The European Union and Immigration from

New Member Countries

The case focuses on the issue of immigration from the new member states who joined
the EU in 2004 into the older member states of the European Union. It traces the
process of European integration from the period after the Second World War, and the
formation of the European Union and its subsequent expansions.
The case further discusses the different approaches adopted by the older member
states of the EU to deal with the expected flood of job seekers from the newly
independent states from Central and Eastern Europe, which joined the EU after the
disintegration of the Soviet Union.
While Ireland, the United Kingdom and Sweden were fairly open to immigrants from
these countries, the other EU members imposed many restrictions on the movement of
workers from the new member states. The case then compares the impact of
immigration on the three EU member states that chose to allow immigrants in, with
the countries which followed a more restrictive approach. It ends by examining the
issue of the expected eventual decrease in the EU's population in the coming
years/decades and the need for these countries to supplement their indigenous labor
markets with immigrants.

The European Union and Immigration

from New Member Countries
The [European] Union has today set itself a new strategic goal for the next decade:
to become the most competitive and dynamic knowledge-based economy in the world
capable of sustainable economic growth with more and better jobs and greater social
cohesion.1
Presidency Conclusions, Lisbon European Council, in March 2000
The old EU owes them [the new members] a welcome. In practical terms, this
means that West European politicians should stop exploiting populist resentment of
low-wage competition. They should explain to their voters that economic reforms
would be necessary even in the absence of enlargement and that, on the whole, the
addition of ten new members has been good for the EU economy. 2
Katinka Barysch, Chief Economist, Centre for European Reform, 3 in 2005.

Introduction
On March 09, 2006, the Spanish Prime Minister, Jose Luis Rodriguez Zapatero
(Zapatero), and his Polish counterpart, Kazimierz Marcinkiewicz, announced at a joint
press conference that from May 01, 2006, Spain would open up its labor market to
workers from Poland and the other seven countries from Central and East Europe
(CEE) which had joined the European Union (EU) on May 01, 2004 4. The
announcement was not unexpected as it had been widely anticipated that Spain would
favor opening up its labor market to the new members 5 of the EU. On February 28,
2006, Portugal had also indicated that it would open up its labor market to the new
members from the CEE. Before that, on February 13, 2006, Finlands Labor Ministry
had proposed that restrictions on labor movement from the new EU member countries
be lifted.
At the time of the 2004 enlargement, the EU had allowed its existing members (the
old member states) to impose restrictions on the free movement of labor from the new
member states for a transition period extendable up to 2011. Twelve out of the fifteen
countries opted for labor restrictions, fearing that there would be a large-scale influx
of immigrants from the new member countries chasing jobs and driving down wage
rates. Only the UK, Ireland, and Sweden decided to allow the new member countries
access to their labor markets (Refer to Exhibit I for a map of the European Union
in 2005).

1
2
3

www.union-network.org/uniibits.nsf
www.cer.org.uk/pdf/essay_eastvswest_jan06.pdf
The Centre for European Reform is a London-based think tank devoted to improving the
quality of the debate on the future of the European Union
The EU was enlarged in May 2004 with ten new members. They were Cyprus, the Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. While
the nationals of Cyprus and Malta were given the freedom to access the labor markets
within the EU, others were severely restricted.
Here new members would mean the eight new members from the CEE; i.e., all the new
members of 2004, except for Cyprus and Malta. The old members would mean the 15 EU
member states before the 2004 enlargement.

522

The European Union and Immigration from New Member Countries

Exhibit I
Map of European Union in 2005

Source: www.ezilon.com/ eu_map_europe.jpg.

A year later, these three economies reported that they had not experienced any
upheavals or disruptions in their labor markets. Instead, they claimed, the immigrants
had helped fuel their economic growth by filling in the gaps in their labor markets
be it in construction, health & hospitality, or in other areas, while making few claims
on the welfare system or public services.

Background
Human migration, or the movement of people from one place to another, is a
phenomenon that is as old as mankind itself. Indeed, it is believed that humans first
appeared in Africa, and subsequently spread out toward the Middle East, Europe,
Asia, Australia, and finally to the Americas. Even after the advent and growth of
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International Business
human settlements, people have continued to migrate from one place to another,
shaping the growth of civilizations and the progress of human history. For example,
the migration of the Huns, the Goths, and other tribes during and after the fall of the
Roman Empire changed the demographic and cultural landscape of Europe. In the 17th
century, the movement of English religious groups to the New World, seeking a place
where they could practice their religion freely, laid the foundation of the present day
United States.
In modern times, after the advent of the nation states and the consolidation of
nationalities, the migration of people from one nation to another came to be regulated
by the national governments. The inflow of migration into a country became
immigration while the outflow came to be known as emigration. Emigration had a
profound influence on Europe in the 19th century and the early 20th century, when
hundreds of thousands of poor families left Western Europe for the United States,
Canada, Brazil, Argentina, and Australia. 6
Why do people move from one place to another? The reasons could be to escape war,
famines, droughts, disease, political and religious persecution, and poverty. Or they
may migrate for more positive reasons
to seek adventure, better employment and
business opportunities, higher incomes, or better healthcare facilities, or to reunite
with their family members.
In the late 20th century, while the development of transport and communications
turned the world into a global village, increasing restrictions by national governments
on immigration made it very difficult for people to move from one country to another.
The arrival of new immigrants into a country was often seen by its citizens as diluting
their countrys national, ethnic, or religious character. Immigrants were also often
viewed as job-chasers who drove down wages and salaries. However, there were also
others who welcomed the immigrants, seeing them as hard-working people
contributing to the development of the host countrys cultural and economic life.
Immigrants have thus been welcomed and despised at the same time by different
sections of their host country.

