OUTLINE

I – Introduction

a) Historical Background
b) Economic and Political Rationale of Integration
c) Thesis Statement

II – Current Migration Situation

a) Four Types of Migration

b) The Background for Migration After the 2nd World War
c) Statistics of Migration Inflows and Relevance

III – Reasons that Contribute in Fostering Migration

a) The Migration Rationale

b) Economic and Other Indices Fostering Migration

IV- Analysis of Three Main Phenomena Occurring Due to Migration

a) Brain Gain
b) Brain Drain
c) Brain Waste

V – Economic Impact of Migration

a) Impact on Labor Supply

b) Impact on Input, Output and Productivity
c) Remittances
d) Location Shift of Industries
e) Complementary vs Substitute Skills

VI – Barriers Not Allowing a Boost in Migration

a) Level of Qualifications and Skills

b) Regulations
c) Language

VII – Analysis of Structural Changes in European Union’s Population

a) Low Fertility
b) Higher Life Expectancy
c) Higher Dependency Ratio
d) No Ground to Fear Social Dumping

VIII – Will Migration Boost After Union’s Enlargements

a) No Evidence to Support a Boost in Migration

b) Past Experiences
c) Future Projections
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IX - Conclusion

Since the establishment of the European Economic Community, migration has been a
real matter of concern. The very first founders of today’s European Union viewed a unified
and integrated continent as the only way to overthrow past conflicts and look forward in
establishing the necessary bridges that would guarantee peaceful and prosperous cohabitation.
Being the major battlefield of both World War conflicts, a bloody land of millions of
atrocities, Europe was in a desperate quest of cooperation ties. Under such circumstances, the
establishment of an economic, social and political union would pave the way to a common
integrated future. However, the perspective of creating such a union posed both major threats
and opportunities. The positive impact in terms of, expanded market, exploitation of new
opportunities with regard to resources and access to a larger labor pool endowed with various
levels of skills, a more equal distribution of income, higher mobility of labor and capital etc,
constituted the economic rationale behind the need for integration. Also, the growing power
of the United States, the threat coming from the communist Russian Federation, and the need
to strategically reposition itself as a major power, constituted the political rationale of
integration. However, the major drawback, raising huge concerns among the most developed
members of the European Union has been the fostering of migration through the membership
of less developed countries. The purpose of this paper is to identify that migration due to the
free mobility of labor is an opportunity rather than a threat to both sending and receiving
countries; but, there are no indices to make us predict a possible boost in migration as the
European Union grows larger.

Since its establishment, the European Union has gone through six enlargement
processes, with the 2004’s enlargement being the biggest not in terms of area and population
but in terms of new member states joining the union. The whole process of enlargement has
been associated with debates regarding the increased propensity to migrate. We can identity
four broad types of migration; labor migration, family linked migration, asylum seeker and
illegal migration (Guardia & Pichelmann, 2006, pp.13-14). After the 2nd World War, the iron
curtain split Europe into two distinct realities which moved toward development at very
different rates. On one side, Western Europe operating under a free market economy
experienced an economic boom, while on the other side, Eastern Europe operating under the
supervision of the communist Russia and under a planned economy as well, was left very
much behind. The visible gap in economic growth between the west and the east as well as
between the north and south, with the north being much more developed, established the

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background for labor migration. Also, the political disputes between the democratic west and
the communist east created the necessary base for the asylum seeker migrants as well as for
illegal migration. The fall of the Berlin wall in 1989, signed a step forward, both in the
process of European integration and in the process of fostering all the four above mentioned
types of migration. However, since 2003, the net migration inflows are experiencing a
downward trend, with a net migration inflow of 2 million in 2003, 1.8 million in 2004 and 1.6
million in 2005 (Guardia & Pichelmann, 2006, pp. 7-8). Also, it is important to mention that
in certain European countries, considered as main receiving countries such as Germany,
Austria, United Kingdom, France and Belgium, the foreign population constitutes from 5-
9.5% of the population as well as 5-9% of the total labor force (Guardia & Pichelmann, 2006,
p. 10). This data indicate that the participation of foreign population to the European Union
countries’ total national labor force is relatively high. However, statistics reveal that the
average foreign born population as a percentage of total population in Europe, being 9%, is
much lower than in other areas such as Canada with 20%, Australia with 20% and the United
States with 12 % (Guardia & Pichelmann, 2006, p. 10). This is a clear indicator that more
than a real threat to developed countries of the European Union, migration can be a real
opportunity, taking into account the level of economic development of Canada, Australia and
the United States.

