A fairer deal on free movement

Free movement of labour in Europe has been hotly debated in the last few years in the UK, and it is likely to be featured highly during the general election campaign. David Cameron has made it a central issue of his ‘renegotiation strategy’ if he were to remain in power after 7 May.

But some of these discussions and political initiatives ignore important facts and arrive at unrealistic, unpractical or unfair conclusions. This paper argues that labour mobility remains an opportunity rather than a threat for all countries, including ‘receiving’ ones like the UK. It challenges two of the claims most commonly heard: first, that migrant workers increase competition on jobs and exert downward pressures on wages; second, that the UK welfare system is a significant ‘pull’ factor. It concludes, with practical examples, that a lot can be done without EU treaty changes to manage migration better.

Increased mobility in the EU: costs and benefits

Labour mobility should be a win-win for all involved. Workers have more job opportunities than they would have in a restricted geographical space. Companies can recruit from a wider circle than just from within their national boundaries. Receiving countries enjoy higher rates of growth; ‘sending’ countries benefit from remittances – and a more experienced workforce once some of the migrants return.

On the whole, research provides evidence to suggest that there are net benefits associated with labour mobility in the UK, even if one should not ignore some important side-effects. According to a 2014 study by the UCL Centre for Research and Analysis of Migration (CReAM), both immigrants from western and eastern Europe who have arrived in the UK since 2000 have contributed far more to public finances than they have received benefits. In the same vein, the Migration advisory committee finds no evidence that migrants taking up low-skill jobs in the UK have had a negative impact on the labour market. Migrant   workers are not responsible for youth unemployment, it suggests. Instead it blames skill shortages and the education system’s disappointing performance. A marginal impact on low wages might be due to the lack of proper enforcement of the minimum wage.

In the real world, however, the advantages of migration materialise in an imbalanced way and are associated with various costs, tensions and controversies. Migrants face transaction costs: families are disrupted; workers become vulnerable in a less well-known environment; people may end up in jobs for which they are overqualified; and the risk of undeclared employment may also increase. In receiving countries, there are significant side-effects such as public transport congestion and pressures on housing and public services (for instance, health care) in specific areas which need to be properly addressed.

For all these reasons, EU policy in recent years has not only aimed at ‘removing barriers’ but also at creating greater transparency in the labour market, and improving the legal framework. A prime goal has been to help member states, regions and municipalities deal with the aftermath of the difficulties related to labour mobility either on the sending or the receiving side.

The EU was bound to have more discussions on mobility than before since the volume of it has practically doubled following the enlargements to the east of 2004 and 2007. It is worth remembering, though, that even after this only up to about three per cent of the total EU labour force work outside their country of origin.

Disparities in wages have been assumed to be and seen as a main factor driving labour mobility. This leads to the suggestion that migration from eastern and southern Europe is likely to remain significant for some time. However, other shorter-term factors, such as the level of unemployment, the availability of vacancies, political developments, social cohesion, and the overall expectations concerning all of these, play a role.

The post-2007 financial crisis (and especially the 2008-09 recession) reduced mobility temporarily but also affected the directions of population movements in Europe.  South to north migration has markedly increased while remaining far below east to west mobility in absolute numbers. People do not only migrate from the eurozone periphery to the northern EU countries but also to non-EU countries – for instance, from Portugal to Brazil or Ireland to the United States –  where language connections make it easier to start a business or get a job.

With increased migration from south to north, the profile of migrants has also changed. The new migrants tend to have higher levels of education and they are less likely to be overqualified for the job they get than their eastern European peers.

Ensuring equal rights for all: the welfare question

A key element to preserve mobility as a win-win is to guarantee equal labour protection standards between migrant workers and ‘home’ workers on the one hand; and to make sure that there is a rigorous link between work and entitlements on the other.

This requires coordinating social security and ensuring that all mobile workers are fairly covered. In the EU, the right of workers to free movement cannot be defended without ensuring that mobile workers do not lose social security coverage and do not end up in inferior jobs or subject to outright discrimination when it comes to things such as their rights at work.