The European Community (EC)

After the end of the Second World War, Europe was divided into two opposing blocs
the US-led free-market oriented Western Europe and the Soviet Union-led socialist
Central and East Europe. The West European countries, devastated by the war,
realized that economic protectionism and chauvinistic nationalism were factors that
could lead to war among various nations. Jean Monnet, considered by many as the
architect of the European Union, felt that if Europe was to avoid the scourge of
destructive wars, the European states must come together. He declared, There will be
no peace in Europe, if the states are reconstituted on the basis of national
sovereignty...The European states must constitute themselves into a federation. 7
Accordingly, the European Coal and Steel Community (ECSC) was founded in 1951
by Belgium, the Netherlands, Luxembourg, France, Italy, and West Germany, in order
to pool their all-important steel and coal resources. The process of integration was
further strengthened with the signing of the Treaty of Rome in 1957 establishing the
European Economic Community (EEC), which came into effect on January 1, 1958.
6
7

Emigration, http://en.wikipedia.org/wiki/Emigration
Jeremy N. Smith, The Father of Europe,
http://www.worldtrademag.com/CDA/Articles/Column/
0489bc5ec5499010VgnVCM100000f932a8c0__

524

The European Union and Immigration from New Member Countries

The EEC was established with the aim of creating a Customs Union (CU) among the
six member states based on the four fundamental freedoms: the freedoms of
movement for goods, services, capital, and people. The CU was finally established in
1968. The EEC was later renamed the European Community (EC).

Enlargement of the EC and the Creation of the European Union

The success of the EC in stimulating trade, growth, and development among the
member states prompted Britain, Denmark, and Ireland to apply for the EC
membership in 1961.8 A series of negotiations followed in which the EC members and
the prospective members evaluated a number of proposals and counter-proposals.
Finally, Britain joined the EC along with Denmark and Ireland in 1973. This was the
first enlargement of the EC. In 1981, six years after its application for membership,
Greece acceded to the EC.
When Spain and Portugal applied for EC membership in 1977, the existing EC
members were forced to face the problem of immigration associated with the
enlargement of the EC. Although Portugal and Spain eventually gained membership
in 1986, the people of these two countries were restricted for a period of 10 years from
moving freely within the EU in search of work. One of the reasons for these
restrictions was the fear that there would be a large influx of Portuguese and
Spaniards looking for work into the more prosperous countries of the EC if the
borders of these countries were opened up fully. 9
In 1993, the Maastricht treaty, signed a year earlier, modified the Treaty of Rome and
established the European Union (EU). The EC became an integral part of the new EU.
The EU was enlarged in 1995 to include Austria, Finland, and Sweden.

The Collapse of the Socialist BLOC and the Copenhagen Criteria

Meanwhile, the collapse of the socialist bloc in Central and Eastern Europe in 198990 released many countries from the control of the Soviet Union. During this period,
Poland, Hungary, Bulgaria, Romania, and Czechoslovakia became free of Soviet
control. In 1991, the disintegration of the Soviet Union led to the emergence of
several new states on the international stage -- the Russian Federation, Lithuania,
Latvia, Estonia, Ukraine, Belarus, Moldova, Georgia, Armenia, Azerbaijan,
Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan. Having been
severely constrained for decades by centralized planning, many of these newly
independent states looked eagerly toward the EC for the development of their
economies. It also provided an opportunity for the EC to further the process of
European integration.
Therefore, as initial steps to future integration, the EC concluded Europe Agreements
with Hungary and Poland in December 1991, Romania, Bulgaria, the Czech Republic,
and Slovakia in February 1995, Estonia, Latvia and Lithuania in February 1998, and
Slovenia in February 1999. The aim of these agreements was to liberalize trade
between these countries and the EU.10

10

Norway also applied for the EC membership. But in a referendum held in 1972, its people
rejected the governments decision to join the EC. More than two decades later
in a
referendum held in 1994, the Norwegian electorate again voted against joining the EC.
Antonio Vitorino, The Challenges of Global Migration: An EU View,
http://www.carnegiecouncil.org/ viewMedia.php/prmID/4985
The
Enlargement
of
the
European
Union,
http://www.auswaertigesamt.de/www/en/eu_politik/ vertiefung/erweiterung_html

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International Business
In June 1993, the EU formulated the Copenhagen Criteria that defined the eligibility for
EU membership. These criteria required that the candidate countries have stable
institutions to guarantee democracy, the rule of law, human rights, and the protection of
minorities (the political criterion); a functioning market economy and the capacity to cope
with competitive pressures and market forces within the EU (the economic criterion), and
the ability to take on all the obligations of membership, i.e. the ability to conform to the
entire body of EU law (the so-called acquis communautaire), and adhere to the aims of
political, economic, and monetary union (the acquis criterion).11

