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European Commission

[Check Against Delivery]

László Andor

European Commissioner for Employment, Social Affairs and Inclusion

Labour mobility in the EU: challenges and perspectives for a genuine European labour market

Lecture at the European University Institute

Firenze, 24 June 2014

Ladies and Gentlemen,

I am grateful to the European University Institute for the invitation to speak about labour mobility in Europe.

I will share with you today an analysis of recent labour mobility trends and I will explain the ways in which the European Union is seeking to support labour mobility between EU countries.

Approximately 8.1 million EU citizens work and live in another Member State today, representing 3.3% of the total EU labour force.

Over the last ten years, two key developments have created new patterns of labour mobility within the European Union. First, the EU enlargements of 2004 and 2007 substantially strengthened the East-West mobility trend, in addition to the traditional South-North trend.

Second, the recent economic crisis has increased imbalances in European labour markets and created new pressures for labour outflows from the so-called ‘peripheral countries’ of the euro zone.

Consequently, East-West labour mobility remains predominant, but South-North mobility is again on the rise.

Unfortunately, free movement of EU citizens, including workers, across the Union is under attack today in many European countries and tends to be somehow dissociated from the other basic freedoms underpinning the Single Market.

You have surely heard phrases like ‘benefit tourism’ or ‘poverty migration’, also in the context of the recent European Parliament elections.

These concepts, cultivated by the tabloid press and picked up by various politicians, are nearly entirely a fiction. What I would like to do today is to confront three myths which are being increasingly invoked in the political rhetoric in some countries.

The first myth is that Europe is experiencing enormous migration between countries.

The second myth is that movements of workers between countries have increased during the economic crisis.

And the third myth is that migrants are a burden on the countries of destination.

Each of these myths can be easily refuted with data, which is what I will do in the first half of my lecture. I will also show that, to the extent labour mobility does leads to certain economic and social problems, these are more serious in the case of the countries of origin rather than in the countries of destination.

In a nutshell, I will argue that besides the value of the free movement of workers as an individual right, labour mobility also makes good economic sense. It contributes to the objectives of Europe’s strategy for smart, sustainable and inclusive growth by making it easier to fill cyclical and structural labour shortages and by offering people opportunities for upward economic and social mobility.

In the second half of my presentation I will explain how the European Union has sought to promote labour mobility over recent years.

EU policy on labour mobility has three main dimensions, namely:

  • further removing obstacles to labour mobility;

  • actively supporting labour mobility and cross-country matching of jobseekers with vacancies; and

  • addressing various economic and social challenges linked to labour mobility.

The case for intra-EU labour mobility

Ladies and Gentlemen,

Free movement of workers took full effect between the six founding Member States of the European Economic Community on 1 January 1968. Today, it encompasses the labour markets of 28 Member States.1

EU nationals have the right to look for work and take up employment in another Member State and to receive assistance from the employment services in the host country when looking for a job.

They have the right to be treated equally with regard to conditions of employment and work, and with regard to social and tax advantages and obligations.

Finally, EU workers have a right of residence for themselves and their family members.2

But is intra-EU labour mobility a massive phenomenon?

As I mentioned, around 8.1 million economically active EU citizens lived in another EU country than their country of citizenship in 20133, representing 3.3% of the total EU labour force.

In addition, there were just over 1.1 million cross-border or frontier workers4, i.e. EU nationals working in an EU Member State other than the one where they reside.

Finally, there are about 1.2 million posted workers in the EU, i.e. workers performing short-term assignments abroad for their companies in the context of the free movement of services.

You can see very clearly that the increase in intra-EU labour mobility has been associated mainly with the 2004 and 2007 enlargements of the EU and with the extension of the Single Market to ten countries in Central-Eastern Europe.

The economic crisis of the last six years has resulted in a slowdown of intra-EU labour mobility and in certain changes in the direction of labour flows, as I will show in a few minutes.

It is evident that the EU does not have the same levels of labour mobility as the United States or Australia, and probably never will have.

This chart compares the annual mobility rates within and between EU countries with labour flows inside the United States.

