The complicated politics of free movement

by Chris Wright, guest author
PhD Candidate, Department of Politics and International Studies, University of Cambridge, United Kingdom, cflw2@cam.ac.uk

Public policy-making invariably involves weighing the potential benefits derived from anticipated policy outcomes against the possible costs. This is particularly the case with labour immigration, which depending on the attributes of immigrants and the labour requirements of receiving economies, can deliver substantial macroeconomic benefits to host countries. But expansionary labour immigration policies can also deliver a range of unanticipated outcomes, and tend to be electorally unpopular. The balancing act between economic benefits and political costs was particularly apparent in the deliberations of the 15 Western European member states of the European Union (‘the EU-15’) when 10 Central and Eastern Europe states joined the EU in 2004 and 2007. The EU-15 states were permitted to restrict nationals from the new member states from freely working in their labour markets for up to seven years, but the transitional measures used by EU-15 governments were mixed and varied.

On the accession of the eight states that joined in on 1 May 2004 – the ‘A8’ states – Ireland, Sweden and the United Kingdom were the only three EU-15 states to allow free movement from the outset. When the EU further enlarged three years later to include Bulgaria and Romania (the ‘A2’ states), only Sweden and Finland opened their labour markets from the date of accession.

There is no straightforward explanation for the varying responses of EU-15 states to free movement, but domestic political pressures and economic institutional factors – not to mention the policy positions of other member states (1)– certainly played a part. This is evident in the case of the UK, which was the only large member of the EU-15 to allow A8 nationals to freely work, but subsequently prevented A2 nationals from being able to do so.

The majoritarian nature of Westminster democracy meant that Blair government had few political constraints in implementing a policy of free movement in 2004. This was a privilege that would not have been offered by the political systems of many other EU-15 states, but perhaps meant that the Blair government was more shielded from any discernable political costs, which were no lesser than elsewhere.

Nonetheless, economic considerations had the greatest bearing over the Blair government’s decision to opt for a policy of free movement. Labour shortages arising from low unemployment fuelled by over a decade of sustained economic growth meant that the competition for jobs between A8 nationals and UK residents was likely to be less of a problem than in other EU-15 labour markets. But whereas most EU-15 governments saw free movement as having a potentially adverse economic impact, the Blair government justified its position in terms of the benefits that could be delivered.

When announcing the Blair government’s intention to allow A8 nationals to work freely in December 2002, Foreign Secretary Jack Straw said such a move was “in the UK’s interest” because it would “attract workers we need in key sectors”(2). By contrast, the language used by leaders of the EU-15 states that imposed restrictions was often couched in terms of the potential costs that would otherwise be imposed on their more protectively regulated labour markets. For instance, German Chancellor Gerhard Schröder said that domestic labour markets, particularly those in areas bordering the accession states, would not be able to accommodate a large inflow of workers (3).

This contrast was also evident in the way that interest groups and the broader community responded to the prospect of free movement. While business groups and trade unions were hostile to such a position in states such as Germany and Austria, in the UK these groups were supportive. And although public opinion and press coverage towards immigration was similarly ambivalent in the UK and Germany, concerns about labour market impact were more apparent in the latter (4).

This was not simply a question of job vacancies and unemployment; there are also structural explanations for why free movement was a more appealing prospect in the UK than elsewhere. Rates of unemployment and/or labour market inactivity were in fact lower in a number of other EU-15 states that adopted restrictive policies – such as Austria, Denmark, Luxembourg and the Netherlands – than in the UK (5). But the more flexible nature of the UK labour market meant that it was better placed to absorb more workers without an accompanying increase in unemployment (6).

Despite both adopting open labour market policies with similarly low levels of unemployment, over 200,000 A8 nationals came to work in the UK each year following enlargement, compared with only around 5,000 to Sweden (7). While strong demand for labour in the UK was one reason for these disparities (8), weaker labour market regulation enabled employers to hire migrant workers on relatively lower wages and conditions, particularly compared with Sweden, where much stronger regulation afforded no such scope (9).

Moreover, various ‘system effects’ of the UK’s economic institutions had eroded the capacity of the government and employers to respond to labour shortages through orthodox strategies such as increasing wages, investing in labour-saving technology or training resident workers. As Anderson and Ruhs have argued, the self-reinforcing nature of the UK’s lightly regulated labour markets meant that many employers have been ‘unable or unwilling to train’ new staff, in part due to ‘a fear of poaching, the rise of self-employment and the consequent importance attached to on-the-job training and learning by doing’(10).

