EurWORK European Observatory of Working Life

Migrant workers: positive assets or ‘benefit tourists’?

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The influential Confederation of Danish Employers has published an analysis of the effect of migrant workers on the country’s economy. It concluded workers from Poland and Romania in are a net benefit to the Danish state since migrants pay more tax than they receive in benefits, pensions and other forms of welfare such as child allowances. The report angered those who fear that many migrants are ‘benefit tourists’, and that Danes are losing jobs to cheap migrant labour.

Background

In Denmark, the election of members to the European Parliament on 25 May 2014 took place during a period of heated debate. Discussions centred on what influence EU rules on ‘the free movement of labour’ has and will have on the Danish welfare model.

This has been a regular topic of debate during the past year, but the intensity increased as the date for the EU Parliament elections approached.

The intense focus on the free movement of labour and its consequences for Danish welfare policy – and the heated political discussions it generated – prompted EU President Herman Van Rompuy to give a rare interview on the subject. In the daily paper Politiken he tried to calm angry Danes worried they were being exploited in an unfair trade between migrant workers from Poland, Germany and Romania. He also wanted to allay fears over the impact of EU rules on the Danish labour market and its social policy.

Two views of migrant workers

In April the influential Confederation of Danish Employers (DA) published an analysis in its magazine Agenda (in Danish). Based on figures from Statistics Denmark, combined with its own calculations, DA concluded that migrant workers were beneficial for the Danish state.

The article was reassuringly called ‘Eastern European workers ARE a profit for the state treasury’. It argued that:

Migrants from Eastern Europe currently generate DKK 16,000 [€2,145 as at 23 July 2014] per person in revenue for the state. By contrast, Danes receive DKK 6,000 (€805) more from public funds than they generate.

The calculations are intended to offer a snapshot of the Eastern Europeans’ contribution to Government of Denmark revenues. It plots income tax and VAT revenue against any drain on public funds, including income transfers and hospital expenses.

A television debate took place shortly after the publication of the report called ‘Is the EU threatening Danish jobs’? People involved in the debate reacted angrily against the analysis. The Chief Executive Officer of DA, Jørn Neergaard Larsen, who took part in the debate, met fierce criticism.

His critics claimed the analysis did not take into account the problem of Danes losing jobs to Eastern European workers. They say Danish workers are forced into unemployment and onto social benefits. They argued that the Polish workforce was not a supplement to a labour market that had employed all its own workers and was in need of a new workforce. On the contrary, they argued, foreign workers were replacing Danish workers because they were much cheaper to hire and more willing to work long hours.

Taking these factors into account, said the report’s opponents, the profit it identifies turns into a deficit because of the state benefit needed by Danes unable to find work, or to top up low wages.

Benefits eligibility

The debate can, by and large, be encapsulated in one question: should EU migrant workers, most of them from Eastern Europe, be eligible to receive Danish unemployment benefits and other social benefits such as child allowance from the very day they enter Denmark, on the basis that they have ‘earned’ the eligibility in their home country?

In general, those who argue they should not be eligible talk of the risks of social dumping and benefit tourism. Others see migrant workers as vital for increased productivity. Some see them as a healthy element, creating competition for jobs.

In 2010, a two-year waiting period before social benefits could be granted to foreign workers, including immigrants from EU-countries, was introduced by the then LiberalConservative government led by Lars Løkke Rasmussen with the support of the nationalist party, the Danish People's Party. However, this contravened EU regulations that forbid discrimination against employees from other parts of the EU, and which oblige governments to give them the same social policy entitlements as resident nationals, including receipt of benefits.

The current Social Democratic government, under Prime Minister Helle Thorning-Schmidt, followed the EU-regulation and cancelled the two-year waiting period. This was opposed in the Danish Parliament where members argued for the introduction of preventive orders to ‘protect’ Danish welfare from being exploited. High-level ministry officials pointed out that this was simply not possible. The EU regulations had to be followed.

Benefit tourism and social dumping

The Danish Confederation of Trade Unions (LO) has defined ‘benefit tourism’ as an abuse of the free movement of labour. The confederation has said: ‘The core of benefit tourism is that a person’s motivation to move is not combined with the aim to find a job abroad but with an aim to get a legal claim on social benefits’.

