Advanced Labor Economics:

Changes in the emigration of skilled labor in Bulgaria after the drop of the "Work permit" regime in the EU in

2014

Abstract: With the accession of Bulgaria and Romania in the European Union in 2007 many people

were wondering whether there will be the same wave of immigration as there was in 2004 when other 10

countries joined the Union. The reality showed that, there was a large amount of people migrating from the

two countries to the old member state. Nevertheless, we were not even close to the proportion of migration

coming from the countries from the previous EU enlargement. As a precautionary measure the borders of

the labor market of the other member states remained closed for the workers coming from the two

countries. With time most of them opened, but not all. 7 years later, when Bulgaria and Romania are to

benefit from the completely free migration within the whole EU, there are again rising discussions and fear

of the magnitude of the potential migration toward the last eight countries that opened their labor markets.

Even though the experts have explained numerous times that those fears have no grounds and Europe will

not see "Flights and buses full as Romanians and Bulgarians head for the UK" (Daily Mail), many people

are certain that the governments should have kept the labor markets closed for the "eternity" if possible.

What is more troublesome is that as the governments are planning new ways of restricting the free

migration, the number of experts in the field of labor economics saying that, the free movement of labor in

Europe is vital, is rising.

In this paper I will present a comparison of the number of people migrating from Bulgaria in the

period around 2007 and in 2014, and the reasons behind the fear of labor migration in Western Europe, as

well as a short overview of the experts' opinion on the matter.

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Introduction

The freedom of movement of workers is one of the four fundamental pillars of economic

integration in the European Union (EU), which also includes the free mobility of capital, goods, and

services. Unfortunately, Bulgaria, being a member of the EU since 2007, is yet to see this. Ever since

Bulgaria and Romania started negotiating with the EU regarding a full membership, there has been a

fear in the eyes of the Old member states of what would happen when all the free labor force of the

countries pours into their labor market. The Bulgarian and Romanian workers were nearly demonized

shortly after 2007, when thousands of people decided to take advantage of the right of free movement

of workers and to seek better opportunities outside of their home countries. As a precaution to this

"invasion", the Old member states closed their borders for foreign workers and imposed restrictions on

the Bulgarian and Romanian citizens. In the following two years, ten countries opened their labor

markets, and during the next three years, another seven did. In 2014 the final eight countries, still

refusing to accept the option of free labor mobility from the two countries, had no more legal ways to

postpone it. According to the EU law a member state is allowed to keep their labor markets closed for

citizens from new member states for up to 7 years, with revisions required after 2 and 5 years, following

their accession. At the end of 2013 those 8 countries were still expecting another round of workers'

invasion coming from the EU2 (the 2 countries that joined the EU in 2007 (Romania and Bulgaria). And

although there have been lengthy explanations of economists and other experts that there's no grounds

for such expectations, the media was shocked when on the first flight to the UK, on January 1st 2014,

only one Romanian arrived seeking a job.

A few months later the situation has not changed much. Although the preliminary reports from

the UK are not showing a spike in the immigration of Bulgarians and Romanians, the Medias and the

populist parties in the parliaments in the old member states are preparing more restrictive amendments

of the laws regarding social benefits for migrants.

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The main purpose of this paper is to compare the migration movement of Bulgarian skilled labor

in 2007, after the country's accession in the EU, and in 2014, after the drop of the last boundaries to the

labor market of the whole EU. Unfortunately the data, relevant to the matter, available for the period

shortly before 2014 and up until now is scarce and inconclusive. Thus, I will add another side into the

focus of the paper by discussing in more detail the reasons why the EU would benefit from the possible

spike in migration of the two countries and how free labor mobility is expected to contribute to the EU

in long term.

Data analyses and restrictions

The migration in the European Union is a sore topic for some of the member states. Surprisingly

there is not enough conclusive data on exactly how many people migrate and what are the sending and

receiving countries. Admittedly, there are a lot of governmental agencies and organizations collecting

and analyzing such data, but it is also a fact that not all member states keep a neat record of the

migration flows of their citizens. Sadly, Bulgaria is one of those countries. The agencies responsible are

presenting annual data on the number immigrants in Bulgaria, and also on the number of emigrants.