You can see that even labour mobility within older EU Member States is lower than mobility between the four main regions of the US (the West, Midwest, South, and Northeast).

Despite the increase in labour mobility after the 2004 and 2007 enlargements, the annual mobility rate between EU countries in 2011-12 was only around 0.2% of the total EU population, while in the US the annual mobility rate between the 50 States is around 2.7%.

In addition, there are only a handful of countries where labour inflows are significantly above the EU average: Luxembourg stands out very clearly, followed by Cyprus and Ireland, and to a much lesser extent Belgium, Austria and the United Kingdom.

While the number of EU mobile workers has increased sharply in absolute terms over the last decade, in terms of the overall active population it has only gone up one percentage point, rising from 2.1% in 2005 to 3.3% in 2013. This is far from a "mass movement" referred to by some politicians.

It is also worth noting that intra-EU labour mobility is lower than the percentage of non-EU migrant workers in the EU labour force (4.3%).

So much for the myth that we have enormous migration between EU Member States.

Let’s now tackle the second myth: has intra-EU labour mobility surged during the economic crisis?

Intra-EU labour mobility flows in fact declined considerably during the first phase of the economic crisis (2009-10) when economic activity and employment worsened in almost all Member States.

In the years 2009 and 2010, mobility flows fell by 41% compared with the years 2007 to 2008. This drop can be explained by a sharp fall in labour demand, especially for low and medium-skilled workers, and also by a progressive reduction in the mobility potential of workers from the Central-Eastern European Member States. It was a logical decrease given the very high flows in the post-enlargement years 2004 to 2008.

Many mobile workers actually returned home in the first years of the economic crisis.

In the second phase from 2011 to 2012, intra-EU labour mobility recovered somewhat, increasing by 22% compared with 2009 to 2010. This was especially due to growing outflows from Member States where unemployment was high.

Countries experiencing the highest increase in labour outflows to other EU countries in 2011-12 were Greece, Spain, Ireland, Hungary and Latvia.

If we compare labour outflows from the EU’s Southern Member States between the period 2011-12 and the preceding two years, we see a 73% increase, and this figure does not actually capture emigration to countries outside the EU, which is significant, for example, in the case of Portugal.

However, as you can see in this graph, the majority of intra-EU movers still originate in the Central-Eastern European countries that joined the EU in 2004 and 2007.

We can therefore say that over the last decade, intra-EU labour mobility has been driven mainly by income and wage differentials between Eastern and Western Member States5. More recently, it has also been driven by the growing differences in levels of unemployment, especially between euro area countries6.

Besides 'push factors' such as high unemployment in the euro zone periphery or worsening political environment in some countries, the direction of labour mobility obviously depends also on 'pull factors', such as language, wage differentials and the economic performance of the host country.

We can observe growing labour inflows during the crisis years into economies that have been more resilient, such as Germany and Austria.7 Conversely, we can see declining inflows and increasing outflows from countries most affected by the crisis, such as Spain and Ireland.

When unemployment rose in countries such as Spain, Ireland and the UK, the return flows back to Eastern Member States or other countries of origin increased.8

This evidence suggests that labour mobility in the EU has played a certain role in helping labour markets to respond to economic shocks.

However, changing patterns of labour mobility have been far from sufficient to compensate for the high differentials in unemployment rates between countries that emerged over the last few years, especially in the euro area.

Economists often speak about labour mobility as a ‘mechanism of macroeconomic adjustment’ in cases of asymmetric shocks.

It is clear that an increase in the number of workers moving from Southern Europe to the ‘core’ of the euro zone by a few tens of thousands is not such a strong phenomenon as to substantially decrease the unemployment rates in the South, where millions of additional people have become unemployed over the past few years.

In addition, because of its limited magnitude, labour mobility cannot significantly alleviate economic shocks like those Europe has experienced since 2008.

Finally, labour mobility does not provide the answer to the question how to restore the growth potential of countries experiencing a downturn. When the most talented people leave, achieving an economic recovery in the countries of origin can actually become more difficult.