The Accession of New Members

Following the formulation of the Copenhagen Criteria, many of the CEE countries
applied for EU membership. Hungary applied in March 1994, Poland in April 1994,
Romania and Slovakia in June 1995, Latvia in October 1995, Estonia in November
1995, Lithuania and Bulgaria in December 1995, the Czech Republic in January 1996,
and Slovenia in June 1996. Turkey had already announced its desire to become a
member in April 1987. Cyprus and Malta had done likewise in July 1990 12.
The applicants had to go through painful transitions of their polities, economies, and
societies so as to conform to the eligibility criteria. It was not easy for these countries,
which for decades had been planned socialist economies with strict policing and
almost no concern for human rights, to undergo the democratization process and move
toward becoming market-oriented economies. The prospective candidates were to
incorporate all the existing laws of the EU into their domestic legal framework and
work for their active application.
The EU continuously monitored the progress of the candidate countries with respect
to the Copenhagen Criteria to determine their eligibility. In 1997, the EU decided to
open accession negotiations with Cyprus, Hungary, Poland, Estonia, the Czech
Republic, and Slovenia. Romania, Slovakia, Latvia, Lithuania, Bulgaria, and Malta
were added to the list in 1999. In December 2002, leaving Bulgaria and Romania
aside for further negotiations, the EU concluded access negotiations with the
remaining ten candidates. The Treaty of Accession with these ten countries was
signed in Athens on April 16, 2003, and the treaty came into effect on May 01, 2004.
Bulgaria and Romania were slated to accede to the EU in 2007.
Thus, ten new countries became members of the EU on May 01, 2004. These
countries, when compared to the old members, were very small in terms of GDP, but
quite large in terms of population and labor force. While the new member states
combined GDP was 5% of the GDP of the old EU, their labor force amounted to 25%
of that of the latter. Moreover, there were huge differences in wage rates between the
old and new members. The new members were erstwhile socialist countries which
gave their citizens full employment at the expense of economic health and
competitiveness. Dismantling of these economic systems in the early 1990s led to
huge lay-offs and high levels of unemployment in these countries.
With accession, the new member countries gained the right to participate on an equal
basis in the institutions and committees of the EU. The market for their goods and
services expanded and the free movement of goods, introduced as per the Europe
Agreements of the early 1990s, was to be complete. Membership of the EU also
provided full freedom of movement for persons from one country to another within
the EU. Citizens of both the old and new members could travel freely anywhere in the

11

12

The
Enlargement
of
the
European
Union,
amt.de/www/en/eu_politik/ vertiefung/erweiterung_html
The
Enlargement
of
the
European
Union,
amt.de/www/en/eu_politik/ vertiefung/erweiterung_html

526

http://www.auswaertigeshttp://www.auswaertiges-

The European Union and Immigration from New Member Countries

enlarged EU.13 However, for a transition period of seven years, the old members were
allowed to impose restrictions on the movement of labor from the new members, if
they so wished. This provision was made out of fear that people from some of the new
member states would swamp the labor markets of the old members. However, the
citizens of Cyprus and Malta did not face this restriction.
Only three of the old members opted not to apply these restrictions on the free
movement of workers. The UK, Ireland, and Sweden opened their labor markets to
people from the new member states. However, there were fears even in these
countries, especially in the UK, that the workers from the new member states would
chase local jobs and strain the economy by seeking welfare benefits.

The Demographic and Economic Profile of the EU

To understand the issue of migration in the EU, it is essential to understand certain
important characteristics of the demography and economy of the EU member states.
These issues were interlinked, and, individually and in combination, had a significant
impact on the growth rates in these countries. The old EU economies, especially, had
been struggling with low growth rates for many years. Between 2000 and 2004, the
growth rates of GDP of the old EU countries had ranged between 1.0% and 3.8%
(Refer to Exhibit II for growth rates in the EU between 2000 and 2004).
Exhibit II

Real GDP Growth Rates in the Old and New Member States in %
2000

2001

2002

2003

2004

Old EU 15

3.8

1.8

1.1

1.0

2.2

New EU 10

4.1

2.4

2.4

3.8

5.1

Source: Katinka Barysch, East versus West?The European economic and social
model after enlargement,
www.cer.org.uk/pdf/essay_social_model_barysch_oct05.pdf.
The old EU economies had also been facing very low employment rates 14 64% as
against the EU norm of 70%. Paradoxically, in spite of high wage rates, there were
also many gaps in the labor market that were unfilled because of the unwillingness of
the domestic labor force to take up certain jobs (Refer to Exhibit for III hourly
labor costs in the EU). At the same time, they also had high unemployment rates
8.5% (Refer to Exhibit IV for unemployment rates in select old EU member
countries). This paradox of high unemployment and huge gaps in the labor market
was explained by the welfare nature of these economies, and their high and rigid wage
rates.
Many of the EU countries were welfare states, where the governments provided
generous unemployment benefits and allowances to workers, to help them get through
periods of unemployment, and find jobs better suited to their abilities and aptitudes.
These allowances, in some instances, had the effect of people deliberately choosing to
remain unemployed. The allowances also made people reluctant to move in search of
13

14

There were also other transition measures such as the precedence of national rules over the
free movement of capital with regard to the purchase of agricultural and forest land in all the
new member states (again Cyprus and Malta along with Slovenia were excluded)
Employment rate refers to the percentage of the labor force that is employed, while
unemployment rate is defined as the percentage of the total labor force that is unemployed
but actively seeking employment and willing to work.

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International Business
employment. As a result, in many of these these countries, high unemployment rates
coexisted with a large number of unfulfilled job vacancies. These unfulfilled job
vacancies were partly responsible for the slow growth rates of these economies (Refer
to Exhibit V for economic indicators of the EU).

Exhibit III
Hourly Labor Costs in Industry and Services in 2000 &
Labor Productivity in the EU in 2002
Hourly
Labor Cost
in Euros

Labor
Productivity
in 1000
Euros

Sweden

28.56

64.4

Denmark

27.10

Germany

Hourly
Labor Cost

Labor
Productivity

Cyprus

10.74

NA

68.0

Slovenia

8.98

25.4

26.34

56.9

Portugal

8.13

NA

Luxembourg

24.61

90.5

Poland

4.48

16.9

France

24.42

65.6

Czech Rep.