Prior to analyzing anything else related to migration, it is important to determine the

various factors that contribute to its development. The 4 types of migration mentioned above,
lead us to determine various reasons for why migration occurs. The basic formula of
migration reveals that there is a propensity to migrate when the present value of migration
benefits exceeds the migration costs (Guardia & Pichelmann, 2006, p.8). However, if we take
this formula for granted, we are indirectly assuming that each individual possesses all the
information required to make the necessary calculations. Considering the educational
background and access to information of the migrant population which in most cases is either
low or very low, the formula does not always fit reality. Still, independently of the level of
information by which a potential migrant is endowed, there is always an analysis of perceived
benefits and costs preceding any decision to migrate. If we think in terms of economic
indices, the main factors that might contribute to fostering migration are the differences in
wage levels among countries, high level of unemployment in the source country, the
perspective of profiting from the receiving countries’ social security systems etc. Besides the
economic indices, ethnic, religious and political conflicts within a country might contribute in
fostering migration as well. However, to us, it is of major importance to analyze whether
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there is ground for migration based on the above indices and what would be the impact of a
possible boost in migration.

Brain gain, brain drain and brain waste are three very important phenomena associated
to the process of migration. Under migration circumstances, brain gain, the process of
receiving qualified and skilled labor force, favors the receiving countries; brain drain, the
process of losing qualified and skilled labor force, damages the sourcing countries and brain
waste, the process of underutilizing the qualified and skilled labor force, damages
productivity (Guardia & Pichelmann, 2006, p.38). Mainly because of low employment
opportunities and of low compensation for the same workload relative to other countries, part
of the labor force of one country perceives migration as an opportunity to improve his/her
living standards. However, this process creates substantial shortages of labor force in the
domestic labor market, thus influencing directly in lowering productivity. Economic theory
suggests that an employ goes from where he is less productive to where he is more productive
(As stated in Guardia & Pichelmann, 2006, p.22). If we agree on this statement, than we are
assuming that each economy fully employs its factors of production, including labor, to
maximize productivity. Unfortunately, this is not the case, especially in developing countries,
where the lack of capital, know-how and of strategic development programs creates huge
gaps in productivity. Yet, besides the effects of the brain gain and brain drain phenomena, the
brain waste process is of similar consequences. Research suggests that 12-14% of post 1989
migration is considered as high-skilled (As stated in Guardia & Pichelmann, 2006, p.22).
Still, most of these high-skilled employees are utilized into jobs that require a much lower
level of qualifications and skills than those with which they are endowed. As we can see, due
to brain gain, brain drain and brain waste, migration is effecting the source countries more
negatively than the receiving countries.

Another very important element of migration is its impact on a nation’s or a union’s

economy, as it is the case of the European Union. There are several factors that make
migration advantageous to both the sourcing and receiving countries. For instance, migration
directly contributes in increasing the labor supply pool in the receiving countries, covering
those areas in which there might be shortages, thus contributing also in increasing both output
and productivity (Gilpin et al., 2006, p.31). Also, similarly as the nationals, migrant pay taxes
and spend on consumption which effects the country’s aggregate demand. Yet, some positive
contributions are delivered even to the sourcing countries. Remittances, money coming from
the nationals living and working abroad, are a real and substantial contribution of migrants to
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their countries of origin. Statistics reveal that, usually remittances are the most important
source of financing after Foreign Direct Investments (Guardia & Pichelmann, 2006, p.38).
Besides their contribution through remittances, migrants can also contribute by bringing
know-how and new gained skills into their home countries. The competitive advantage of the
developing countries joining the EU is mostly related to their low wages (Lammers, 2004,
p.7). This can result in a shift in the location of labor-intensive industries from developed to
developing countries due to low labor cost. However, what would maximize migration’s
contributions to receiving countries is the nature of skills with which the coming labor force
is endowed. If the skills of migrants are complementary and not substitutes to the skills of the
native labor force this would add value to the receiving country (Kok, 2003, p.45). The above
mentioned advantages are additional indicators that migration can be an opportunity rather a
threat to both sourcing and receiving countries.

