1.7.2006 | Von:
Michael Heinen and Anna Pegels

Free Movement of Workers and Economic Theory

Using very basic economic models, it is possible to argue – as some economists did prior to the EU enlargement – that the creation of a common market for labour, i.e. the elimination of barriers to the movement of workers between two countries, can have negative effects on certain parts of the population if the economic conditions in those countries vary greatly.
Ein Männchen mit Aktenkoffer steht am 26.04.2013 in Berlin auf einem EU-Logo. (© picture alliance / dpa Themendienst)

For example: these models show that the comparatively high wages in one country will attract workers from another country that has relatively low wages. This, in turn, can lead to the lowering of wages through competition in the destination country or, if this is not possible, to an increase in unemployment due to the presence of more workers in the labour market than are employable. It was precisely this fear of lower wages and higher unemployment that was heightened by the media in many EU15 countries immediately prior to the accession of the EU8 countries.

In order to function properly on a theoretical level, however, such models make certain assumptions about labour migrants and labour markets that do not always hold true on a practical level. For example: it is presumed that labour migrants are primarily motivated by a desire for economic gain. But while higher wages may be attractive to labour migrants, social and cultural factors, as well as linguistic problems and difficulties in having educational qualifications recognized in other countries, often temper workers' willingness to leave their native countries. With regard to the labour market, it is assumed that native and migrant workers are interchangeable, i.e. that they are both qualified to do the same work and thus compete for the same jobs. However, in many economies, particularly in Western Europe, there is a shortage of particular skills that labour migrants may fill. In this case, labour migrant workers complement rather than compete with native workers, meaning that employment levels and wages are not necessarily negatively affected.

The evolution of living standards in the EU15 and EU8 will also affect the movement of workers in the future. Economic performance in the EU8 is already improving, which suggests that, in the course of time, there will be fewer economic incentives for workers to seek employment abroad. The more the standard of living in the EU8 converges with that in the EU15, the fewer workers will be inclined to leave their native countries. This development, among other factors, must be taken into account when predicting the future level of migration between the EU8 and the EU15.



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