3.90

17.3

UK

23.85

58.1

Hungary

3.83

17.0

Austria

23.60

63.1

Slovakia

3.06

13.3

Netherlands

22.99

55.6

Estonia

3.03

12.0

Finland

22.13

64.3

Lithuania

2.71

12.9

Italy

18.99

56.5

Latvia

2.42

10.7

Ireland

17.31

81.6

Old average

22.10

57.6

Spain

14.22

45.9

New
average

4.20

16.7

Greece

11.62

39.3

Combined

19.09

51.9

Country

Country

NA Not Available. Countries in bold are new EU members. No data were available for
Belgium and Malta.
* French labor productivity data is of 2001.
Source: Eurostat; printed in The Wall Street Journal 1618 April 2004.

Exhibit IV
Unemployment Rates in Select Old EU Members

528

Country

2003

2004

2005

Austria

4.3

4.9

5.2

Finland

9.0

8.9

8.3

France

9.5

9.6

9.5

The European Union and Immigration from New Member Countries

Germany

9.1

9.5

9.5

Ireland

4.7

4.5

4.3

Italy

8.4

8.0

7.7

Spain

11.1

10.6

9.2

Sweden

5.6

6.4

United Kingdom

4.9

4.7

NA
4.7

NA = Not Available.
Source: OECD

Exhibit V
Economic Indicators of the EU and its Member States
GDP
% of EU
(2004)

GDP
per capita
in PPP $
(USD)
(2005)

Public
Debt
% of
GDP

12,690.6

100.0%

26,900

63.8

-2.6

2.0

Germany

2,714.4

21.4%

28,988

66.0

-3.7

1.8

United Kingdom

2,140.9

16.9%

28,938

41.6

-3.2

2.0

France

2,002.6

15.8%

27,738

65.6

-3.7

1.8

Italy

1,672.3

13.2%

27,984

105.8

-3.0

2.2

Spain

991.4

7.8%

23,627

48.9

-0.3

3.2

Netherlands

577.3

4.5%

29,332

-2.5

1.5

Belgium

349.8

2.8%

29,707

95.6

-0.1

2.7

Sweden

346.4

2.7%

28,205

51.2

-1.4

0.8

Austria

290.1

2.3%

31,254

65.2

-1.3

2.0

Denmark

243.0

1.9%

33,089

42.7

-2.8

1.7

Poland

241.8

1.9%

12,452

43.6

-4.8

1.4

Greece

203.4

1.6%

22,000

110.5

-6.1

3.2

Finland

186.6

1.5%

29,305

43.6

-2.1

1.0

Ireland

183.6

1.4%

37,663

29.9

-1.3

1.9

Portugal

168.3

1.3%

18,503

61.9

-2.9

0.6

Czech Republic

107.0

0.8%

18,370

37.4

-3.0

1.3

99.7

0.8%

15,546

57.6

-4.5

3.7

Country

European Union

Hungary

GDP
in billions
of $ (USD)
(real
exchange
rates)
(2004)

55.7

Deficit
% of
GDP

Inflation
%
Annual

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International Business
Slovakia

41.1

0.3%

15,066

43.6

-3.3

2.5

Slovenia

32.2

0.3%

20,306

29.4

-1.9

1.7

Luxembourg

31.1

0.2%

61,220

7.5

-1.1

3.2

Lithuania

22.3

0.2%

12,610

19.7

-2.5

2.0

Cyprus

15.4

0.1%

22,330

62.3

-3.5

1.5

Latvia

13.6

0.1%

11,850

14.4

-0.8

6.6

Estonia

10.8

0.1%

13,190

4.9

-1.8

4.6

5.4

0.04%

18,720

75.0

-5.2

2.1

Malta
Source: wikipedia.com.

The EU also faced the problem of an ageing population. As the proportion of retired
people in the population increased, the burden on the working age population in terms
of financing their pension and healthcare costs increased. In 2005, the EU economic
and monetary affairs Commissioner Mr Joaquin Almunia (Almunia) said that under
the existing (current) policies, ageing would increase public spending on pensions,
healthcare, and long-term care by 4% to 8% of GDP in most of the EU's 25 states by
2050.15 In 2004, almost 35% of the EU population was above the age of 50 16. At the
same time, the number of people aged between 0 and 24 was decreasing, creating
possibilities of a demographic crisis in the future. Logically therefore, the economic
problems caused by the unfilled job vacancies and the shrinking population in the
working age group, should have led these countries to welcome immigrants from the
CEE (Refer to Exhibit VI for area and populations statistics of the EU).

Exhibit VI

Area and Population Statistics of the EU and its Member States

Member State

Population
in millions

Population
% of EU

Area
km2

Area
% of EU

Pop. density
People/km2

454.9

100%

3,976,952

100%

115

Austria

8.2

1.8%

83,858

2.1%

98

Belgium

10.3

2.3%

30,510

0.8%

340

Cyprus

0.8

0.2%

9,250

0.2%

84

10.2

2.2%

78,866

2.0%

130

Denmark

5.4

1.2%

43,094

1.1%

126

Estonia

1.4

0.3%

45,226

1.1%

29

Finland

5.2

1.1%

337,030

8.5%

15

France

60.2

13.2%

547,030

13.8%

111

European Union

Czech Republic

15

16

EU needs immigration to support ageing population,

http://www.workpermit.com/news/2005_10_25/ europe/eu_needs_immigration
Europe in figures: Eurostat yearbook 2005, European Commission, Luxembourg.