If the concept of EU citizenship means anything, then the adult population cannot be divided into, on the one hand, migrants who are only entitled to income from employment (plus perhaps some work-based benefits) and, on the other hand, nationals (with income from employment and all types of benefits, including tax credits, housing benefit etc).

This, however, does not mean that there should or would be free movement between different welfare systems. The access to social benefits in a country other than your country of origin is strongly linked to employment. EU law does not oblige member states to support citizens of other countries if they have not worked there, unless they are a family member of a worker or ‘habitually resident’ in the host country – a status gained only by meeting strict criteria.

The British case is often said to be different given the weak contributory nature of the welfare system. Social rights and services tend to be disconnected from employment, hence the widespread – though ungrounded – perception that migrants ‘free-ride’ on benefits. Both the Conservatives and Labour have recently announced their intention to lengthen dramatically the period after which migrants are entitled to receive unemployment, childcare and housing benefits. They are also thinking about restricting access to the tax credits paid to those on low wages. Such measures would relegate EU workers to the same status as non-EU migrants, and they go clearly against the non-discrimination spirit of EU treaties. Although some marginal adjustments of relevant EU law might be possible, British politicians should beware of raising public expectations.

That social rights cannot be detached from mobile labour in the EU has also been demonstrated in the debates on ‘posted’ workers, especially since the enlargement to the 10 eastern European countries. Posted workers are sent to another country to work by their employer on a temporary basis. By definition, they are not integrated into the local labour market and society, and therefore their social security arrangements remain within their home countries.

The regulatory framework of posting is special because it is based not on the free movement of people but on the freedom to provide services. Since these differences gave rise to various forms of abuse and controversial practices, the European commission in 2012 put forward an enforcement directive, which was adopted last year.

Better enforcement of existing rules can help eliminate abuse and prevent difficulties in other areas. If, for example, companies use their power to prevent EU migrants from organising, there should be intervention to stop such abuse. If some employers abuse the temporary agency work directive and make workers redundant after three months in order to avoid equal treatment requirements, there should be ways to prevent this.

The point is that it is equal treatment, including ensuring equal social rights, that creates fairness, and not the opposite. However, it is one thing to defend the right to free movement (together with associated social rights) as something that belongs to all citizens, and another to manage migration better. Working on the second should be possible without calling into question the first.

The need for a higher quality debate in the UK

Viewed from the continent, the UK debate often seems distorted and unfair for many reasons. Mainstream parties are seen as failing to resist the pressure from the United Kingdom Independence party, which portrays EU migrants solely as an economic and social burden. Also, the employment of workers from other EU countries is regularly discussed in the context of ‘immigration’, thereby ignoring the different legal base for entry and employment of EU and non-EU workers. Yet evidence suggests that the UK has consistently received more ‘immigrants’ from non-EU countries than from the EU.

Recent discussions have often been focused on Romanian and Bulgarian citizens, especially since transitional arrangements expired a year ago. No explanation was ever given that Romanian and Bulgarian citizens would not be expected to arrive on a comparable scale to that of Poles. Speculative discussions and actual proposals often simply linked immigration to the (past and future) enlargements of the EU without mentioning that the recent rise in migration comes mainly from the crisis-hit southern regions of the eurozone.

Another twist in the narrative is the claim that, when EU leaders drew up the initial rules, they were not expecting the EU to be so large and diverse. Yet the EU directive that regulates free movement and social security coordination was adopted as late as 29 April 2004, just a few days before 10 countries joined the EU.

Reciprocity is also virtually absent from most immigration debates in Britain which ignore the very high numbers – 1.8-2 million – of Britons working or living in other EU countries. Curiously, it is sometimes mentioned that more British people receive unemployment benefit in Germany than Poles do in the UK, but these hard facts never impact on the debate, which is driven by emotions, and, more precisely, prejudice.

