by Rainer Münz
EU Enlargement and Transit Provisions
In May 2004 the European Union (EU) grew by 74 million inhabitants with ten new member states: the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. The EU now has 25 member states with some 455 million people living in this politically and economically integrated space. In 2007 two new countries, Bulgaria and Romania are expected to join, adding an additional 30 million EU citizens. The EU will soon decide on the status of Croatia as a new candidate country.
All countries in Eastern Europe, when compared to the "old" fifteen EU member states, have less competitive economies, a lower Gross Domestic Product (GDP) per capita and significantly lower wages. Initially, they will not be net contributors to the EU budget but will need a longer time to develop the means for building infrastructure and competitive industries.
The considerable difference in income between the "old" and "new" EU states has caused public concern about potential East-West migration after enlargement. For this reason, during negotiations with the new EU member states, Austria and Germany along with some other EU members have insisted on a transition period. For up to seven years the "old" member states can still exercise control over the access of citizens of "new" member states to their labor markets (except Cyprus and Malta). In 2004 a majority of "old" EU member states decided to implement such restrictions for at least two years. After two- and five years, respectively (2006, 2009), they must justify to the European Commission the reasons for maintaining these restrictions.
In answer to this, one new member state, Hungary, decided to reciprocate with similar restrictions for workers and employees from all those EU countries which have implemented these measures.
Expected Effects of Migration
The transitional provisions will limit the free movement of labor between new and old EU countries. At least in Austria and Germany they will presumably stay in effect until 2009 or even 2011. But it cannot be expected to completely prevent East-West migration after EU enlargement. There are a number of reasons for this:
Firstly, the provisions governing the transition period only limit access to the labor market. But it has become possible for the citizens of the new EU states to move to another member state as students, retired persons or as family members. They will also have the right to establish a firm in any EU member state or to act as self-employed persons. East-West migration will also increase through marriage, education or higher employment in the informal sector.
Not everyone will stay permanently in Austria or other parts of Western Europe. Some people will simply 'try out the new freedom' to reside elsewhere, while others will use the opportunities that come with it. In particular, Austria and Germany, situated in geographic vicinity to the new member states, face immigration and irregular employment of new EU citizens now legally entering and residing in the country but excluded from the formal labor market.
Secondly, another increase might occur after the end of the transitional provisions. In 2009, or 2011, citizens of new EU states will have full access to Western Europe's labor markets. However, when estimating the expected migration of labor, one must consider the expected changes in the demographic and economic situation in Eastern Europe. Due to low birth rates the number of those entering the labor market in Slovakia, Hungary, Poland and the Czech Republic after the year 2010 will become considerably smaller. At the same time these countries will have continuing economic growth.
Financial support from EU funds will bring additional pace to an already dynamic economic process. Increased demand for labor and skills will be the consequence. After earlier EU enlargements Greece, Portugal, Spain as well as Ireland have all experienced this change turning them into immigration countries. With the EU's Eastern enlargement similar changes are to be expected.
Thirdly, East-West migration will increase with family reunions within the enlarged EU. When people from Eastern Europe already living in Western Europe become EU citizens, their spouses and minor children are allowed to join them without any waiting period. They will, however, have no right to enter the labor market.
We can specify this migration potential for Austria. Since 1980 some 250,000 people have entered the country and become naturalized. Of this total, about 12% came from Eastern Europe. An additional 90,000 legal citizens of new EU member states and of the accession countries of 2007 are currently living in Austria. They represent a significant potential for further family migration. As a result of EU enlargement more people will choose to commute from the new to the old member states. This will become easier when the remaining controls at the Eastern borders of Germany, Austria and Italy are removed. This, in turn, depends upon progress in implementing border control and enforcement in line with the Schengen agreement at the Eastern borders of Poland, Slovakia and Hungary. They then will become part of the so-called "Schengen area."
The Schengen area is a territory made up of fifteen countries (Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Italy, Greece, Luxembourg, the Netherlands, Norway, Portugal, Spain and Sweden). These countries have signed a treaty known as the Schengen Treaty, agreeing to end mutual border checkpoints and controls. Common rules regarding visas, asylum rights and checks at external borders were adopted to allow for free movement of persons within these states. The name "Schengen" comes from a small town in Luxembourg where the treaty was originally signed in 1985 by five countries. Potential workers from the Czech Republic, Slovakia, Hungary and Slovenia will be able to travel to work in Lower Austria, Burgenland, Vienna or Styria without delays at open borders. By the same token the number of daily or weekly commuters from Austria to neighboring Eastern Europe will also increase. Some Austrians and Germans may even take up residence in Slovakia, Hungary, Slovenia or in the Czech Republic and commute from there to their work in Austria.
East-West Migration to Austria - a Dilemma?
Today many people in Austria see East-West migration as a problem. But in the medium- and long-term, additional migrants will be welcome in order to fill gaps in the labor force. In the future Austria's native work force will shrink as a result of low birth rates and hence a declining number of young adults entering the labor market.
Without immigration, the domestic work force would be roughly reduced from currently 3.7 million to 3.6 million by 2011 and to 3.2 million by 2021. Within less than twenty years the decline in the number of those working would be about 500,000, or 25,000 per year. It is therefore an advantage for Austria if qualified workers from neighboring countries become part of the labor force. Social and cultural integration should not be a major problem. Until now the immigration from neighboring countries has mainly consisted of educated people with a fair knowledge of German and the willingness to adapt to Austrian society. There are good reasons to believe this will also be the case in the future.
Austria, Germany and many other old EU member states have implemented transitional restrictions for citizens of new EU member states before they get full access to their labor markets. Those who are looking for higher wages and better working conditions will therefore migrate to EU states without such restrictions; for example, Great Britain and Ireland. The U.S. and Canada will also remain attractive destinations. Austria and Germany must therefore be careful not to miss the opportunities that the East-West migration provides.
Rainer Münz is a Senior Fellow at the Hamburg Institute of International Economics (HWWA) and a leading Austrian expert on migration. He currently works for the World Bank as an outside consultant.
by Rainer Münz