However, since not all Bulgarians emigrating are declaring it, the agencies are unable to present the final

number of emigrants, whereas the immigrants are required to declare their presence in the country and

their intended duration. Thus, the agencies are working with estimations of the real number of

migrants. One way of minimizing this gap in information is to crosscheck it with the number of

registered Bulgarians in other EU countries. As a result, we have relatively complete information for

some EU member states, but not for all, due to similar problems.

Regarding this paper, I have identified four reasons that make the data collection and analysis

incomplete. Firstly, when EU representatives present data regarding the migration flows of labor force

form the member states Bulgaria is usually paired with Romania as EU2 and data only for Bulgarian

emigration is more difficult to find. This makes the analysis of the situation in Bulgaria more difficult and

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could lead to unrealistic conclusions. The second reason is connected to the fact that not all countries in

the EU have complete record of the immigrants in their countries for the past years, more specifically

data for the Bulgarian immigrants in the period before the accession in the EU in 2007 and shortly after.

The next reason is similar to the previous but refers to the period shortly before and after 2014. As a

rule, the annual data releases are done at the beginning of the following year at the earliest, which

means that I have to use information from news reports and raw quarterly data if available. This leads to

the fourth problem that I am facing, preparing the paper, the unreliability of the some of the sources.

News reports are not as reliable as statistical data, they could be considered as a source only when no

relevant statistical data is available. And in the case of the immigration of Bulgarians in other EU

member states some news reports, that I have not deemed appropriate, claim that every single

Bulgarian in working age was heading at the UK or Germany on January 1st which was almost

immediately refuted by the governmental agencies in those countries.

Having in mind all of the above problems, I have tried to collect as much relevant and updated

information on the matter, as possible, and to draw the conclusions that I am presenting in this paper.

Post enlargement migration from Bulgaria

Given the already mentioned difficulties collective complete data for the period of the Bulgarian

accession in the European Union, I've found that before 2007 there were 1.3 million Bulgarians and

Romanians in the EU15 countries (the 15 countries that formed the EU before 2004: Belgium, Denmark,

Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland,

Sweden, United Kingdom.) In 2007 they grew to almost 2 million, by 2008 they were 2.3 million and in

2009 became 2.5 million (Holland, Fic and Paluchowski). The statistics show that after the initial spike in

migration from the two countries, there was a slowdown that continued in the following years. In 2007

the migrants from the EU2 represented 6.74% of the EU2 population and 0.5% of the EU15 population.

In comparison in 2004, when was the previous EU enlargement, the migrants represented 0.26% of the

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population of the EU15. In the next 2 years until 2009 the percentage of EU2 migrants reached 0.65 of

the EU15 population, whereas in 2006 (2 years after their accession) the migrants from the EU8 (the

EU10 are the countries that joined the EU in 2004 - Cyprus, Czech Republic, Estonia, Hungary, Lithuania,

Latvia, Malta, Poland, Slovenia, Slovakia; EU8 are the EU-10, excluding Malta and Cyprus) were 2.23% of

the population of the EU15. That means that after the previous enlargement the countries that migrated

heavily increased their migration by 0.85% in 2 years. For the same period of time, between 2007 and

2009, Bulgaria and Romania grow 0.15%. I am providing this comparison as an initial marker for the rate

of migration of the countries from Eastern Europe. This is necessary since there is a certain separation

and lack of trust between the countries from Western Europe (mainly forming the EU15) and those from

Eastern Europe (mainly EU8 and EU2).

Moving on to the questions of "from where and where to did migrants from the new member

states go" Kahanec (2012) shows that the most important sending countries are Romania and Poland,

which in 2009 together accounted for three quarters of all migrants from the EU8 and EU2 in the EU15.

On the other hand the most significant of the EU15 host countries for EU8 citizens were Germany and

the UK, jointly hosting 62% of them and for EU2 citizens the two most significant destinations were Italy

and Spain, in 2009 each hosting more than 40% of all EU2 citizens residing in the EU15 (Kahanec). Since

the access to most EU15 labor markets continued to be restricted for EU2 up until 2009, when the first

ten countries opened up completely, there was a significant growth of migration in Denmark and

Sweden. Among the other EU15 countries Austria, Ireland, Luxembourg, and Belgium hosted the most

dynamic EU2 populations (Kahanec).

