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European Commission

[Check Against Delivery]

László ANDOR

European Commissioner responsible for Employment, Social Affairs and Inclusion

Moving towards the facts: mobility in the Nordic-Baltic region

Conference on Labour Mobility and Transnationalism in the Nordic-Baltic Region

Tallinn, 7 March 2014

Ladies and gentlemen,

Labour mobility has existed for more than fifty years within the European Union, but in recent months has become the subject of much controversy, as I am sure you have noticed.

In various EU countries, we have seen increasing unease, animosity, and sometimes hostility towards migrant EU workers, in particular as regards the rights of citizens from other EU Member States to various forms of social benefits in host countries.

New pressures have been added of recent with the outcome of the referendum in Switzerland, where the population voted narrowly to restrict the entry of non-Swiss nationals into Switzerland.

The truth is that the vast majority of people who move from one EU country to another do so in order to work.

They don’t do it in order to claim benefits. These workers are in fact of considerable benefit to the economies, and to the welfare systems, of the receiving countries.

There is a consensus among experts on the advantages of EU labour mobility.

But there are also concerns where for example specific sectors or geographical areas face concentration of the costs or disadvantages of mobility.

For example, if a large number of young doctors leave a country within a short period, labour mobility will be seen as a problem.

Where there is tension and where the costs and disadvantages are concentrated, a solution has to be found.

EU cooperation helps in finding the solutions and in ensuring that the result of labour mobility in Europe can improve.

The EU Single Market's four freedoms

The first point is that free movement for workers within the EU does not stand alone. Labour mobility is just one of the four freedoms on which the EU's Single Market is based, along with free movement of goods, capital and services.

Those fundamental principles were enshrined in the Treaties from the beginning and have been ratified by the parliaments of all EU countries on numerous occasions.

Member States cannot cherry pick which of the freedoms they want and leave the rest because the EU is based on a balance of mutual interests.

That is why the EU has been so successful, and so mutually beneficial to all Member States.

The EU's rules on free movement of workers entitle EU citizens to move to another Member State and work there on the same terms as nationals, without any restriction or discrimination.

Workers and non-active people

Workers and their direct family members are entitled under EU rules to move to other countries without restriction and to be treated in the same way as the host country's workers.

Although social security systems and rules are decided at national level, there are EU rules to ensure that people moving to another EU country are not penalised.

Self-employed entrepreneurs are also entitled to move and to establish themselves on other EU countries without discrimination.

Workers who are posted temporarily to another EU country to work can continue to pay social security contributions in their home country for up to two years, but they are subject to all of the host country's social legislation on such issues as minimum wages, equal pay, working time, paid holidays and health and safety at work.

Clearly, workers from other EU countries, whether temporarily posted or working more permanently, need to be protected from exploitation by unscrupulous employers.

And job-seekers are entitled to look for work in another EU country for up to six months, or even longer, on condition that they continue to seek employment in the host country and have a "genuine chance" of getting work.

However, the EU rules on people who are not working, or genuinely looking for work, are more restrictive.

Essentially, EU law entitles the Member States to require that non-active people — such as students and pensioners — can demonstrate that they have sufficient financial resources to avoid being a burden on the host country, if they wish to stay longer than three months.

Advantages and risks associated with labour mobility

Free movement of labour can give more flexibility to the labour markets of both the host countries and the countries of origin.

This is because people can move quickly to countries where there is a labour shortage and can return to their own country if the host country’s labour-market situation deteriorates or the situation in their country of origin becomes more attractive.

Studies consistently show that mobility flows are mainly driven by job opportunities in the host countries.

That is why Spain and Ireland attracted so many EU mobile workers before the crisis and now have negative net migration, as a result not only of higher outflows, but above all much lower inflows.

For the countries of origin, labour mobility can cause problems , such as a “youth drain”, "brain drain" and skill shortages, particularly in certain sectors such as healthcare. I will return to this issue later.

That said workers, especially younger ones, do not necessarily move to another country permanently and they may return to their home country later, armed with experience and new skills.

Barriers to labour mobility – what is the EU doing to eliminate them?

Of course, there are still many obstacles and disincentives that dissuade EU citizens working — or looking for work — in another Member State, including language, family ties, culture and climate. In any case, mobility will always remain an issue of personal choice.

The EU does not have the same levels of labour mobility as the United States or Australia, and never will have. Precisely because of these factors.

Until the 2004 enlargement, labour flows between the Member States were very limited. The 2004 and 2007 enlargements brought a huge increase in the number of workers moving from one Member State to another.

The number rose from 4.7 million in 2005 to 8 million in 2013.

Three quarters of that increase stems from free movement of people from the Member States that joined in the last ten years.

Despite that increase, the annual mobility rate between EU countries in 2011-12 was only around 0.2% of the total EU population.

The Commission is committed to taking further measures to support and improve the principle of Free Movement of Workers. You may be aware, for example, that the co-legislators have agreed on a new Directive last December – the first new legislation in this field since 1968 – to provide for better enforcement of the EU rights of EU mobile worker and their families at national level.

It will require every Member State to set up at least one body to provide assistance and information to employers, EU workers and their families on their rights and obligations under EU law. It will also require Member States to put in place effective means of redress for workers if they encounter discrimination or unfair treatment.

Do income differences drive migration flows?

The fact that the bulk of EU labour mobility between the Member States is in the East-to-West direction seems to confirm that income and wage differentials are among the main push factors for labour mobility, as well as short-term job prospects and expectations.

