The former Communist countries have carried out sweeping reforms in order to make market economies out of their planned socialist economies. These reforms have resulted in major economic and social changes, permanently altering the face of national labour markets. In particular, regional differences have become more and more marked, especially in those countries where there is a long tradition of specialisation in one sector, and unemployment is on the increase in areas which hadn’t even heard of unemployment 15 years previously. In light of these challenges, for which the new EU Member States were virtually unprepared, and also due to differences in wages and incomes, their neighbours to the West came to dread a massive influx of migrants, making this subject one of the biggest pre-Enlargement debates.
The main change that has occurred in labour markets is to do with the proportion of those employed in each sector. Historically substantial, the primary sector employed 21.2% of the workforce in 2001, while the industrial sector registered a drop (31.4%) and the tertiary sector remained underdeveloped (47.4%).
Wide-scale unemployment appeared in a very short space of time (even if it is falling slightly at the moment) and quickly became a major worry. The proportion of the population eligible to work (made up of more women than in Western Europe) has not decreased but the number of jobs has dropped dramatically since the countries started the move to a market economy. The features associated with unemployment are making their effects felt, weighing heavily on a social security system that is still in its early stages: long-term unemployment makes up a large proportion of the overall unemployment rate and accounted for up to 63% of the job hunting population in Slovenia in 2000. Employment policy-makers are struggling to keep the crisis in check and have neglected other areas worthy of attention such as lifelong training.
The area of self-employment has also experienced some slight changes. Previously seen as somewhat undesirable it was virtually nonexistent, except for in Poland where the dominance of the agricultural sector made it viable. Being self-employed is now widely encouraged as it is rightly seen as a sign of dynamic innovation and as being linked to the creation of new jobs.
Based on these trends economists started asking themselves about the possible consequences in the fifteen ‘old’ EU Member States of migratory influxes from the ten new countries.
According to various sources, mainly from Austrian and German institutions, such as the Institut für Arbeitsmarkt- und Berufsforschung (Institute for research into employment and the labour market) but also according to European researchers working on a major European Commission project, it is estimated that there will be 335 000 foreign residents coming from the ten new Member States into the Fifteen each year after the free circulation of workers comes into force. This number is expected to drop to 150 000 people per year after a decade and the population of foreign workers is expected to reach its peak after 30 years, making up 3.5% of the total population of the ‘old’ EU of fifteen.
The fears of those who expressed concern over the effects of mass migration of ‘Eastern Workers’ on their wages can also be assuaged. Austrian and German studies have each found that a 1% increase in the number of foreign workers in a sector reduces wages by 0.25% and 0.6% compared to situations in which migration is not present. What’s more, unlike migration from other parts of the world, this particular migration looks set to be a temporary trend.
We must also not forget that these waves of migrants will be heading for ageing countries like Germany, which will need to resort to using a foreign, young and qualified workforce in the future. This is expected to be the profile of those wishing to migrate in the years to come (people with fewer qualifications often already have the possibility of working in neighbouring countries thanks to bilateral agreements). However, this migration is to the detriment of their own countries.
The losers – the countries of origin
If the debate has, up until now, focussed on the consequences of migrant waves for the West, the effects on the labour markets in the new Member States risk being even more disruptive. To start with, the populations of the new members will also become older and older; furthermore, the reforms currently taking place require well trained people who can adapt to the demands of the new labour market. In other words, the very people who are looking to migrate. This will further weaken the policies currently being put into place and will adversely affect the economy and the national employment rate. Therefore, the time will come when European economists will be forced to study and predict the negative effects on the changing national economies of the new members. Because it cannot be denied that the rate of employment in these countries and the possibility of reducing unemployment there is what will shape their economies over the next twenty years.