The freedom of movement for workers is the right of every citizen of the European Union (EU) to take on employment in another EU member state. The EU member states are obliged to issue a residence permit to migrating workers upon presentation of their identity card or passport and proof of employment. No work permit is required. The migrating worker must be treated the same as a domestic citizen in terms of access to employment, working conditions, social benefits and tax advantages. The freedom of movement for workers has existed since the foundation of the Community in 1957.
The freedom of movement for workers has its legal foundation in Article 39 of the EC Treaty, supplemented by Directive 1612/68 on the freedom of movement of workers within the Community and Directive 2004/38/EC on the freedom of residence (freedom of movement directive).
Through the eastern enlargements of the EU on 1 May 2004 (Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia; often referred to as the EU10) and 1 January 2007 (Bulgaria, Romania), the number of inhabitants of the EU grew by around 105 million or 28 percent to ca. 485 million. Since a flood of eastern European workers to the western EU states was feared because of the large wage gap between east and west, the EU limited the freedom of movement of workers for the accession countries up to a maximum of seven years after joining the EU.
In the meantime, 17 of the 27 EU states have completely opened their labour markets: the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Poland, Slovenia, Slovakia, Finland, Sweden; Spain, Greece, Hungarians as well as Portugal as of 1 January 2009 and Denmark as of 1 May 2009; Romania and Bulgaria have also not set any restrictions for taking on employment in their countries.
In the remaining ten EU states, freedom of movement for workers from the new member states remains restricted to differing extents, and at least a work permit is necessary (European Commission: Your Europe). As of May 2011 the full freedom of movement for workers will apply to the EU10 states and as of 1 January 2014 also for Bulgaria and Romania.
From an economic viewpoint there are good reasons for the free movement of workers not only within a country but also across boundaries. As long as the migration is touched off only by international wage and productivity differences and the labour markets of the target countries are sufficiently flexible and absorptive, migration increases economic prosperity in both the source and the target countries. Migration then ensures an efficient distribution of workers, since the self-regulation of the labour markets continuously and optimally adjusts the migration to the circumstances in the source and target countries. To be sure, in some market segments the competition for jobs increases and depresses wages in the target country. But since capital income and wages for complementary (supplemental) work increases simultaneously, this country also gains, on balance.
Problems arise if the migration encounters an encrusted labour market with inflexible wages and a system of wage replacement benefits, because then the immigrants force the target-country workers onto the dole. An increase in prosperity via migration does not take place or only to a limited extent.
In the opinion of the Ifo Institute, the complete freedom of movement for workers requires a reform of the German labour market. In addition to opt-out clauses for industry-wide wage agreements and a reform of the dismissal protection laws, what is also needed is the activating social welfare reforms proposed by the Ifo Institute. Only in this way can wages be lowered to create the necessary jobs for migrants in the primary labour market without causing social hardship.
Even if no unemployment arises after a flexibilisation of the labour market, problems arise in that the redistributing welfare state always causes an excessive immigration of low-skilled workers. Because of their low market earnings, migrants as a rule pay lower taxes and social insurance contributions than they receive from free public services and also from social benefits. In net terms, an immigration premium is paid that causes excess immigration since the last immigrants reduce the common social product of both source and target countries by their decision to migrate.
Ifo Policy Issue “Free Movement Directive” / Migration
Ifo Policy Issue Low Wage Employment / Welfare to Work
Lists of entries the database DICE on Labour Migration
RSS