National Instituteof Economic and Social Research

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. StokesJune 2011

Objective

• The objective of this study is to assess the macro-economic 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

0

1000

2000

3000

4000

5000

600019

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

EU8 EU2

99% of labour movements in the EU have been East-West migration flows from EU8+2 to EU15Since 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

• 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

• From individual EU8+2 countries

• The biggest outflows have materialised in the case of Romania – 7.2% of domestic population, Lithuania – 3.6% and Bulgaria – 3.4%

Migration to EU15 over 2004-2009

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

Spa

in

Italy

UK

Ger

man

y

Irel

and

Aus

tria

Gre

ece

Net

hs

Bel

gium

Fra

nce

Sw

eden

Den

mar

k

Por

tuga

l

Fin

land

EU8 EU2

Migration from EU8+2 over 2004-2009

-1800000

-1600000

-1400000

-1200000

-1000000

-800000

-600000

-400000

-200000

0

Rom

ania

Pol

and

Bul

garia

Lith

uani

a

Slo

vaki

a

Hun

gary

Latv

ia

Cze

ch R

ep

Est

onia

Slo

veni

a

Mobile workers’ characteristics

0

10

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EU

8E

U2

*

EU

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U2

EU

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EU

8*

EU

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EU

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AT BE DE EL* ES FR IE IT NL UK

Low Medium High

• Age profile• More than 80% of migrants are of working

age, compared to an EU-27 average of about 65%

• There is an overrepresentation of working

age citizens from all EU8+2 countries

• Education profile• About 28% of all EU8+2 workers in EU15

countries are low-skilled, 55% are medium-skilled 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

0%10%20%30%40%50%60%70%80%90%

100%

Bul

garia

Cze

chR

ep

Est

onia

Latv

ia

Lith

uani

a

Hun

gary

Pol

and

Rom

ania

Slo

veni

a

Slo

vaki

a

Age 15-64 Age 0 -14 Age 65+

Mobile workers’ characteristics

• Occupational structure• 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

• Sectoral structure• 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

0

5

10

15

20

25

30

35

40

Eleme

ntary

occu

patio

ns

Serv

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isher

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EU8 EU2

0

5

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Acco

mod

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EU8 EU2

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 2004-2009

What is the impact of migration on the long run level of output?• in receiving countries

• 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

• in sending countries

• 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

-0.5

0

0.5

1

1.5

2

2.5

3

Irel

and

Spa

in

Italy

UK

Aus

tria

Gre

ece

Den

mar

k

Bel

gium

Sw

eden

Net

hs

Por

tuga

l

Ger

man

y

Fin

land

Fra

nce

EU8 EU2 -9

-8

-7

-6

-5

-4

-3

-2

-1

0

Rom

ania

Lith

uani

a

Bul

garia

Latv

ia

Est

onia

Slo

vaki

a

Pol

and

Slo

veni

a

Hun

gary

Cze

ch R

ep

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 2004

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Irel

and

UK

Den

mar

k

Sw

eden

Aus

tria

Bel

gium

Net

hs

Fin

land

Spa

in

Ger

man

y

Ital

y

Gre

ece

Por

tuga

l

Fra

nce

Other push and pull factors Enlargement

The process of migration from EU2 startedwell before the accessionEU2 average: about 50%

About 90% of the impact in the UK and Irelandresults from the enlargement itself.EU8 average: about 75%

Enlargement 2007

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Spa

in

Ital

y

Gre

ece

Aus

tria

Bel

gium

Irel

and

Por

tuga

l

UK

Den

mar

k

Fra

nce

Net

hs

Ger

man

y

Sw

eden

Fin

land

Other push and pull factors Enlargement

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

• 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

-200000

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Pol

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Slo

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a

EU

-8

Bul

garia

Rom

ania

EU

-2

Actual migration over 2008-2009 If there was no crisis

-0.05

-0.04

-0.03

-0.02

-0.01

0.00

0.01

0.02

0.03

0.04

Be

lgiu

m

De

nm

ark

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rma

ny

Ire

lan

d

Gre

ece

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ain

Fra

nce

Italy

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x

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ths

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stri

a

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rtu

ga

l

Fin

lan

d

Sw

ed

en

UK

cha

ng

e in

EU

8+

2 s

ha

re

GDP per capita Unemployment

What is the impact of the crisis on a sending country? Romanian perspective

• 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

– from Spain towards Italy (and the UK)

• The employment status of Romanian migrants worsened

– 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

• The crisis did not result in large flows of return migration

– 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

Net migration rate

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Belg

ium

Denm

ark

Germ

any

Irela

nd

Gre

ece

Spain

Fra

nce

Italy

Luxem

bourg

Neth

erlands

Austr

ia

Port

ugal

Fin

land

Sw

eden

Unite

d

EU

-15

2007 2009

Remittances and FDI as % of GDP

0123456789

10

2005

2006

2007

2008

2009

Remittances FDI

What is the impact of the crisis on a receiving country? UK perspective

• Rates of total immigration from EU8 and EU2 remained positive

• The crisis resulted in outflows of Poles, Bulgarians and Lithuanians

• Over 2008-2009 the employment status of those who remained in the UK improved

– 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

• 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

• 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

Immigration rate

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

Bul

garia

Cze

chia

Est

onia

Hun

gary

Latv

ia

Lith

uani

a

Pol

and

Rom

ania

Slo

vaki

a

Slo

veni

a

EU

8

EU

-2

2007 2009

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