530

The European Union and Immigration from New Member Countries

Germany

82.4

18.1%

357,021

9.0%

231

Greece

10.7

2.4%

131,940

3.3%

81

Hungary

10

2.2%

93,030

2.3%

108

Ireland

3.9

0.9%

70,280

1.8%

57

Italy

58

12.8%

301,320

7.6%

193

Latvia

2.3

0.5%

64,589

1.6%

35

Lithuania

3.5

0.8%

65,200

1.6%

55

Luxembourg

0.5

0.1%

2,586

0.1%

181

Malta

0.4

0.1%

316

0.0%

1,261

Netherlands

16.2

3.6%

41,526

1.0%

395

Poland

38.6

8.5%

312,685

7.9%

124

Portugal

10.1

2.2%

92,931

2.3%

114

Spain

40.2

8.8%

504,782

12.7%

80

Slovakia

5.4

1.9%

48,845

1.2%

111

Slovenia

1.9

0.4%

20,253

0.5%

99

Sweden

8.9

2.0%

449,964

11.3%

20

60.1

13.2%

244,820

6.2%

243

United Kingdom

Source: www.wikipedia.com.
In comparison, the new members of the EU, especially the eight members from the
CEE, had similar but bigger problems. In some of these countries, unemployment was as
high as 19% in 2004 (Refer to Exhibit VII for unemployment rates in select new EU
member states). High unemployment coupled with a relatively strong educational
environment created a fertile ground for migration to countries with better employment
opportunities. Added to this was the disparity in wage rates between the CEE countries
and the older EU members. With huge differences in wage rates between the old and the
new members, potential migrants could earn much higher incomes in the old EU
countries. All these factors created an environment favorable to emigration in the new
EU countries.

Exhibit VII
Unemployment Rates in Select New EU Member States
Country

2003

2004

2005

Czech Republic

7.8

8.3

7.9

Hungary

5.9

6.1

7.2

Poland

19.6

19.0

17.8

Slovak Republic

17.6

18.2

16.4

Source: OECD.
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International Business
The enlargement thus had the potential to stimulate growth in the economies of the
old EU countries, by solving some of their labor problems. However, this was not to
be.
Theoretically, in a free market, market forces determine the supply of and demand for
labor. These forces also determine the wage rates. However, as mentioned earlier, the
wage rates in the old EU countries were quite rigid. In countries like the UK, the
government fixed the minimum hourly wage rates. In Germany, the wage rates in
many sectors were negotiated by trade unions and federations of employers. As the
wage rates were comparatively rigid, there were apprehensions that the incoming
migrants could have the effect of driving the locals from their jobs and into
unemployment, leading to higher government expenditure on unemployment benefits.
It was also feared that the immigrants themselves might eventually claim
unemployment benefits, further draining government resources.
Some conservative politicians seized on the issue with claims that the enlargement of
the EU and the resultant migration from the East to the West would disrupt the labor
markets in the EU-15 and cause a huge drain on the government exchequers through
claims on welfare benefits. Eventually, they were successful in forcing the EU to
provide for an option to limit immigration from the new members. Many of the old
members opted to impose restrictions on immigration from the new member
countries. These measures ranged from requiring immigrants to obtain work permits,
to restricting them from claiming welfare benefits. (Refer to Table I for more details
on the types of immigration regimes in the old EU member countries, relevant to
immigrants from the new member countries).

Table I: Immigration Regimes in the Old EU Member Countries after the

Enlargement
A restrictive immigration regime in which workers from
the new member states are treated in the same way as nonEEA* citizens and are required to apply for a work permit,
which is to be issued only in cases where neither nationals
nor other EU-15 nationals can fill the position.

Belgium, Finland,
Germany, Greece,
France, Luxembourg,
Spain

Restrictive immigration regime but with a quota for

workers from the new member states

Austria, Italy, the

Netherlands, Portugal

General access to the labor market, however with limited

welfare benefits. Unemployment might also constitute
grounds for the withdrawal of the residence permit.

Ireland, the UK

Community rules on the free movement of workers are

fully applied.

Sweden

*EEA stood for European Economic Area and comprised Iceland, Liechtenstein,
Norway, and the EU along with its 25 member states.
Source:
Julianna
Traser,
Whos
afraid
of
EU
enlargement?
www.ecas.org/file_uploads/1009.pdf.

Immigration in Post Enlargement EU

While other countries imposed various kinds of quotas and restrictions, the UK,
Ireland, and Sweden allowed workers from the new member countries access to their
labor markets. The UK implemented a Worker Registration Scheme, and required all
immigrants from the new member countries to obtain a work permit.
Since the accession, till December 31, 2005, nearly 345,000 applicants from the new
member countries registered with the Worker Registration Scheme to work in the UK.
Of these, around 329,000 applicants were issued worker registration certificates and
cards. The Polish were the largest group of all (204,895) followed by the Lithuanians
532

The European Union and Immigration from New Member Countries

(44,715). More than 80% of the immigrant workers were aged between 18 and 34
(Refer to Exhibit VIII for details on immigrants to the UK between May 2004
and December 2005).

Exhibit VIII

Total

Other

Slovenia

Slovakia

Poland

Lithuania

Latvia

Hungary

Estonia

Period

Czech Rep

Nationality of Applicants by Quarter Applied in the UK May 2004

December 2005

Q2
2004

2,520

660 1,090 2,930 7,720 23,465

3,730

50

30 42,200

Q3
2004

3,510

770 1,315 3,660 7,595 28,070

5,240

65

40 50,260

Q4
2004

3,020

615 1,430 2,770 5,360 23,920

4,875

55

30 42,075

Q1
2005

2,840

730 1,460 3,150 5,915 23,805

4,950

55

35 42,940

Q2
2005

2,825

740 1,650 4,340 7,685 33,700

6,025

30

30 57,030

Q3
2005

2,980

630 1,720 3,455 5,985 39,375

6,545

35

50 60,775

Q4
2005

2,310

535 1,670 2,720 4,460 32,560

4,995

55

45 49,355

20,005 4,680 10,345 23,030 44,715 204,89 36,355

5

340

265 344,63
5

Total
As %
of
Total

6%

1%

3%

7%

Source: Accession Monitoring

www.ind.homeoffice.gov.uk.

