economic models of migration/labour mobility
• According to standard neoclassical theory workers compare the net
present value of job offers outside their region/country with those
within. The net present value of job offers is the difference
between expected benefits and expected costs of migration/mobility,
• Expected benefits are given by income/wage differentials between
arrival countries/regions and countries/region of origin (Wa-Wo)
and differences in employment opportunities.
• Expected costs are given by the opportunity costs (Co: differences
in employment probabilities and forgone earnings) and direct
mobility costs (Cd), both monetary (search costs and re-locating
costs such as information costs, housing costs, moving costs, etc.)
and psycological (breaking family ties,..)
• Migration costs and benefits vary according to the abilities/skills of
individuals (A), because ability affects both C and wage
differentials.
rm = f ( Wa-Wo; A;Co; Cd)
Implications of the neoclassical model
• Labour mobility and migration contribute to optimal allocation of
resources and labour market adjustment: high wage and low
unemployment regions attract migration inflows from low wage
and high unemployment regions; migration flows, by increasing
labour supply in high wage countries and reducing it in low wage
countries, reduce regional differences in wages and
unemployment.
• Returns and costs of mobility vary across workers due to personal
and family characteristcs:
 Young people are more likely to move, because for older workers
higher post – move earnings are discounted over fewer years
 If skill/educational qualifications are transferable, skilled and better
educated and higher potential income workers are more likely to
move, because they have lower moving costs (i.e.easier access to
information and lower re-locations costs) and higher expected
benefits
The policy implication is that labour mobility should not be limited,
but rather encouraged.
Effects of migration/1
• According to human capital models, the wages of migrant
workers in arrival countries are initially lower than similar
indigenous workers, but then increase with the duration of
stay in the arrival country, reflecting the initial investment
in “country specific human capital”. With temporary
migration this initial investment is not convenient, if
acquired skills are not recognised in the country of origin.
• Selective migration: differences in wage distribution
across skills/occupation between sending and arrival
countries and the transferability of qualifications may
affect the composition of migration inflows. If the wage
dispersions across qualifications is higher in arrival
countries, there will be higher incentives for highly skilled
workers to migrate, than for low skilled ones. On the other
hand low skilled workers are incentivated to migrate by
differences in welfare benefits and low direct migration
costs.
Effects of migration/2
• Effects of migration on arrival countries depend on the
composition of migration flows and their complementarity/
substitubility with local workers. They also depend on wage
flexibility in arrival countries. Econometric studies on wage
and employment impact of migration find low or no wage and
employment effects of immigration
• The economic conditions of sending countries may be
worsened by out-migration if it is made mainly by the most
skilled young workers (brain drain)
• However if the migrant workers acquires skills in the arrival
country which are more valued (in terms of real wages) in the
country of origin than in the arrival country, migrants may
decide to return to the country of origin.
Empirical evidence: Serious data problems
– Population and migration statistics:
• Few EU-countries report migration stocks (residents)
and flows accordingly
DK, FIN, GER, NL, SWE
• Others provide short time series and not in all years
AUS, BEL, LX, ITA, ESP?
• Many provide no or incomplete or flawed data
FRA, IRE, GRE, POR, UK
– Other data sources
• Labour Force Survey: underreporting of temporary
migrants, low response rates
• Work permits: underreporting of return migration,
inflated figures
Why low migration patterns in the EU?
Migration flows are restricted by cultural and
institutional barriers, which are particularly relevant in
EU countries and may explain the low mobility
patterns:
• Linguistic and cultural differences
• Institutional obstacles
• Housing transaction costs
• Lack of pension portability
• Restrictions to foreign access to domestic labor markets
(Immigration laws, imperfect recognition of diplomas,…)
• No recognition of qualifications/educational degrees
• Others: Social ties
• On the other hand, generous welfare regimes may be
an attracting factor.
Migration Policies: a European dilemma
• A stagnating and ageing Europe badly needs migrants: for
example in Spain they contributed to almost 50% of growth
in the last 5 years.
• But migration to countries with a rich welfare state creates
fiscal spillovers across jurisdictions, increasing concerns of
public opinion about migrants..
• ..inducing “race to the top” in migration restrictions and
tightening of national policies.
FEARS with enlargement:
• Deterioration of living standards, wage losses and job
displacements if substitution effect prevails, especially for
low skilled and Southern Europe
• Pressures on labour markets and social cohesion due to mass
migration. Especially on bordering areas and on traditional,
labour intensive sectors (agriculture and industrial sectors).
Migration policies
• Everywhere tightening of migration policies
towards the unskilled
• While race to attract highly skilled migrants
• Explicit point systems in an increasing
number of countries outside the EU (Canada
since 67, Australia since 84, New Zealand
since 91, Switzerland since 96)
Tightening everywhere, mostly in rich
welfare state countries
www.frdb.org index of the stance of migration policies (increasing in
restrictions)
Table A.8
Indicator of the restrictiveness of immigration laws in OECD countries (scale 0-10)
Average 1992-2003
Switzerland
4.32
Austria
5.34
Spain
5.81
Norway
5.95
United States
6.11
Australia
6.36
Greece
6.44
New Zealand
6.48
Iceland
6.63
France
6.65
Canada
6.71
Ireland
6.71
Germany
6.85
United Kingdom
6.91
Italy
6.98
Finland
7.01
Belgium
7.20
Netherlands
7.32
Portugal
7.40
Sweden
7.52
Luxembourg
7.55
Denmark
7.73
Are these fears based on reality?
– Has Eastern Enlargement resulted in more
migration than expected?
– Have transitional periods resulted in diversion
of migration flows?