Another important aspect regarding the migration from the EU2 countries is the level of

education of the emigrating workers. Brücker and Damelang (2009) report that in 2006 among EU2

migrants in the EU15 29% had low and 18% had high educational attainment. Among the natives in the

EU15 there were 27% of them with low and the same percentage with high educational attainment.

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Holland et al. (2011) find that Luxembourg, Denmark, Sweden, and Ireland are most popular among

high-skilled workers, while low-skilled workers are more likely to go to Greece, Portugal, Spain, Belgium,

Netherlands, and Finland.

Fears before 2014, who and why

Bulgarians and Romanians gained the right to visa-free travel to the whole EU in 2007. But there

were temporary restrictions on the kind of jobs they could take. In some countries employers had to

apply for work permits and migrants for an "accession worker card". In others low-skilled workers were

restricted to existing quota schemes in different sectors. Some of the EU member states dropped those

restrictions 2 years later in 2009, namely Cyprus, Czech Republic, Estonia, Finland, Latvia, Lithuania,

Poland, Slovakia, Slovenia, and Sweden. In the next 3 years another 7 countries opened their borders,

more specifically Denmark, Greece, Hungary, Ireland, Italy, Portugal, and Spain. The remaining 8

countries (Austria, Germany, Belgium, France, Luxembourg, Malta, the Netherlands, and the UK)

dropped those restrictions on 1 January 2014, and I would add, very unwillingly. The reason for the lack

of desire on their side to have migrants from the two countries comes from the bitter experience from

the past. After the enlargement in 2004 and the substantial underestimation of the expected migration

from the EU8 countries to the UK, the other EU member states feared that their labor markets will be

flooded with poor, low skilled Bulgarians and Romanians seeking not only jobs but also social benefits.

After January 1st Bulgarians and Romanians will be entitled to claim the same benefits and health care as

other EU citizens, which brings the topic of "benefits tourism." That is due to the existing difference

between the economic states of the EU2 and the EU15 countries.

The fears of the citizens in the UK are magnified by headlines in some tabloids, like "tidal floods

of new immigrants" from Romania and Bulgaria, "Britain is powerless to stop tens of thousands of

Bulgarians and Romanians moving to UK" (Telegraph), "Romanian and Bulgarian immigrants

...threatening to swamp Britain — and flood our overstretched jobs market" (Sun), and an e-petition

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implies that as many as 600,000 could come, often to seek benefits. An additional aspect of the problem

comes from the fact that the governments of Germany and Britain are both currently under

conservative/liberal coalitions, that opted for restricting access to employment for citizens of Romania

and Bulgaria. In the UK the so called Populist Party is increasingly gaining support to "protect the labor

market from the migrants".

In response to the pressure from the public and the populist parties, the UK is tightening the

benefit rules to ensure that migrants cannot claim out-of-work benefits for three months after arriving

and will only qualify for support after six months if they have a genuine chance of employment.

Germany on the other hand is welcoming the high skilled migrants from Eastern and Southern Europe to

fuel the economy, but is also concerned regarding the "poverty migration" (Düvell)

The real migration potential of Bulgaria and Romania

Regardless of the feared flood of migrants coming from the EU2 toward the EU15, the experts

have already explained in length and on multiple occasions that such thing will not happen. There are

several reasons for that. The first and easiest to understand is that as the officials from the two

countries said "most Bulgarians and Romanians who want to be in the UK are already in the country and

the predicted "flood" on 1 January will not happen" (BBC News). In July 2012 there were 94,000

Romanian-born people and 47,000 Bulgarian-born people living in the UK, according to the Office for

National Statistics in the UK (BBC News). In its Migration Statistics Quarterly Report from February 2014,

the same shows there was a statistically significant increase in immigration of EU2 citizens to 24,000 in

the year ending September 2013 from 9,000 in the previous year. An estimated 70% arrived for work

and 30% for study (2014). Compared to the overall estimated net flow of 212,000 long-term migrants to

the UK, those coming from the EU2 are 11%, and 70% of them are actually seeking employment, which

makes 16,800 people.

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Since the UK is the most "outspoken" of the EU15 that last opened their labor markets, I am

mainly focusing on the statistics regarding the possible migration to the UK, keeping in mind that the

other countries are facing the same likelihood for immigration from the EU2 if not less. In order to know

how many Bulgarians and Romanians are likely to immigrate lets first calculate how many are actually

capable of doing so. Romania has a population of 22 million and Bulgaria 7 million, 29 million in total.