13%

Report

59%

May

11% <0.5 <0.5

%
%
2004

December

100%

2005,

The top five sectors of employment for registered workers who applied between May
2004 and December 2005 were Administration, Business & Management (32%),
Hospitality & Catering (22%), Agriculture (12%), Manufacturing (8%) and Food, Fish
and Meat Processing (5%). 17 The immigrants filled labor gaps in the British economy
as process operatives (70,555), packers (18,765), kitchen and catering assistants
(18,255), warehouse operatives (17,430), domestic staff (14,440), farm workers
(12,645), and truck drivers (2,930), among others. The British government in a report
17

Most of the data on this page are from Accession Monitoring Report May 2004
December 2005, A joint online report by the Home Office, the Department for Work and
Pensions, the HM Revenue & Customs and the Office of the Deputy Prime Minister, United
Kingdom, 28 February 2006.

533

International Business
called Accession Monitoring Report May 2004 December 2005 released in
February 2006 said that the impact of immigration from the new member states on the
British economy had been modest but broadly positive (Refer to Exhibit IX for the
sectors in which registered workers were employed).

Exhibit IX

Sectors in which Registered Workers are Employed in the UK, by

Quarter Applied May 2004 December 2005
Q2
2004

Q3
2004

Q4
2004

Q1
2005

Q2
2005

Q3
2005

Q4
2005

Total

Admin, bus &

man services

6,590

11,110

13,535

14,155

17,165

21,100

21,360

104,915

Hospitality and
catering

12,000

12,980

9,325

8,085

10,475

11,300

8,420

72,590

Agriculture
activities

8,240

5,660

3,005

4,000

9,295

6,685

2,645

39,525

Manufacturing

2,360

3,750

3,640

3,550

4,280

4,250

3,410

25,245

Food/fish/meat
processing

1,590

2,545

2,345

2,215

2,815

2,935

2,550

16,995

Health &
medical services

1,170

2,220

2,160

2,300

2,580

3,290

2,660

16,380

Retail & related

services

1,545

1,950

1,860

1,815

2,120

2,525

2,220

14,035

Construction &
land services

1,710

1,995

1,480

1,610

1,905

2,090

1,575

12,365

Transport

600

910

1,210

1,505

1,890

1,815

1,400

9,330

Ent. & leisure

services

790

950

450

890

1,195

1,135

430

5,840

Education &
cultural act

460

545

490

445

480

510

485

3,400

Real est. & prop

services

155

205

170

240

240

255

190

1,450

95

115

130

100

110

195

140

890

Financial
services

135

160

130

115

110

135

95

880

Extraction
industries

75

145

145

85

110

125

115

805

Sector

Sec. & protect

services

534

The European Union and Immigration from New Member Countries

Q2
2004

Sector
Computer
services

Q3
2004

Q4
2004

Q1
2005

Q2
2005

Q3
2005

Q4
2005

Total

130

120

135

100

95

125

95

800

Telecommunications

55

60

60

80

30

45

30

365

Utilities elec.
gas, water

35

50

40

35

35

50

35

280

Sporting
activities

45

60

45

40

15

35

30

266

Government

20

30

25

25

30

40

35

205

Law related
services

35

30

25

20

15

20

20

160

990

850

195

85

80

135

45

2,375

38,830

46,440

40,600

41,480

55,065

58,690

47,985

329,090

Not stated
Total

Source: Accession Monitoring Report May 2004 December 2005, www.ind.homeoffice.gov.uk.

The report also mentioned that very few immigrants had actually applied for taxrevenue funded welfare benefits. Even from the limited number of applications for
welfare benefits, only a few had been approved for further processing. During May
2004 and December 2005, there were 992 applicants for Income Support, 2,232
applicants for income-based Jobseekers Allowance, and 46 applicants for state
Pension Credit. Out of these, only 194 applications (or 5.9% of the total) had been
shortlisted for further processing. The remaining 94.1% of applications had been
disallowed on the grounds of Right to Reside and Habitual Residence Tests (Refer to
Exhibit X for the number of applications for income related benefits May 2004
December 2005).
Similarly, Irelands booming economy and especially its construction industry
absorbed a large number of immigrants from the new member countries. Among the
immigrants, the Poles and the Lithuanians constituted the largest numbers, followed
by the Latvians. The Latvians, in particular, earned a good name for themselves as
hard workers. Alfie Lambert, the owner of a firm that makes door frames for the
booming Irish building trade, said, We can't live without the Latvians. We can't grow
without them. He added, Our young Irish don't want to do these jobs any more. 18
Between May 2004 and December 2005, Latvia sent 14,000 workers to Ireland, and in
all, Ireland received close to 160,000 immigrants from the CEE 19. Like Ireland,
Sweden, which too opened its doors to the new members, did not report any
disruptions in its labor market.
18

19

Kevin
Sullivan,
East-to-West
Migration
http://www.washingtonpost.com/wpdyn/content/article/2005/11/27/AR2005112700950_2.html
Migrant workers from east helping to boost EU's
http://www.guardian.co.uk/ eu/story/0,,1705656,00.html

Remaking

fortunes,

Europe,

says

report,

535

International Business

Exhibit X
Applications for Tax-funded, Income-related Benefits in the UK
May 2004 December 2005
Q2
2004

Q3
2004

Q4
2004

Q1
2005

Q2
2005

Q3
2005

Q4
2005

Total

Applications for Income Support

Disallowed

43

60

101

134

123

251

237

949

Allowed to
proceed for
further
processing

22

43

43

63

103

141

127

256

259

992

Total

Applications for Income-based Jobseekers Allowance

Disallowed

191

162

184

268

358

497

423

2,083

Allowed to
proceed for
further
processing

12

43

71

149

197

170

188

273

370

540

494

2,232

Total

Applications for State Pension Credit

Disallowed

13

15

44

Allowed to
proceed for
further
processing

Total

14

16

46

Total
disallowed

234

223

288

409

486

761

675

3,076

Total
allowed to
proceed for
further
processing

11

12

16

49

94

194

240

234

294

421

502

810

769

3,270

Total

Source: Accession Monitoring

www.ind.homeoffice.gov.uk.