(slide 1)

But the relative income level is obviously not the only push factor. The employment, social and political situation also influence people’s desire to move.

As for the pull factors, employment opportunities in the destination countries seem to have been the main driver, together with culture, language and network factors.

Impact of the crisis – changes in volume and direction

The economic crisis that started in late 2008 has triggered big changes in intra-EU mobility patterns.

In the first phase in 2009 to 2010, mobility flows declined sharply.

This was due to a sharp fall in labour demand, especially for low and medium-skilled workers, and to the progressive reduction in the mobility potential of the Eastern European Member States.

This fall was logical, given the very high flows from 2004 to 2008.

Baltic countries were somewhat an exception to this picture as mobility outflows continued a high rate even in 2009-10 – due to the strong effect of the recession on the labour market.

In the second phase from 2011 to 2012, mobility recovered somewhat, increasing by 22% compared with 2009 to 2010. This was due in particular to a sharp increase of 73% from the southern Member States, where unemployment was high.

While many factors explain the changes in outflows, there is a relatively strong correlation with changes in the unemployment rate in the countries of origin.

Impact on source countries

There are justified concerns about the long-term impact on countries of origin, given the outflows of young people, demographic challenges and the risk to competitiveness.

This holds mainly true for the Central and Eastern European Member States, but it may also be problematic for those in the South if outflows continue to increase.

Outflows of EU mobile citizens from Central and Eastern European Member States since 2003 amounted to almost 5% of the working-age population of the countries of origin in 2013, with higher percentages in Romania (9.2%), Lithuania (8.1%) and Latvia (6.9%), while the figure for Estonia remains a modest but significant 3.2%. Overall, the Baltics are characterised by low population size, but high overall emigration with the outflow of its citizens amounting to as much as 6.7% of its working age population.

(slide 2)

The outflows of young people from some Member States have been disproportionately high.

At EU level, the percentage of recent intra-EU mobile citizens aged 15 to 34 (48.6%) is much higher than that of the total population of the countries of origin (24.6%).

(slide 3)

The difference is even greater in the case of mobile citizens from the Central and Eastern European Member States, where the figures are 52.9% and 26.9% respectively. Estonia is no exception and sees as much as 53% of its movers 15-34 years of age, compared to just 28% of its population. The same is true overall of the Baltic states with 59.7% and 26.2% shares of 15-34 aged movers and stayers respectively. This is linked to the high youth unemployment rates in Baltic countries. This may be problematic, notably for the public finances and the sustainability of social security systems especially in countries where the demographic outlook is unfavourable to which Estonia is not an exception.

It is worth pointing out that EU mobile workers from Central and Eastern European Member States are often employed in jobs for which they are over-qualified.

(slide 4)

This was true of more than 50% of those with a tertiary education in 2012.

This represents a loss for the mobile workers themselves, and for the countries of destination and origin.

The situation regarding the “brain drain” is less clear. In the case of the 8 largest countries that joined the EU in 2004, the percentage of mobile citizens with a tertiary education is only slightly higher than in the total population of the countries of origin (30.9% versus 27.7%), while it is even lower in the case of Bulgaria and Romania (17.9% versus 20.7%). Estonia seems to have a higher proportion of tertiary educated people staying than leaving (34.8% vs 37.9%). The same is true of Latvia (23.3% vs. 33.6%) and Lithuania (25.6% and 38.3%), making the overall Baltics average of stayers considerably more highly skilled than the movers.

(slide 5)

Overall, the Central and Eastern European Member States do not seem to be affected by a particularly serious “brain drain” and the rise in enrolment rates for tertiary education may offset the outflow of skilled labour. Between 2000 and 2012, Estonia experienced an increase of 8.3 p.p. in its share of tertiary educated among the 30-34 year olds.

But this does not rule out some highly negative effects in certain sectors or occupations, such as the health sector, which may have repercussions for access to healthcare services in the countries of origin, especially in rural areas. However, the 2009 figures for Estonia indicate moderate emigration from the Estonian health sector, as 2.4% and 1.6% of all Estonian doctors and nurses respectively emigrated in that year.

Given the scale of the outflows, studies estimate that the negative effects of post-enlargement mobility on the GDP of the Central and Eastern European Member States will be significant, though the impact in terms of GDP per capita are more limited.

Remittances sent by workers living abroad may partially offset the negative growth impact in the short and medium term.

(slide 6)

They represented 3.3% in Lithuania, 2.2% in Latvia and 1.8% for Estonia (average 2004-12) and may help to drive economic growth by supporting aggregate demand and financing investment in education or start-ups of capital-intensive businesses.

Lastly, mobility is not always a one-way street, especially in an area of free movement.

Workers leaving their home countries often return with added experience, language skills and savings to invest back home. Such a scenario in Estonia's case is not so unlikely given that in 2010 as many as 57% of all migrants to Estonia were return migrants, an increase of 14% compared to 2009.

In situations where unemployment, especially among young graduates, is very high, finding a job abroad is certainly more beneficial for both the individual and the country of origin than staying unemployed.

Nonetheless, both the economic and the social impact of mobility should be monitored where the outflows are large in scale and extend over time.

Conclusion

Ladies and gentlemen,

It will be crucial to fully use EU Structural and Investment Funds including ESF to mitigate potential negative impacts and increase favourable labour market conditions in the country of origin to both keep desirable workforce and attract (back) highly skilled workers.

I have spoken to you today because I wanted to present an objective and factual overview of free movement within the EU. Because I firmly believe that the debate on labour mobility should be based on facts rather than perceptions.


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