Thursday, 5 May 2011

Europe takes huge step towards free movement of labour

From 1 May 2011, the entire European labour market will open to Member States who joined the Union in 2004, including the citizens of Hungary, who currently holds the EU Presidency. The fear of many workers migrating from new Member States to the West, have so far proven unjustified; since the opening of the labour market in old Member States has contributed to the economic growth. Free movement of labour is one of the fundamental principles of the EU’s single market, enabling EU citizens to take up employment freely in any other member state. Since certain older Member States of the Union had been wary that workers from countries who joined in 2004 could “flood” their labour markets, so, Member States were given the rights to restrict employment for up to seven years, at their own discretion. This rule was incorporated into the accession document.

Gradual relaxation

Several countries have taken advantage of this option, regarding citizens of eight countries that joined the Union in May 2004, namely the Czech Republic, Estonia, Poland, Latvia, Lithuania, Hungary, Slovakia and Slovenia. Sweden and Ireland, have opened up their labour markets from the very start; and Great Britain only required the simple registration of employees. In 2006 Finland, Greece, Spain, Portugal and Italy, in 2007 Luxembourg and the Netherlands, in 2008 France, and in 2009 Belgium and Denmark lifted the restrictions.

Only two Member States – Austria and Germany – maintained the restriction for the longest permissible term, until 30 April 2011, claiming that the authorisation of free employment would cause major labour market disorders. Also, despite the general restrictions, both Austria and Germany were allowed to, under bilateral agreements, the employment of a certain number of citizens coming from the newly accessed countries. Owing to such agreements, approximately 28,000 Hungarian citizens worked in Austria and about 13,000 in Germany from the beginning of 2011. Also, states were already allowed provide free employment in certain sectors, which was effected by a chronic shortage of labour force.

Iceland, Norway, Liechtenstein, Switzerland

The single market also comprises of three countries who are not members of the Union, but hold membership in the European Economic Area (EEA). Of these countries, Iceland lifted the restrictions in 2006 and Norway in 2009, while Liechtenstein will be opening its labour market together with Austria and Germany. Switzerland, which is a member neither of the EU nor of the EEA, will terminate it presently used quota system at the end of April; however, it will be entitled to restore the restrictions until 31 May 2014, in justified cases.

None of these countries imposed any restrictions on Cyprus or Malta, who also joined the EU in 2004; nor did the eight other new Member States have restricted employment to citizens coming from the rest of the Member States.

Fears remained unjustified

Some of the older Member States could sense the concerns from the other Member States within the Union, regarding migrants from Eastern Member States, could potentially flood the labour market, bringing down wages and triggering unemployment. This was however proven unfounded. Migration to the West, from countries who joined the Union in 2004, fell way behind the expectations, as the number of migrants actually increased from 900,000 to approximately 1.9 million, between 2003 and 2009. The lowest count of migrants was given by Hungary and the Czech Republic; while most of them had moved from Poland and Lithuania.

The migrants are typically young people working in positions, which requires low to medium level qualification – although in many cases their actual qualifications are higher. According to experiences so far, labour force migration has proven to be temporary in most cases. For example, half of the employees from new Member States, who came after 2004, to Great Britain and Ireland, have already returned home, partly owing to the economic recession.

GDP has increased

According to calculations, the flow of labour force following the enlargement of 2004, has increased the EU’s GDP by 0.11% in the short term, between 2004 and 2007; and this growth is expected to a further rise of 0.2% in the long run. By fulfilling the labour force demands of the host states, workers from new Member States, have significantly contributed to the sustainable economic development. The labour force movement following the enlargement, has not resulted in significant labour market distortions, and its impact on the welfare services and finances of the host countries has been minimal.

In certain Member States, like Poland, the Baltic states and Romania, remittances of foreign workers have significantly contributed to the domestic production of the home countries. In these countries, the migration of the citizens of new Member States have mitigated unemployment, but have also caused a decrease in the number of labour forces in several sectors. It is a further problem, that typically, young people choose to seek employment abroad.

Bulgaria, Romania

In the case of citizens of Romania and Bulgaria, who joined the Union in January 2007, the other 25 Member States are still allowed to enforce restrictions. Similarly to the enlargement of 2004, a temporary term of up to seven years applies to these two countries; which is due to expire on 31 December 2013. Even so, several Member States have decided not to restrict the employment of citizens from Romania and Bulgaria. Accordingly, they can also freely enter the labour markets from the following countries: Cyprus, Czech Republic, Denmark, Estonia, Finland, Greece, Poland, Latvia, Lithuania, Hungary, Portugal, Spain, Sweden, Slovakia and Slovenia

Source: Hungarian Presidency of the Council of the European Union

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