To conclude on the second myth, Europe has not seen any major surge in labour mobility as a consequence of the economic crisis.

The third and most dangerous myth concerning intra-EU labour mobility is that mobile EU workers – or mobile EU citizens at large – are a burden on the host countries.

In fact, mobile EU workers are more likely to be employed than the nationals of the host countries and they are net contributors to the host countries’ welfare systems.

Mobile EU workers help increase GDP and contribute to improving the functioning of the host countries' economies: they improve the skill mix and work mainly in sectors and occupations where labour shortages need to be filled9.

Mobile EU workers are on average younger than the population of the host countries, which can represent a welcome demographic boost to the host countries in case these young people settle there.

Among the working age population, EU mobile citizens also have a higher activity rate than nationals (77% versus 72%). Mobile EU citizens have a slightly higher unemployment rate than nationals of the host countries. But the key difference is that mobile EU workers are employed at a significantly higher rate (68%) than nationals of the host countries (65%) or third country nationals (53%).

Moreover, mobile EU workers also increasingly possess high qualifications: 36% of them had tertiary education in 2012 compared to 22% in 2000.

The recent increase in labour outflows from Southern European countries is also characterised by a disproportionate share of tertiary graduates among those moving, which attests to the current lack of economic opportunities in Southern Europe, including in Italy.

In fact, mobile EU workers are often over-qualified for the jobs they perform in the host countries.

Over-qualification is a particular issue in the case of Central-Eastern European workers, who often perform low and medium-skilled occupations in ‘older’ EU countries.

Fortunately, the over-qualification rate for mobile workers from Central-Eastern Europe has somewhat decreased in the last few years, which suggests that the quality of labour mobility may be somewhat improving.

However, the over-qualification rate has recently risen among those moving from Southern Europe.

Considering the demographic and educational profile of mobile EU workers, it is no surprise that studies have shown significant economic benefits of labour mobility for the destination countries.

For example, the long-term GDP of the ‘older’ Member States (EU-15) has been boosted by 1% as result of post-enlargement mobility,10 and even more in major destination countries, such as Ireland, the UK, Spain or Italy.

The effect of post-enlargement mobility on the unemployment rate and wages in the destination countries has been estimated to be marginal, at least in the long-run11. The impact of competition from mobile EU workers tends to be short-term, moderate and concentrated on specific groups in particular the low-skilled workers12.

However, concerns often arise about so-called ‘social dumping’, i.e. undercutting of wages and employment standards by mobile workers. These relate in particular to the working conditions of mobile EU workers and to insufficient enforcement of labour law by national authorties in the destination countries.

Mobile EU workers can be subject to abuse and exploitation, for instance when they get trapped in undeclared work or when rules on the posting of workers are not respected.

Member States' enforcement authorities, especially labour inspectorates, therefore have a key role to play in order to enforce applicable conditions and terms of employment. Enhanced EU cooperation can help tackle various irregular situations of mobile EU workers as well.

Finally, at local level, inflows of mobile EU citizens may result in additional pressure on public services such as healthcare, housing, education or transport, especially when such services need to respond to a larger population over a relatively short period13.

In such cases, the right answer is to invest in the provision of relevant public services, which would of course benefit the native population as well. In any event, there is no evidence that mobile EU citizens have higher receipt rates of social security benefits than nationals of the host countries.

I hope to have shown you that intra-EU labour mobility is not a massive phenomenon; that it has not risen significantly due to the long economic crisis; and that it has major benefits for the economies and welfare systems of the destination countries.

In the remainder of this lecture I will explain how the EU has been promoting free movement of workers and labour mobility, and I will discuss what else could be done in this field.

A three-pronged EU policy to support labour mobility

There are many reasons why the level of cross-country labour mobility within Europe is rather low.

Some of them are exogenous to the functioning of labour markets, such as language, family ties, culture, the functioning of the housing market and even climate.

Others are endogenous to the labour market, including different social security and taxation systems and lack of harmonisation of professional qualifications.

However, the number of people planning to move to another EU country has slightly increased since the beginning of the crisis: it was 0.5% in 2008-10 and 1.2% in 2011-12.