The decision of EU-15 states that imposed barriers to A8 nationals in the form of restrictions or quotas can perhaps therefore be interpreted as protectionist measures consistent with the regulatory characteristics of their labour markets, whereas the UK’s liberal stance was compatible with its more laissez-faire approach to market regulation. But why then did the UK opt to restrict free movement to A2 workers when the EU further expanded in 2007? Essentially because this time around, the Blair government saw the potential political costs as being greater than the economic benefits that it expected to garner.

Before the 2004 enlargement, the government had commissioned a report to predict the likely size of the migration flows from the A8 states. The authors of the report estimated, that between 5,000 and 13,000 people would arrive per year, but strongly warned that because of a ‘lack of good data’, there was, ‘a large potential error’ in their analysis (11). Nonetheless, these estimations gained much media attention, and indeed turned out to be rather inaccurate. The underestimation made the Blair government much more cautious about free movement for Bulgarians and Romanians.

Opposition was more widespread and vocal to the prospect of free movement than it had been in 2004, and although the institutional capacity of the government to override this opposition was no weaker, the economic benefits were less obvious than they had been three years earlier. The Blair government saw the economic impact of A8 workers as positive and a reason to consider continuing a policy of free movement. But it believed that changes in the UK economy, and different attributes of Bulgarian and Romanian workers, meant that the economic case for opening the labour market once again was less compelling.

Ultimately, the response of the UK and other EU-15 governments shows the complex and often entangled considerations that inform labour immigration policy-making. While such decisions invariably involve balancing anticipated economic and political benefits and costs, these benefits and costs are more apparent in some circumstances than others.

Notes:
(1) Kvist, Jon (2004) ‘Does EU enlargement start a race to the bottom? Strategic interaction among EU member states in social policy’, Journal of European Social Policy, 14(3): 301-318
(2) Quoted in The Independent (2002) Castle, Stephen, ‘UK lifts bar on workers from new EU countries’, 11 December: 12
(3) Jileva, Elena (2002) ‘Visa and free movement of labour: The uneven imposition of the EU acquis on the accession states’, Journal of Ethnic and Migration Studies, 28(4): 694
(4) Boswell, Christina, Chou, Meng-Hsuan and Smith, Julie (2005) Reconciling Demand for Labour Migration with Public Concerns about Immigration: Germany and the United Kingdom, Anglo-German Foundation for the Study of Industrial Society: London, 27
(5) OECD (2005) Employment Outlook, Organisation for Economic Cooperation and Development: Paris, 237-239
(6) Somerville, Will and Sumption, Madeleine (2009a) Immigration and the labour market: Theory, evidence and policy, Equality and Human Rights Commission/Migration Policy Institute, available at: www.migrationpolicy.org/pubs/Immigration-and-the-Labour-Market.pdf, 13
(7) Drew, Catherine and Sriskandarajah, Dhananjayan (2007) ‘EU enlargement in 2007: No warm welcome for labor migrants’, Migration Information Source, 1 January, available at: www.migrationinformation.org/feature/display.cfm?ID=568
(8) Krings, Torben (2009) ‘A race to the bottom? Trade unions, EU enlargement and the free movement of labour’, European Journal of Industrial Relations, 15(1): 54
(9) Ruhs, Martin (2007) ‘Greasing the wheels of the flexible labour market: East Central European labour immigration in the United Kingdom’, in Smith-Bozek, Jen (ed) Labour Mobility in the European Union: New Members, New Challenges, Center for European Policy Analysis: Washington DC, 24
(10) Anderson, Bridget and Ruhs, Martin (2008) A need for migrant labour? The micro-level determinants of staff shortages and implications for a skills based immigration policy, Paper prepared for the Migration Advisory Committee, September, available at: www.ukba.home office.gov.uk/mac, 38-42
(11) Dustmann, Christian, Casanova, Maria, Fertig, Michael, Preston, Ian and Schmidt, Christop M. (2003) The impact of EU enlargement of migration flows, Home Office Online Report 25/03, available at: www.homeoffice.gov.uk/rds/pdfs2/rdsolr2503.pdf, 58