Report

May

2004

December

2005,

All the three economies

UK, Ireland, and Sweden
had been experiencing strong
economic growth before the enlargement and they continued to do so even after the
arrival of the immigrants after the enlargement (Refer to Exhibit XI for growth
rates of select EU members between 2000 and 2004).
536

The European Union and Immigration from New Member Countries

Exhibit XI
GDP Growth Rates of Select EU Member States
Country

2001

2002

2003

2004

2005

Ireland

6.2

6.1

4.4

4.5

Sweden

1.5

3.6

2.6

United Kingdom

2.2

2.5

3.2

1.9

Finland

2.2

2.4

3.6

1.8

Portugal

1.7

0.4

-1.1

0.5

Spain

3.5

2.7

2.9

3.1

3.2

Austria

0.8

1.4

2.4

1.9

France

2.1

1.3

0.9

1.5

Germany

1.2

0.1

-0.2

1.6

0.8

Italy

1.8

0.4

0.3

1.2

Czech Republic

2.6

1.5

3.2

4.4

4.1

Estonia

6.5

7.2

6.7

7.8

Hungary

3.8

3.5

2.9

4.2

3.4

Latvia

6.4

7.5

8.5

7.8

Lithuania

6.4

6.8

9.7

6.7

6.8

Poland

1.4

3.8

5.4

Slovak Republic

3.8

4.6

4.5

5.5

Slovenia

2.7

3.3

2.5

4.6

3.9

Source: IMF.

The Other Economies

Germany and Austria, which shared common borders with some of the new member
countries, estimated that around four million people would move into their countries
from the CEE by the year 2030. This high estimate prompted both countries to apply
severe restrictions on the movement of labor from the CEE, through the imposition of
quotas on immigration. In August 2005, Austria announced that it would continue to
apply restrictions on labor movement till 2007. In the same month, it also announced a
proposal for a bilateral agreement with Slovenia, easing restrictions and permitting
free movement for Slovene nationals.
In France, while nearly 2.5 million French workers remained unemployed, 250,000
job vacancies remained vacant. Between May 01, 2004, and March 31, 2005, only a
little more than 700 Polish nationals were granted temporary work permits in France.

537

International Business
At the end of 2005, some of the EU economies had very low unemployment rates.
Ireland reported an unemployment rate of just 4.3%, while the UK had 4.7%. In
comparison, Germany had 9.5% unemployment and Poland 17.8%. The GDP growth
rates for 2005 were estimated at 1.9% for the UK, 2.6% for Sweden, and 5% for
Ireland. In contrast, Germany recorded a GDP growth rate of 0.8%, and Italy showed
no growth at all in 2005. The new members, on the other hand, had impressive GDP
growth rates. In 2005, it was estimated that Latvia showed 7.8% growth in its GDP,
Lithuania 6.8%, while for Poland and Hungary the growth rate was 3% and 3.4%
respectively.
In a report released in February 2006, the European Commission urged the rest of the
EU to do what Britain, Ireland, and Sweden had done that is, drop restrictions on
labor migration from Eastern Europe. Vladimir Spidla (Spidla,), the European
employment commissioner, said, Free movement of workers is economically rational
and is enshrined in EU treaties. We have not seen any catastrophic tendencies since
enlargement. Spidla said that Britain, Ireland, and Sweden, which had opened their
borders, had seen a drop in unemployment, a rise in employment, and high economic
growth. In contrast, the 12 old member states which had maintained restrictions on
East European labor had seen undesirable side-effects, such as higher levels of
undeclared work, as well as bogus self-employed work20, the report said.21

Spain, Portugal and Finland

Migration from the new to the old EU countries was watched closely by all the member
states. Many member states realized that in spite of imposing severe restrictions, some
countries were facing large-scale illegal immigration. They realized that it would be better
to legalize immigration and integrate the immigrants with the mainstream, instead of
leaving them to live on the fringes of society.
Spain experienced a heavy flow of illegal immigration from the North African
countries. The fact that labor migration did not lead to labor market disruptions in the
host economies led Spain, Portugal, and Finland to contemplate the idea of opening up
their labor markets. In February 2006, all the three countries gave indications that they
were willing to consider the issue of opening up their labor markets to the new
members. And on March 9, 2006, the Spanish Prime Minister Zapatero announced
that Spain would open up its labor markets to the new members effective from May
01, 2006. The announcement was welcomed by the EU, which advised other member
countries to follow suit. However, Germany and Austria along with Italy and France,
the main economies in the rest of the EU, declared that they had no intention of doing
so.

Outlook
Though many of the older EU members have imposed restrictions on immigration
from the new member states, it is believed that these countries will eventually have to
take in an increasing number of immigrants to offset the growing number of vacancies
in their labor markets caused by ageing populations and exacerbated by the declining
fertility rates in Europe. The Total Fertility Rate 22 in Europe was estimated to be
20

21

22

The old member countries could restrict only labor force in search of work. No restrictions
could be applied on those seeking self-employment.
Migrant workers from east helping to boost EU's fortunes, says report,
http://www.guardian.co.uk/eu/story/0,,1705656,00.html
Total Fertility Rate is defined as the average number of children expected to be born to a
woman during her lifetime.