This suggests that there is certain untapped potential for transnational labour mobility14.

Over the past five years the EU employment policy agenda has been substantially strengthened: the long economic and jobs crisis has forced us to explore any possible source of a job-rich recovery

One of the important elements of the Commission’s Employment Package in 2012 was the concept of a genuine European labour market.

This notion has been based on the recognition that cross-border labour movements can be useful both in helping to cope with cyclical downturns and in overcoming structural mismatches between skills available and skills needed in any particular country.

The Employment Package therefore set out a number of measures in support of intra-EU labour mobility. I will now share with you what has been achieved since 2012 and tell you about new challenges that have arisen meanwhile.

The first dimension of EU policy in support of cross-country labour mobility is to remove remaining obstacles to the free movement of workers.

The EU has recently cleared a major hurdle to labour mobility, which concerns pension rights for mobile workers.

Thanks to existing rules on social security coordination, previous periods of social security insurance, work or residence in other EU countries are taken into account when a person claims pension or other social security benefits.

However, rules on social security coordination do not cover supplementary pension rights, such as occupational pensions.

It is therefore very good news that in April 2014, the European Parliament and Council adopted a Directive on improving the acquisition and preservation of supplementary pension rights for mobile workers15.

Another obstacle to labour mobility is the difficulty to obtain recognition of qualifications in certain regulated professions, such as doctors or architects. The good news here is that European co-legislators achieved agreement in 2013 on updating the common rules facilitating the process of recognition16. The adapted rules will make it easier for professionals to move around the EU, while strengthening safeguards for consumers and patients.

Finally, we are in the process of modernising the coordination of national social security systems. EU rules on social security coordination have existed since the 1950s and have been adapted several times to ensure that they reflect legal and societal changes. EU legislation may need to be updated in a number of areas though no legislative proposal will be made under the present mandate of the Commission.

The second dimension of our policy is to actively support labour mobility and the cross-border matching of jobseekers and vacancies.

EU workers often face difficulties in obtaining information about their rights and lack assistance with their enforcement. Therefore the Commission proposed in 2012 and the European Parliament and Council adopted in April 2014 a Directive in order to facilitate the exercise of rights conferred in the context of the free movement of workers17.

A key requirement of this Directive is that Member States must ensure that one or more bodies at national level has responsibility for advising and providing support and assistance to EU migrant workers, including jobseekers, with the enforcement of their rights. Member States have two years to implement these rules.

The EU also tries to actively help jobseekers and companies find each other. The European Network of Employment Services, known as EURES, has over 1.7 million job vacancies and over one million CVs available online.

EURES aims to increase the transparency of the European labour market and to help EU citizens to make an informed choice about job opportunities in other Member States. The EURES network also helps spread information on living and working conditions in different EU countries.

EURES member organisations provide free assistance to jobseekers looking for work in other Member States and assist employers to fill their job vacancies through matching activities, including online job fairs.

The challenge today is to make sure that the EURES network is up to speed with technological developments. This means getting even more vacancies online and using the possibilities of automated matching of jobseeker profiles with vacancy profiles.

Moreover, we are trying to expand the range of EURES services so that more jobseekers and companies can receive individualised support from EURES staff across Europe.

The third dimension of the EU’s labour mobility policy is to address possible economic and social downsides of cross-country workforce movements.

As I mentioned, pressures on public services can arise in localities which experience high inflows of migrant workers and their families. Schools, healthcare, public transport and other services may get stretched and local governments may not have enough resources to cope with the increased needs.

At the same time, countries of origin may face skills shortages if many talented people leave to work abroad.

The European Social Fund can play an important role in alleviating these challenges both in the countries of origin and of destination.

In the countries of destination, the ESF can help to address social inclusion challenges of mobile EU citizens with poor labour market integration18. For instance, it can co-finance language and orientation training, as well as other socio-economic integration measures.

The ESF can also help countries of origin to mitigate potential negative consequences of outflows of workers: it can co-finance training and labour market integration of people who stay in the country and who may lack skills or who may be economically inactive.