Rethinking the UK and EU policy response

The UK’s experience of exceptionally high levels of immigration in the last two decades has led the current government to commit to reducing the overall numbers coming in.

While Ukip demands direct controls and a ceiling on the absolute number of EU citizens who can work in the UK, Cameron’s proposals on 28 November 2014 focused instead on the conditions and circumstances of residence and employment. This practical rather than ideological approach recognises that Germany and other countries are highly unlikely to agree with arbitrary limits on EU labour mobility. Nevertheless, it comes at the price of presenting discrimination against EU migrants as a possible way forward, despite the fact that migrant workers already have fewer entitlements than national citizens.

Despite animosity and the temptation of welfare chauvinism, the EU has maintained a positive attitude towards labour mobility, beyond simply insisting on the right to free movement. The European commission’s April 2012 employment package outlined the vision of a genuine pan-European labour market. In a supplementary youth employment package in December 2012 it repeatedly highlighted the potential benefits of cross-border mobility.

By ascribing a strategic importance to labour mobility, the commission confronted two common fallacies. One is that immigration might be a cause of unemployment, and the other that labour mobility can play a dominant role in addressing imbalances within the EU and especially inside the eurozone.

In the wake of the employment package, several initiatives have been launched to tackle problems arising from closer labour market integration in the EU. Proposals were made to create a cross-border network of public employment services, to reinforce EURES (the EU employment service and its website), and to establish an EU platform against undeclared work (this may turn out to be an initial step towards an EU labour inspection agency).

Three important legislative achievements point towards a better functioning European labour market: the April 2014 directive about the exercise of the rights of mobile workers; a directive (also adopted in April 2014) about the portability of occupational pensions; and, finally, a May 2014 enforcement directive about the posting of workers.

While at the EU level the focus has been on improving the legislative framework and the institutional infrastructure of mobility, member states have also responded actively to local challenges. The German government established a fact-finding committee and mobilised national resources to help affected cities and regions. In the Netherlands, we have seen a big effort to combat undeclared work.

These examples show that the UK is not alone in thinking about ways to manage migration better. They also prove that there is scope for steps that can be made within the strictly national context without questioning the right to free movement and without opening the door to discrimination.

In recent years there have been a number of ideas to manage migration and mobility better. They are partly of a legal and partly of a financial nature.

Portability of unemployment benefit

First, EU law could provide greater clarity on the coordination of social security regimes to help both job-seekers and the receiving countries at the same time. For instance, since May 2013, the European commission has been floating the idea of creating a rule according to which migrant job-seekers are covered by unemployment insurance for a uniform period of six months after losing a job. Currently, member states can choose anything between three and six months, and most migrant job-seekers turn to their host state for support shortly after arriving there.

A more uniform rule about portability – receipt of benefit from the member state where the person lost their job even if he/she lives or seeks work in another – would be better understood by job-seekers as well as by the member states. Of course, one would not rely on Slovak unemployment benefit for very long when looking for a job in Germany, and not even on Danish benefits when making similar efforts in Croatia. Nor does this imply that benefit levels need to converge.

Nevertheless, a new rule could address concerns about the fairness of supporting foreign job-seekers, while avoiding the problems that arise when someone is not covered at all while being unemployed abroad. A harmonisation of this type would also raise questions about the models of countries, like Hungary, where the duration of unemployment benefit is too short (90 days only in the Hungarian case). Through such incremental changes, the legislation of Social Europe can be built.

The portability of unemployment benefit should not be confused with the concept of an EMU unemployment insurance scheme. The first applies to the EU as a whole, while the second, as a fiscal stabiliser, would make sense for the eurozone (and for others on a voluntary basis). The first would certainly not need Treaty change, while, in the case of automatic fiscal stabilisers, it would depend on the model chosen.

However, the idea of EMU unemployment insurance is not irrelevant even for the UK, and it should be seen in a positive light. This would act as a mechanism to stabilise support for the unemployed in countries experiencing a downturn inside the eurozone, thus also sustaining aggregate demand and, through that, the overall growth and employment potential would improve – encouraging and assisting lower-skilled, lower-income workers to find employment locally.

