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Economic impact of migration prepared on the basis of „Labour mobility within the EU. The impact of enlargement and the functioning of the transitional arrangements” by T. Fic, D. Holland, P. Paluchowski, A. Rincon-Aznar, L. Stokes June 2011 National Institute of Economic and Social Research Objective • The objective of this study is to assess the macroeconomic impact of the increased labour mobility that has resulted • from the two recent EU enlargements in 2004 and 2007 • on both host and home countries Outline • Labour mobility in the EU – Migration trends in Europe – Mobile workers’ characteristics • Economic impact of labour mobility – The role of the enlargement process itself • The impact of the crisis on migration Total migration from EU8+2 to EU15 EU8+2 migration to EU15 in thousands 6000 5000 4000 3000 2000 1000 EU8 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 0 EU2 99% of labour movements in the EU have been East-West migration flows from EU8+2 to EU15 Since the 2004 enlargement, about 1.8% of the EU8 population has moved to the EU15, raising its population by 0.3% Since 2007, about 4.1% of the EU2 population has moved to the EU15, raising the host country population by a further 0.3% Migration to and from individual countries • To individual EU15 countries • From individual EU8+2 countries Migration to EU15 over 2004-2009 EU8 • Finland Portugal Denmark -1200000 Sweden -1000000 0 France 100000 Belgium -800000 Neths 200000 Greece -600000 Austria 300000 Ireland -400000 Germany -200000 400000 UK 500000 Italy 0 Spain 600000 Slovenia Estonia Czech Rep Latvia Hungary -1400000 -1600000 -1800000 EU2 Migration has raised the Irish population by about 4%, Spanish – by 1.9%; Italian – by 1.4% and the UK - by 1.1%; elsewhere - inflows have been small Slovakia 700000 Lithuania 800000 Bulgaria Romania 900000 Poland Migration from EU8+2 over 2004-2009 • The biggest outflows have materialised in the case of Romania – 7.2% of domestic population, Lithuania – 3.6% and Bulgaria – 3.4% Mobile workers’ characteristics Slovenia Slovakia EU8 EU2 EU8 EU2 EU8 EU2 EU8 EU2 IT NL Poland Lithuania Romania EU8 EU2 IE Hungary EU8 EU2 FR 80 70 60 50 40 30 20 10 0 EU8 EU2 • Age 65+ 90 EU8 EU2 • Age 0 -14 100 EU8 EU2* • About 28% of all EU8+2 workers in EU15 countries are low-skilled, 55% are mediumskilled and 17% are high-skilled EU8 mobile workers are somewhat better educated than EU2 movers Germany, France and Ireland tend to attract high-skilled workers, while Greece, Belgium, Netherlands are more popular destinations among those with low skills ES Age 15-64 • Education profile • Latvia Bulgaria age citizens from all EU8+2 countries AT BE DE EU8* EU2 • More than 80% of migrants are of working age, compared to an EU-27 average of about 65% There is an overrepresentation of working Estonia • 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Czech Rep • Age profile EL* Low Medium High UK • • Arrivals from the EU8 work predominantly in manufacturing and wholesale and retail trade, while movers from the EU2 are frequently employed in the construction sector and by private households EU8 EU2 0 Real estate activities* Public administration and defence* Financial and insurance activities Water supply; sewerage* Arts Information and comunication Education Professional Other service activities • Sectoral structure Skilled agricultural and fishery workers Legislators senior officials and managers Clerks Technicians and associate professionals Professionals Plant and machine operators and assemblers Craft and related trades workers Service workers and shop and market sales workers 5 0 Agriculture • Manufacturing • About 32% of EU8+2 nationals work in elementary occupations About 54% are employed in occupations requiring medium skills such as craft and related trades workers, service workers and shop and market sales workers About 14% work in high skill occupations as legislators, senior officials, managers, professionals, technicians and associate professionals Accomodation&food service activities Wholesale and retail trade; repair of motor Activities of households as Administrative&support service activities Health &social work activities Transportation and storage • Elementary occupations • Occupational structure Construction Mobile workers’ characteristics 40 35 30 25 20 15 10 EU8 EU2 25 20 15 10 5 What is the impact of migration on host and home economies? • To assess the macroeconomic impact of labour flows from each of the EU8 and EU2 countries to each of the EU15 countries • we conduct a series of macroeconomic simulations • We use a global model NIGEM where most countries are modelled individually • We use annual data on population stocks from Eurostat’s Population statistics for EU8+2 and EU15 countries over 20042009 What is the impact of migration on the long run level of output? Czech Rep Hungary Slovenia Poland Slovakia Estonia Latvia 2.5 Bulgaria 3 Lithuania • in sending countries Romania • in receiving countries 0 2 -1 -2 1.5 -3 1 -4 0.5 -5 EU8 • • France Finland Germany Portugal Neths Sweden Belgium Greece Austria UK Italy Spain Ireland -0.5 Denmark -6 0 -7 -8 -9 EU2 On average, population inflows from EU8 correspond to a long run increase in EU15 GDP by 0.34%, and in the case of EU2 – 0.31%. Ireland and the UK have benefited more than others from migration from the EU8, whereas Spain and Italy – from migration from the EU2 • On average, population outflows from the EU8 correspond to a long run decline of EU8 GDP of 1.31%, and in the case of the EU2 – of 7.4% of EU2 GDP. Romania, Lithuania and Bulgaria have experienced biggest reductions