In the programming period 2014-20, the total ESF resources across the EU-28 amount to over €80 billion in current prices and promotion of labour mobility is one of the Fund's specific objectives.

But beyond financial support from the EU budget, I would like to highlight one more legislative achievement of the EU over the past years, which was probably also the most contentious legislative file I have had to deal with during my mandate.

I am referring to the rules on the posting of workers in the context of the free movement of services, and in particular to the adoption of a new Enforcement Directive on the posting of workers in May 2014.

This enforcement Directive represents a very important step forward in protecting mobile EU workers from exploitation and avoiding social dumping. It will ensure better protection of posted workers on the one hand, and a more transparent and predictable legal framework for service providers on the other.

In particular, the enforcement Directive reinforces the means available to Member States for detecting and preventing abusive use of posting, and for controlling compliance with national and EU rules. It sets up a system for cross-border enforcement of administrative sanctions and improves protection of posted workers in subcontracting chains in the construction sector, by introducing new joint and several liability obligations.

Finally, the Commission has recently proposed the creation of a European Platform to prevent and deter undeclared work in order to reinforce cooperation between national labour inspectorates and other relevant bodies across the EU19.

Conclusion

Ladies and Gentlemen,

Cross-country labour mobility is not a panacea that would help the European Union overcome the growing divergence in labour market situations, but it is a phenomenon that helps increase employment and economic output.

We should not overestimate the potential of labour mobility in Europe as an adjustment mechanism to macroeconomic shocks and imbalances. Mobility is first of all a right. People certainly should not find themselves in situations where they are economically forced to move. After all, the Treaty on European Union establishes the objective of balanced economic growth throughout the EU.

However, it is right for the EU and its institutions to support people who voluntarily want to move to another Member State to work or look for work.

More than that, I would argue that EU institutions have an obligation to counter false claims about cross-country mobility in Europe and to explain the advantages of mobility even to sceptical audiences.

At a time when chauvinism is gaining strength across Europe, it is particularly important that the EU institutions play their role.

Mobility strengthens the European economy, and it also helps people to develop a common European identity in addition to national and local identities.

I look forward to your questions and comments.

Thank you very much for your attention.

1 :

Transitional arrangements apply in certain EU countries as regards Croatian workers.

2 :

Article 45 TFEU; Regulation (EU) No 492/2011 of the European Parliament and of the Council of 5 April 2011 on freedom of movement for workers within the Union, OJ L 141, 27.5.2011, p. 1.

3 :

Eurostat, LFS, 2013. Most of the figures provided are based on this same source, unless otherwise stated.

4 :

Eurostat, LFS, 2012.

5 :

European Commission, ESDE 2013, chapter 5, Box 3, p 284.

6 :

EPC (2013), Making progress towards the completion of the single European labour market, IP n°75.

7 :

European Commission, EU ESSQR June 2013, table 7.

8 :

Eurofound, Labour mobility within the EU: the impact of return migration, August 2012

9 :

European Commission, ESDE 2011, pp. 268-276.

10 :

NIESR 2011, Labour mobility within the EU - The impact of enlargement and the functioning of the transitional arrangements.

11 :

NIESR 2011

12 :

See European Commission, ESDE 2011, chapter 6, pp.275-276.

13 :

EY: Evaluation of the impact of the free movement of citizens at local level, http://ec.europa.eu/justice/citizen/files/dg_just_eva_free_mov_final_report_27.01.14.pdf

14 :

See European Commission, EU ESSQR June 2013, EPC (2013); and Bertelsmann Stiftung, Harnessing European Labour mobility (2014).

15 :

Directive 2014/50/EU

16 :

Directive 2013/55/EU of the European Parliament and of the Council of 20 November 2013 amending Directive 2005/36/EC on the recognition of professional qualifications and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System (‘the IMI Regulation’)

17 :

Directive 2014/54/EU

18 :

COM(2013)837 final

19 :

Proposal for a Decision of the European Parliament and of the Council on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work COM(2014) 221 final


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