An EU migrant fund to boost integration

Another widely discussed idea is a European fund to support migration. This seems all the more relevant since, as preliminary results of forthcoming research by Eurofound on the impact of mobility on public services revealed, integration costs and other problems arise mainly at a subnational level, within local communities.

Municipalities may need more support to integrate children of migrants and to prevent or deal with various social problems. While, for example, homelessness did not start with EU enlargement in the UK and other richer countries, it is true that migrants are over-represented among the homeless. Some additional fiscal and institutional capacity would certainly improve the prospects for many of these migrants to remain in (or return to) decent employment. The point is not to spend more on poor migrants but to invest in ensuring that all working-age EU migrants can participate actively to the host economy and society.

In reality, there is an EU fund to support EU migration – the European Social Fund (worth about eight per cent of the EU budget). The European commission has been actively encouraging member states to use the ESF for the purpose of easing integration into the labour market and society. When the new EU budget was drafted in 2011, the commission did not propose a separate fund for managing migration because the need to do so was not voiced (even by the UK). That decision also reflected the fact that the general philosophy has always been to keep the ESF a universal fund whose main spending priorities can be defined by beneficiary countries and regions themselves.

On the other hand, there are examples of ‘compartmentalisation’ within the ESF such as the youth employment initiative, which was created to support the introduction of the EU-wide youth guarantee. If member states want to have a migration fund supporting those communities that take in high numbers of migrants, then the mid-term review of the 2014-2020 multi-annual financial framework (MFF) might provide the opportunity to create one.

Better spending of EU funds in emigration countries

‘Push’ factors are often discussed when people contemplate ways to bring more fairness into mobility inside the EU. And this is right, since these – the factors prevailing in countries of origin and affecting potential migration – are not entirely exogenous in Europe. So while the EU should not restrict free movement, it should strive to reduce the number of people who want to migrate out of despair. The stronger the role professional ambition plays in migration (as opposed to economic and political ones), the greater chance we have to improve both the quality of, and satisfaction with, mobility.

Indeed, more can be done to ensure that the EU financial instruments available for creating prosperity and opportunities in less-developed regions are used better and more efficiently and thus reduce migration push-factors. It is not true that it is primarily in the new member states where there are problems with the absorption of EU funds, although it is the case that, in countries such as Romania, neither the speed nor the quality of absorption has been encouraging. Better absorption of EU funds on the EU (and eurozone) periphery would certainly help create prosperity locally and reduce incentives for mobility.

Those who make a close connection between the use of EU funds and migration often ask if unused funds could be diverted to the countries of migrants’ destination in order to help their integration there. It would be better, however, to attempt to ensure there is a more effective method for managing funds than under conventional shared management. The 2016 MFF mid-term review could establish a system of direct management that could be introduced (well before the threat of taking funding away) when it is shown that the management system of the beneficiary member state is failing.

Cooperative change that makes a real difference

Treaty change is not necessary for new measures to ensure that labour mobility works better in the EU and is seen in a more positive light. The examples discussed above show that there are constructive ways to think about improving the conditions of migration and the outcome of labour mobility in the EU. ‘Constructive’ does not mean purely insisting on the status quo and the inherited body of labour law and social security coordination. It means ensuring fairness for all: old and new member states, home and host countries, jobseekers as well as employers.

Beyond mobility, people will only support EU cooperation if it is perceived to be fair for all. But fair solutions can only be reached if the analysis and the debates are free of distortion and manipulation. Political leaders should use convincing arguments rather than issuing ultimatums when setting priorities, announcing new initiatives and choosing policy instruments.

While elections often produce new ideas and commitments, new proposals only stand a chance in the EU policy-making process if they are evidence-based, supported by sound analysis and not made up on the back of an envelope.

This is an adapted version of the paper Fair Mobility by Laszlo Andor first published in the Social Europe Journal in February 2015 and on the Policy Network Blog on 2 March 2015.