The policy debate on the freedom of movement and migration deals with the consequences of the eastern enlargement of the European Union and the associated migration of employed and non-employed persons as well as with principles of a migration policy that makes economic sense.
After eastern EU enlargement there were considerable migration flows, greatly exceeding expectations, to western EU countries that had adopted the freedom of movement for workers. As of 2012, when the temporary exemption expires under EU rules, Germany will also experience new migration.
From an economic viewpoint there are good reasons for the free movement of labour not only within a country but also beyond country borders. As long as the migration is only induced by international wage and productivity differences, and the labour markets of the target countries are sufficiently flexible and absorptive, positive welfare effects arise from migration for both the domestic and migrant population. Migration then assures an efficient distribution of labour, since the self-regulation of the labour markets continuously and optimally adjusts migration to the circumstances in the source and target countries. In some market segments competition for jobs will intensify and put pressure on wages in the host country. Since at the same time, however, capital earnings and the wages for complementary labour increase, this country too gains on the whole.
A problem is the distortion of migration flows from the existing social welfare system. The benefits of the distributive state lead to excess migration. This bears with it the danger of an erosion of the western European welfare states, because these states, in order to prevent a migration of the poor, could engage in competing with each other in implementing the strongest deterrents. The problem is made worse by the fact that the freedom of movement also applies to the non-employed. During their first five years of residence, non-employed migrants must pay for their own keep but thereafter have an unlimited claim to residency and full entitlements to the tax-financed benefits of the host welfare state. The erosion of the social safety net can be prevented, in the view of the Ifo Institute, by applying the country-of-origin principle for EU citizens. The EU source country is responsible for the social services, and the recipients can consume these benefits wherever they prefer.
Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (www.europa.eu.int)
Tables, charts and reports provided by Ifo's Database for Institutional Comparisons in Europe DICE
Agreements on Cross-Border Employment, 2004 (Table | 02.11.2006 | Details | Download)
Free Movement of Labour in the EU-15, 2006 - 2009 (Archived Table | 01.06.2007 | Details | Download)
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