What is the role of the enlargement itself? • Assuming that migration from the EU8 and EU2 would have continued at the same rate as before the accession, we decompose the long run GDP impact of migration into that driven by enlargement and other factors • EU8 and 2004 enlargement EU2 and 2007 enlargement Enlargement 2007 Enlargement 2004 1.4 3.0 1.2 2.5 1.0 2.0 0.8 1.5 0.6 1.0 0.4 0.5 0.2 Other push and pull factors Enlargement About 90% of the impact in the UK and Ireland results from the enlargement itself. EU8 average: about 75% Other push and pull factors Finland Sweden Germany Neths France Denmark UK Portugal Ireland Belgium Austria Greece -0.2 Italy 0.0 Spain France Portugal Greece Italy Germany Spain Finland Neths Belgium Austria Sweden Denmark UK Ireland 0.0 Enlargement The process of migration from EU2 started well before the accession EU2 average: about 50% What has been the impact of the crisis on migration flows? • If there was no crisis and emigration rates from individual EU8+2 in 2007 would have persisted in 2008 and 2009 , migration flows from EU8+2 would have been higher 1400000 1200000 1000000 800000 600000 400000 200000 Actual migration over 2008-2009 EU-2 Romania Bulgaria EU-8 Slovakia Slovenia Poland Latvia Lithuania Hungary Estonia Czech Rep -200000 If there was no crisis 0.04 0.03 0.02 0.01 0.00 -0.01 -0.02 -0.03 -0.04 GDP per capita Unemployment UK Sweden Finland Portugal Austria Neths Lux Italy France Spain Greece Ireland Germany -0.05 Denmark • 0 Belgium • Taking into account relative positions of individual countries during the crisis (measured by unemployment rates and GDP pc) we estimate that: Spain, the UK and Ireland, as well as Italy became less attractive as destinations Germany and France, weathered the recession relatively well (especially as for the labour market performance) and have become more attractive as destinations change in EU8+2 share • What is the impact of the crisis on a sending country? Romanian perspective 1.0 – – – self employed in Italy access to benefits in Spain circular migration Remittances – declined somewhat due to limited employment opportunities – although continue to be almost as high as FDI inflows Remittances and FDI as % of GDP 10 9 8 7 6 5 4 3 2 1 0 Remittances FDI EU-15 United Sweden Finland Austria Portugal Netherlands Italy France Luxembourg 2009 2009 The crisis did not result in large flows of return migration 2007 2008 the share of unemployed increased in 2009 by about 4pp a vast majority work in construction, manufacturing and tourism – sectors which were hard hit by the crisis Spain -0.5 Greece 0.0 Ireland 0.5 2007 – • 1.5 The employment status of Romanian migrants worsened – • 2.0 2006 • from Spain towards Italy (and the UK) 2.5 Germany – 3.0 Denmark • Net migration rate Belgium • The main receiving countries of Romanian nationals are Italy and Spain, which attract about 88% of migrants Despite severe recessions in Spain and Italy, net migration rates from Romania remained positive However the distribution of Romanians across the EU15 has changed 2005 • What is the impact of the crisis on a receiving country? UK perspective • • Immigration rate Rates of total immigration from EU8 and EU2 remained positive The crisis resulted in outflows of Poles, Bulgarians and Lithuanians 0.5 0.4 0.3 Return migration – – • Estimated at about 50000 EU8+2 nationals (2009) resulted both from poorer labour market situation and depreciation of the GBP The value of remittances sent from the UK declined – Driven by return migration and weak pound 2007 • EU-2 EU8 Slovenia Slovakia Romania Poland Lithuania Latvia -0.1 Hungary 0.0 Estonia – driven by increases in employment in services when the crisis hit some of those previously working in agriculture, manufacturing and construction, they either switched to services or decided to leave 0.1 Czechia – • 0.2 Over 2008-2009 the employment status of those who remained in the UK improved Bulgaria • 2009 As the UK economy recovers, immigration rates may increase, however, some of potential flows from the EU8 may be diverted from the UK towards Germany – – – traditional destination for Poles lifted barriers on access to its labour market on 1 May 2011 currently somewhat better labour market prospects Conclusions • Since 2004 about 1.8% of the EU8 population has moved to the EU15: – raising the EU15 population by 0.3% – of this, approximately 75% can be attributed to the enlargement process itself • Since 2007, about 4.1% of the EU2 population has moved to the EU15: – raising the EU15 population by a further 0.3%. – of this, just over 50% can be attributed to the enlargement process itself Conclusions • Migration raised the long run level of output in receiving countries while it left a long term scar on output in sending countries: – in Bulgaria, Romania and Lithuania the potential level of output may be permanently reduced by 5-10%, in Latvia and Estonia - by at least 3% – in receiving countries the macro-economic impact is small, possibly raising the long-run level of potential output by about ½%, with the exception of Ireland - 2½%, and the UK – about 1% Policy implications • Lifting barriers in Germany may divert some EU8+2 workers away from the UK and towards Germany, especially given the relative strength of the German economy compared to the UK • By 31 December 2011, the UK will have to decide whether to extend current restrictions on labour market access to citizens from Bulgaria and Romania. If so, the government will need to demonstrate that lifting barriers threatens a “serious disturbance of its labour market”. Recent NIESR research would provide little support for such an argument