– What is the impact of migration diversion on
GDP and labour markets?
– What can we conclude for the next Enlargement
round?
Estimated impacts of enlargement on migration
• The increase in migration flows are of a minor magnitude. Currently
immigrants from NMS represent only 0.3% of the EU workforce,
and 80% are located in Austria and Germany. Migration especially
from Baltic countries and Poland. Migration flows will be reduced
with growth and ageing population in AC.
• Temporary rather than permanent migration, especially seasonal
workers in construction and catering sectors.
• Negative effects on EU workers would be limited to blue collar
workers in the industrial and construction sectors and unskilled
service workers, however this effect is estimated to be lower than
feared, even in Austria and Germany
• Migration flows, especially in the form of crossborder commuting,
may have positive effects on hosting countries with problems of
excess labour demand and mismatches and of ageing population.
• Limiting migration flows may be negative, because it reduces
integration potentials and increase incentives to illegal immigration
and black economy.
Eastern-Enlargement migration policies
Pre-Enlargement migration conditions
– exclusion of labour markets from step-wiseintegration of NMS into Common Market
– some bilateral agreements and quotas
(e.g. Germany, Austria)
– other channels:
•
•
•
•
shadow economy
establishment of companies (‘self-employment’)
posting of workers through service trade
students
Transitional restrictions (2004-2007) in labour
mobility from NMS
– Majority of countries maintained restrictions
– We can classify Member States into 4 groups:
• free movement (Community rules apply)
• free access to labour markets,
restricted access to welfare benefits
• largely restricted: small quotas,
sectoral exceptions, some bilateral agreements
• totally restricted: similar treatment as non-EU
citizens
First phase:
1. Free movement without restrictions:
SWE only.
2. Free access to labour market,
limited access to welfare benefits:
UK, IRE, DK
3. Largely restricted:
AUS, GER, ITA, ESP, POR
4. Totally restricted:
BEL, FIN, FRA, GRE, LX, NET
Second phase:
1. Free movement without restrictions:
SWE + FIN, GRE, ITA, POR, ESP.
2. Free access to labour market,
limited access to welfare benefits:
UK, IRE, DK
3. Largely restricted:
AUS, GER + BEL, FRA, NET, LX
4. Totally restricted:
--
… and Bulgaria and Romania?
– Policy shift in UK and Ireland
– Free access to labour market:
ESP?
– Largely restricted:
AUS, GER, GRE, POR, IRE, UK, ITA?
– Totally restricted:
BEL, NET, LX
Preliminary, not all countries yet decided.
Post-Enlargement migration
What did we expect before Enlargement?
– Most studies expected long-run migration potential of 3.0-4.5 per cent of
NMS population (Layard et al., 1992; Bauer/Zimmermann, 1999;
Boeri/Brücker, 2001; Alvarez-Plata et al. 2003)
–
Short-run growth of NMS population of
250-400,000 persons p.a. (net migration rate)
„The transitional periods can distort the regional
distribution of migrants from the Eastern Europe
across the EU-15, that is, the diversion of migration
flows away from countries which restrict
immigration into countries which pursue a more
liberal immigration policy.”
1. Aggregate post-Enlargement migration flows
into EU-15 below baseline forecasts under
free movement
2. Dramatic shift in regional migration pattern
away from AUS and GER towards UK und
IRE, but not to SWE and DK
3. Substantial pre-Enlargement migration from
BUL+ROM towards Spain and Italy, reflect at
least in case of Spain bilateral agreements
net increase of NMS-residents, 2006:
baseline projection and actual development 2006
net change in foreign residents from NMS-8
300
250
200
baseline scenario
actual development
150
100
50
0
EU-15
open countries
closed countries
Dramatic shift in regional distribution
500.0
450.0
NMS-8 residents (thousands)
400.0
2000
350.0
2006
300.0
250.0
200.0
150.0
100.0
50.0
0.0
GER
UK
ITA
AUS ESP BEL
IRE
FR
SWE NET GRE FIN
DK
LX
POR
Simulating diversion impact
How do selective restrictions affect welfare?
1. Less migration: more individuals stay at home although
they could obtain higher utility from higher income and/or
quality of life abroad
2. Diversion: More migrants move to locations of second
choice, i.e. locations where the receive less utility
• Economic factors: lower wages and lower labour
productivity; less employment opportunities
• Non-economic factors: quality of life, social networks,
geographical and cultural distance
Economic implications:
– Aggregate GDP falls, if
(i) more labour stays in low-productivity
regions;
(ii) labour is diverted away from high
productivity countries to countries with lower
productivity
– Aggregate unemployment rate increases, if
(i) more labours remains in regions with high
unemployment rates,
(ii) less labour moves to regions where
unemployment is low and integration is easy
Short-run impact: GDP
0.80
diversion
0.60
free movement
change in %
0.40
0.20
0.00
GER
-0.20
-0.40
-0.60
-0.80
UK
NMS-8
EU-15
enlarged EU
Summary of results
– Transitional restrictions reduce GDP in Enlarged EU
• short-run: -0.05%
• long-run: -0.36%
– Main losers are migrants (incl. families)
• short-run: -26%
• long-run: - 32%
– German natives gain from diversion
• short-run: 0.07
• long-run: 0.14
– UK natives lose from diversion
• short-run: -0.01
• long-run: -0.03
What can be done to improve EU internal
mobility?
– Enhance migration policy coordination at EU-level (point
system?)
– Attract high skilled migrants
– Reduce administrative and legal barriers to mobility from NMS
– Introduce minimum EU wide Social Security Schemes and
improve the portability of pension rights
– Improve information and transparency on job opportunities