Both countries have ageing and shrinking populations. The group of young people who are most likely to

migrate is shrinking; there are around 6.5 million Romanians and 2.1 million Bulgarians in the age group

20-39, 8.6 million in total. So far, 1.9 million Romanians and 0.35 million Bulgarians have already

immigrated to other EU countries (Düvell). Even if all the remaining 6.35 million Romanians and

Bulgarians decide to emigrate in Europe, which is highly unlikely, they will not all go to one country.

They will be spread throughout the 15 richest EU countries, and they will most certainly not emigrate at

the same time, but in a more extended period of at least 3 to 5 years. That means that even if all of

those Bulgarians and Romanians that are in the proper age decide to emigrate there will be

approximately 84,000 people migrating in a single country per tear. And as it is well known not all

people at this age will decide to emigrate, since there are other aspects that may play role, such as

migration systems, migration networks, migration politics, opportunity-constraints structures, social and

human capital, perceptions and imaginations, individual characteristics and emotions. In comparison in

2007 when was the initial accession of the EU2 countries there were almost 2 million people migrating

to the EU15, and in 2004 when was the previous enlargement about a million people from the EU8

migrated to the EU15.

Those statistics were meant to show that the migration capacity of Bulgaria and Romania

together is not as large as the media in the UK and some political parties are presenting it to be.

Furthermore, Bulgaria, as a single country, has far less capacity to migrate and has shown in the last few

years declining migration, also some immigration as well as return migration has been observed.

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Another factor worth mentioning is the destination of the possible emigration from Bulgaria.

Statistically the preferred migration destinations are Spain, Germany, Greece, Italy and Portugal

followed by Canada and the US but not the UK, and from those only Germany opened its labor market in

2014, all the other European countries had already done so in the previous years. Having discussed all of

the above reasons and statistics, I can conclude that the expected flood of Bulgarian and Romanian

workers heading for the EU member states that opened their labor markets completely in 2014 is

unjustified and lacks theoretical background.

Overall positive effect of labor mobility within the EU

The EU is facing several problems in the past years, the level of unemployment is high in some

parts of the EU, namely in the southern and southeastern member states of the EU, others are still

recovering from its spike during the crisis. Another problem is the growing shortage of skilled labor in a

number of regions and industries throughout the EU. At the same time, demographic forecasts clearly

demonstrate that this shortage will further increase. The European nations are aging and the number of

graduates from all levels of education is declining and will continue to decline in the coming decades.

That leaves the EU in a very unfavorable position. One way of getting control over these trends, apart

from reversing the demographic decline, is to promote the labor migration within the EU, as a way of, at

least, minimizing the mismatching between job seekers and the employers, and at best reducing the

unemployment throughout the EU. As of 2013 less than 1% of all economically active EU citizens move

from one member state to another annually for work related reasons. Thus, it is obvious that, in the

short term, Europe needs more mobility of labor between EU member states – in particular between

those with high levels of unemployment and those suffering from labor market shortages (Münz).

A simple straightforward analysis of the effects of migration from a country with a lower level of

income to a country with higher level of income for a group of high-skilled workers shows that the

winners of the migration would be the low-skilled workers in the receiving countries (with high income)

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benefiting from higher wages or lower unemployment. In the sending countries (with lower income),

the staying high-skilled workers could also benefit unless the weakened demand for low-skilled workers

resulted in lower low-skilled employment and, as a consequence, lower productivity of high-skilled

workers in spite of their increased scarcity. High-skilled workers in the receiving countries could be

among the losers of migration, but not if the increased demand for low-skilled labor resulted in their

higher employment and thus an increased productivity of high-skilled workers in spite of their increased

relative abundance. Low-skilled workers in the sending countries would clearly lose either in terms of

higher unemployment or lower wages. One can similarly track the redistributive effects of low-skilled

migration in a similar way (Kahanec).