LO accuses employers of using Denmark’s high social benefits as a part of the wage for migrants who arrive from countries which have very poor social benefits.

However, for the employers, DA argues that the ‘fear’ of foreign workers taking Danish jobs is exaggerated. It says: ‘The problem is not the foreigner who is willing to take a job for DKK 120 (€16.10) an hour. The problem is the Dane who is not’.

The issue is directly related to the fact there is no national minimum wage in Denmark. Wage levels are set out in collective agreements and the average collectively agreed minimum wage is around DKK 100–115 (€13.40-15.40) an hour. Most employees receive much more than this because the important part of wage bargaining takes place at company level.

However, there are no rules against hiring foreign workers on the existing minimum wage in the sector. The problem is that in some cases the collective agreements are not observed, and migrant workers receive wages well below the average minimum of €13.40 (DKK 100).

The unions, especially the United Federation of Danish Workers (3F), have spent a good deal of time and energy finding workplaces where low wages are paid, and insisting collective agreements are followed. The Eastern European workers themselves are seldom aware of the agreements that are in force. A wage of €6.7 (DKK 50) an hour, plus a child allowance, might be considered a good salary by a Romanian worker.

Social dumping has been a hot topic during the latest rounds of collective bargaining, especially in the construction sector which employs a number of Polish workers.

The issue of ‘benefit tourism’ is not something which has affected collective bargaining. The question belongs to the political sphere and, in particular, to the EU political sphere. As it stands, EU workers are able to receive child allowances when they start paying tax and when they have proof of their family situation in their home country. At the same time, the EU worker is obliged to sign a health insurance form to confirm they will not be a burden on Danish society. It could be argued that this is not exactly the same as receiving benefits from ‘day one’.

Those claiming unemployment benefit in Denmark must have been member of an unemployment benefit fund for at least one year and must also have worked for at least one year. However, the basic rule in the EU is that it does not matter where in EU the worker has fulfilled these requirements. In Denmark, the only additional rules are that EU workers must join an unemployment fund within two weeks of coming to Denmark and they must be employed for at least 293 hours within three months.

The EU Commission opposes the 293 hours rule. Prime Minister Thorning-Schmidt is arguing for retention of the rule and has joined Finland in working for the same special domestic rules.

Commentary

Most social partner organisations agree that serious social dumping is a threat to the Danish model of labour market regulation through collective agreements.

However, for employers, DA has made little comment on social dumping. The Federation of Small and Medium-sized Enterprises (HVR) and Danish Transport and Logistics Association (DTL) are trying to protect their small and medium-sized company members. They support the introduction of third party liability for large contracts, while DA, the Confederation of Danish Industry (DI) and Danish Construction Association (Dansk Byggeri) are against the idea.

When it comes to ‘benefit tourism’ – or who should receive benefits and when – the parties are also divided. Employer organisations and the unions support the ‘free movement of labour’, but argue that this has nothing to do with ‘free movement of social benefits’.

The unions try to support and protect Danish jobs. But they have many members from Eastern Europe and are trying to recruit as many as they can. This makes it very difficult for a union such as 3F to step forward and say that foreign workers from Eastern Europe should fulfil more difficult conditions than their Danish colleagues before receiving benefits.

However, the pressure from the Danish Peoples’ Party has had a considerable impact on the debate. Its claim that Danish welfare is ‘exported’ to Romania and Bulgaria and that Danish workers are unemployed because of cheap Polish labour has wide support.

The success of the party – which won the majority of Danish seats in the EU Parliament at the election on 25 May 2014 – can be largely put down to xenophobia on the question of foreigners. The Danish Peoples’ Party gained popularity in the 1990s when it turned firmly against allowing foreigners to bring their families to Denmark. It also wants the annulment of the Schengen agreement which abolished internal borders and made passport-free movement possible between a large number of European countries.

Since 2004 the tone in the debate about foreigners in general, and about Polish and other Eastern European workers in particular, has, from time to time, been hostile. In May 2014, it prompted the Polish ambassador to Denmark, Rafal Wisniewski, to write an opinion piece in a national Danish newspaper asking for a more reasonable discussion in the debate about migrant workers.

Carsten Jørgensen, FAOS, University of Copenhagen

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