538

The European Union and Immigration from New Member Countries

below 1.5 since 1995 through 2003,23 making an eventual decrease in the EU
population inevitable. This decrease in population is expected to have serious
consequences for EUs future in terms of growth rates and development. The fiscal
burden of financing pension systems for a large number of people and providing
healthcare for the elderly, as well as serious gaps in labor markets, are other concerns.
A large number of elderly people will mean that young workers will have to pay
higher taxes to finance the state pension systems. Increasing taxation on a relatively
smaller working population is likely to lead to a flight of human capital the
migration of workers to countries with lower taxes.
The fears regarding migration are expected to fade over time. Additionally, as
immigrants from the new member countries earn higher incomes and send remittances
back to their home countries, the CEE countries will begin to provide better
employment and income opportunities to its citizens. As the income gap between the
old and new member countries converge over a period of time, people will have less
incentive to move out of their own countries. As migration entails a lot of costs
tangible and intangible
people will tend to prefer to stay in their own countries,
other factors being favorable. In fact, it is expected that with the development of the
new member countries, many of the immigrants will return to their home countries.
Some of the EU countries are also looking at other options, such as increasing the
birth rates, to overcome the looming problems in their labor markets. How far these
efforts will be successful is anyones guess, given the fact that it takes at least two
decades for a baby boom to impact the labor market.
However, one thing most analysts are clear on is that if the EU wants to become a
knowledge-based dynamic economy as enunciated in its Lisbon European Council, it
cannot afford to have serious labor gaps in its market. How well the different
countries manage to meet that challenge is something that only time will tell.

23

Europe in Figures: Eurostat Yearbook 2005, European Commission, Luxembourg.

539

International Business

Additional Readings & References:

1. Mark J. Miller, Western European Strategies to Deter Unwanted Migration: Neither
New Barbarian Invasions Nor Fortress Europa, US Commission on Immigration
Reform, June 1994.
2. Marek Oklski & Dariusz Stola, Migration between Poland and the European Union:
the perspective of Polands future membership of EU, Institute for Social Studies,
University of Warsaw, March 1999
3. Michel Poulain and Nicolas Perrin, Is the measurement of international migration
flows improving in Europe, Statistical Office of European Communities, May 16, 2001.
4. Migration Policies and EU Enlargement: The Case of Central and East Europe, OECD,
2001.
5. Paul Levine, Emanuela Lotti, Joseph Pearlman & Richard Pierse, The Economic Impact
of East-West Migration in an Enlarged European Union, Hamburg Institute of
International Economics, 2003.
6. Stephen Drinkwater, Paul Levine & Emanuela Lotti, The Labour Market Effects of
Remittances, Hamburg Institute of International Economics, 2003.
7. Stephen Drinkwater, Go West? Assessing the willingness to move from Central and
Eastern European Countries, Hamburg Institute of International Economics, 2003.
8. David Mackie & Michael Marrese, EU enlargement: opportunities grasped by the
east, missed by the west, JPMorgan Research, New York, April 27, 2004.
9. The
Enlargement
of
the
European
Union,
http://www.auswaertigesamt.de/www/en/eu_politik/vertiefung/erweiterung_html, May 2004.
10. Antonio Vitorino, The Challenges of Global Migration: An EU View,
http://www.carnegiecouncil.org/viewMedia.php/prmID/4985, May 14, 2004
11. Fredrik Bergstrom & Robert Gidehag, EU VERSUS USA, Timbro, Stockholm, June
2004.
12. Controlling our borders: Making migration work for Britain, Secretary of State for
the Home Department, United Kingdom, February 2005.
13. John Salt, Types of Migration in Europe: Implications and Policy Concerns,
European Population Committee, Strasbourg, April 2005
14. Tito Boeri & Herbert Brcker, Migration, Co-ordination Failures and EU
Enlargement, Institute for the Study of Labor, Bonn, Germany, May 2005.
15. Migration and the Millennium Development Goals, United Nations Population Fund,
Marrakech, Morocco, May 2005.
16. Ellen Lammers, Global Migration Perspectives, Global Commission on International
Migration, September 2005.
17. Julianna Traser, Whos afraid of EU enlargement? ww.ecas.org/file_uploads/1009.pdf,
September 2005.
18. EU needs immigration to support ageing population,
http://www.workpermit.com/news/ 2005_10_25/europe/eu_needs_immigration, October
25, 2005.
19. Katinka Barysch, East versus West? The European economic and social model after
enlargement, www.cer.org.uk, October 26, 2005.
20. Kevin Sullivan, East-to-West Migration Remaking Europe,
www.washingtonpost.com/wpdyn/content/article/2005/11/27/AR2005112700950_2.html, November 28, 2005.

540

The European Union and Immigration from New Member Countries

21. Nicholas Watt, Migrant workers from east helping to boost EU's fortunes, says
report, http://www.guardian.co.uk/eu/story/0,,1705656,00.html, February 9, 2006
22. Accession Monitoring Report May 2004 December 2005, A joint online report by
the Home Office, the Department for Work and Pensions, the HM Revenue & Customs
and the Office of the Deputy Prime Minister, United Kingdom, 28 February 2006.
23. Europe in Figures: Eurostat Yearbook 2005, European Commission, Luxembourg.
24. www.workpermit.com
25. www.imf.org
26. www.oecd.org
27. www.guardian.co.uk
28. www.eiro.eurofound.eu.int
29. www.finfacts.com
30. www.euractiv.com

541