The promotion of internal migration can be expected to improve the allocation of labor and

human capital. Moreover, migration generates cross-regional and cross-border social ties, thus acting as

a vehicle for international flows of goods and services, capital, as well as ideas and knowledge (Bonin,

Eichhorst and Florman). The resulting improved productivity may benefit all types of labor in sending as

well as receiving countries. Further economic benefits may result from increased ethnic diversity in

receiving countries (Ottaviano and Peri).

In the long run, even a higher degree of intra- European mobility would not be sufficient to close

future gaps in European labor markets. As a result, European countries with ageing societies and

stagnating or declining working age populations that lead to labor market shortages, will have to rely on

immigrants. A number of EU member states accustomed to finding the kind of labor and skills they

require easily will need to think more strategically about how to attract qualified workers. While most

sending countries have adopted liberal migration policies facilitating travel and emigration, receiving

countries in Europe see migration control as a key element of their sovereignty. As a result, EU member

states generally have "unilateral" admission policies that are neither aligned with other receiving

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countries nor with key sending countries. Given this situation, bilateral agreements or mobility

partnerships can only play a minor role in most EU migration policymaking (Münz).

This lack of cooperation between migrant sending and receiving countries increases the costs of

migration and decreases the positive effects on socioeconomic development. The direct costs include

the issuing of visas and passports, the administrative fees for recruitment and travel agencies, the

commissions on currency exchange, the fees on money transfer, and other levies. These indirect costs

are a form of labor market discrimination: they lead to lower incomes compared to those of native

workers with similar skills; to reduced ability to transfer acquired social rights and benefits across

countries, which translates into lower or no pension payments; to lower health insurance coverage; and

to reduced or no access to unemployment benefits. Smarter policies could help reduce these costs and

downsides of international migration. More cooperation at all points of the migration trajectory would

offer policymakers the opportunity to craft policies that can be mutually beneficial and help mitigate the

risks of migration. One driver of restrictive migration policies is public opinion. Many Europeans are not

ready to accept more international migrants in their respective countries. In parallel, political parties

with a restrictive agenda on migration are becoming more popular. Unfavorable perceptions of

migration create at least three challenges for the EU and its member states. First, they point to the need

to organize political majorities in favor of more pro-active migration policies. Second, they emphasize

the importance of making Europe more attractive for mobile people with talent and skills. Third, they

encourage the move away from unilateral migration policies and toward negotiated win-win solutions

aiming at reducing the costs of and enhancing the welfare gains from migration and remittances (Münz).

If no actions are taken in order to promote the mobility between EU members states, those with ageing

populations must also consider other policies to protect the capabilities of their workforces. These

should include increasing the retirement age and the participation of women in the labor force.

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Conclusion

The free mobility of labor across the European Union is supposed to be one of the four pillars of

the Union, but in reality it is a victim of the public opinion and political games. In the time when the

humanity is trying to eradicate the racism and xenophobia we see two nations being criticized for having

the right to work in another European country. Bulgaria and Romania were accepted in the EU in 2007

and although their citizens were allowed to travel freely, they could not seek employment just as freely,

there were restrictions, high cost of travel and migration, and last but not least the emotional trauma of

having to leave family. Over the following 7 years most of the EU member states opened up their labor

markets. Even though no extreme migration was seen, when the time came for the last 8 countries to

open up as well, suddenly, what seems to be, the whole Europe was expecting all remaining Bulgarians

and Romanians to rush into the UK and Germany, looking for not only employment but all to "suck dry"

the social benefits' funds of the countries. When January 1st 2014 came and no such thing happened,

the media claimed that it will happen but may be a little later, thus leaving time for the government of

the UK especially to prepare new amendments of the social benefits laws. What the media and the

political parties have failed to notice is the amount of economists and other experts in field of labor

economics and migration saying that those fears are unjustified and no "migration flood" is expected.

But even if it does happen to some extend it will not hurt the economies of the UK, Germany or any

other EU15 country, in fact it will help them. The only party in the whole situation that will lose is the

sending-workers one, namely Bulgaria and Romania. This is explained by several factors, such as the

aging nations of the EU15 (and most of the other EU countries) that need more and new workers to

replace the old ones and more experts in different fields that are not all educated in their own country,

as well as new talented people to replace the gap that had opened up after many talents left the EU. In

the following years the UK and the other EU15 should focus not on trying to close their borders for

foreigners, but instead to attract as many, as possible, before it's too late to recover their economies.

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