Despite the advantages being provided by migration, there are several barriers
decelerating the entire process. Research suggests that migrants’ participation to the labor
market as well as their skills and educational background are lower than of the natives
(Guardia & Pichelmann, 2006, p.32). However, as time goes by, migrants acquire new skills
that can be implemented in the labor market; but, since the time required to acquire these new
skills bears a certain cost, it becomes a barrier in itself. Both the nationals and foreigners
should consider education a life-long process and should invest in human capital as the best
way to remove barriers and promote a deeper mobility of labor (Kok, 2003, p. 48). Also,
another barrier that restricts migration, even after the accession of a country, is a regulation
that does not allow free mobility of labor for up to 7 years from the day a country joins the
European Union. The citizens of the newly admitted country can freely move and reside in
any other EU member state but they should wait 7 additional years prior to having working
rights same as the natives (Casey & Pelkmans, 2003, p. 15). Language is another very
important factor that might become a serious barrier to the free mobility of labor. Taking into
account the generally low level of qualifications and skills of the migrant population, a very
small percentage of them possess a language additional to the native one; thus contributing to
slowing the entire process of increasing labor mobility. These data indicate that the accession
of new member states won’t be associated with a boost in migration.

The population of the most developed European Union member states is suffering
major structural changes. Couples are usually giving birth to no more than one child and due
to major discoveries in medicine and developments in technology life expectancy has
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increased (Kok, 2003, p.47). Also, the dependency ratio, ratio of old people to the working
population, has marked an increase as well (Kok, 2003, p.47). These are clear evidences that
in one or two decades, Europe will be in a desperate need for young and qualified labor force
that will be mainly attracted from the developing countries. Also, based on this information,
the hypothetical fear that migrants’ participation in the labor force exerts pressure on
lowering the wages, especially for those jobs requiring low level of skills, is neither sound nor
rationale. Future projections with regard to structural changes in population reveal an
increasing need for a deeper mobility of labor.

Despite the positive effects of migration both for the sourcing and for the receiving
countries, there is no evidence that EU enlargement will boost migration. Due to the
accession of 10 new member states in 2004, European Union’s population increased by 20%,
its area increased by 25% and the contribution to GDP was not higher than 5% (Lammers,
2004, p.1). A similar expansion to that of 2004 was the accession of Spain and Portugal in
1986. They accounted for almost 16% of the European Union population; however, after
accession, net migration flows from Spain and Portugal toward the European Union were
close to zero (Kok, 2003, p.45). Studies suggest that, “the number of people who will move to
the current EU after the introduction of the free movement of labor – without taking account
of the transition period of seven years is 335,000 or 0.1% of the current EU population” (Kok,
2003, pp. 45-46). Based on these data, there is no reasonable ground to argue in favor of a
possible boost in migration following the EU enlargement.

In conclusion, I would like to re-emphasize the potential contribution of migration in

fostering development both in the sourcing and receiving country. Reallocation of resources,
increased productivity, increased access to capital, increased know-how, higher remittances,
and higher mobility of labor, are key indicators of the positive impact of migration. However,
despite the positive effects, past experiences reveal that EU enlargement has not resulted in a
boost of migration. This is mostly related to various barriers associated to the mobility of
workers. Still, I believe that, EU member states should undertake structural reforms with
regard to the social security scheme as they may face problems due to changes in population
structure. Overall, I see no reasonable evidences to support a boost in migration.

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 References

Casey, Jean-Pierre., & Pelkmans, Jacques. (2003, April). EU Enlargement: External

Economic Implications. BEEP briefing, No. 4, pp. 1-32.

Gilpin, Nicola., Henty, Matthew. et al. (2006). The impact of free movement of workers from
Central and Eastern Europe on the UK labor market. British Government: Department
for Work and Pensions, No. 29, pp. 1-70.

Guardia, N. Diez., & Pichelmann, K. (2006, September). Labor migration patterns in Europe:
Recent trends, Future challenges. European Commission: Directorate-General for
Economic and Financial Affairs, No. 256, pp.1-52.

Kok, Wim. (2003, March 26). Enlarging the European Union: Achievements and Challenges.
European University Institute & Robert Schuman Center for Advanced Studies,
pp.1-92.

Lammers, Konrad. (2004, May/June). How will the enlargement affect the old members of
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