Labour immigration examined

Against the background of increasing unemployment, Austria's current ÖVP-FPÖ government is pursuing a very restrictive immigration policy, based on a rigid quota system for new residence and works permits. This policy approach contrasts with that of the 1960s and 1970s, when a major labour shortage led governments to attract large numbers of 'guest workers' to work in Austria. This article examines changing migration policies and the shifts in the role of labour migration in Austria’s economy and industrial relations from the early 1960s up to 2005.

Against a background of increasing unemployment levels among foreign nationals in Austria, the current government of the conservative People’s Party (Österreichische Volkspartei, ÖVP) and the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) intends further to restrict labour immigration by workers from outside the European Economic Area (EEA). According to the government’s recently announced plans, the country’s overall intake of immigrant workers from outside the EEA will be near zero in 2005. Over recent years, the government’s policy line was that labour immigration should be restricted mainly with regard to less-skilled labour, whereas it aimed to attract skilled labour from outside the EEA to work in Austria within a certain quota-based framework (AT0109128N). Now, in 2005, the government aims also to reduce the quota for so-called 'key workers' (defined as 'third-country nationals' earning at least EUR 2,100 before taxes per month).

In 2004, aside from about 2,000 key workers, 170 self-employed people and 360 'rich third-country nationals' without labour market access were allowed to immigrate. Some 5,490 people from outside the EEA were permitted to move into Austria under a so-called family reunification programme. In 2002, the immigration quota for less-skilled labour was abolished completely, with the result that poorly qualified 'third-country nationals' seeking to enter the Austrian labour market for the first time have had little chance of success since then, unless covered by special bilateral agreements on labour immigration concluded with a few countries. Although the 2005 quotas for the various employee groups have not yet been fixed, the government is expected to maintain its restrictive policy line regarding immigration.

In the context of recurrent public debates on the principles of an immigration policy that it both practicable and humanitarian, this article examines the function and problems of labour immigration to Austria as well as the role of migration policies in the post-war era. Most of the data referred to in this article is provided by a study carried out and recently published by the National Contact Point Austria (NCPA) within the European Migration Network, which was co-financed by the European Commission and the Austrian Ministry for Internal Affairs (Der Einfluss von Immigration auf die österreichische Gesellschaft, 2004).

Historical review of labour immigration

In Austria, labour immigration began in the early 1960s when additional labour was needed in the wake of what is generally understood as the post-war reconstruction period. At that time, migrant workers secured economic growth. A so-called 'guest worker' scheme was introduced, which brought about 265,000 immigrants to Austria in the period 1961-72, most of them young, male workers from the former Yugoslavia and Turkey. This guest worker system was based on a 'rotation' principle, meaning that immigrants were expected to stay and work for a couple of years and subsequently return to their home countries. However, this concept did not work, since most of the migrant workers decided to stay longer and - in many cases - bring their families to Austria.

The mid-1970s marked a turning point in Austrian immigration policy, when the international economic crisis, alongside the fact that a number of Austrians who had been working abroad returned home, resulted in the first oversupply on the Austrian labour market since 1945. As a consequence, the authorities aimed to reduce the number of foreign workers, such that active recruitment of foreign workers was stopped. In 1975, the Foreign Workers’ Occupation Act (Ausländerbeschäftigungsgesetz, AuslBG) was introduced, which stipulated the preferential hiring of Austrian nationals before that of foreign nationals. Moreover, this act provided for different legal statuses among foreign workers in that it introduced the so-called 'working liberation certificate' (Befreiungsschein) entitling all foreign workers with a continuous record of at least eight years of work to move freely on the labour market. All other foreign nationals remained bound to the employer or had to leave the country. These measures had a significant downward effect on the share of employed migrants in Austria (minus 40% from 1974 to 1984), even though the percentage of foreign residents decreased only minimally due to large-scale family reunifications.

During the late 1980s and the 1990s, the number of foreign residents, in particular 'third-country nationals', grew significantly after the dismantling of the 'Iron Curtain' and the wars in ex-Yugoslavia. Apart from this, the economic upswing in the early 1990s resulted in additional need for foreign labour. This led to a doubling of the number of foreign nationals living in Austria in the four-year period from 1989 to 1993, rising to 690,000. Correspondingly, the proportion of foreign employees in total employment rose to 9.1% in 1993. At the same time, unemployment among foreign workers increased.

This situation prompted the then coalition government of the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the ÖVP first to introduce a quota for work permits (Bundeshöchstzahl) in 1990, defined as maximum share of foreign workers in the total workforce to be fixed each year (generally between 8% and 10%), and then to tighten its immigration policy by enacting a series of laws, the most decisive of which was the 1992 Aliens Act (Fremdengesetz, FrG). By way of these legal measures, the 'old' guest worker scheme was replaced by a yearly quota system for new residence permits, which reduced immigrant numbers considerably. Net immigration decreased to only 159,000 people between 1993 and 2001.

Apart from a considerable inflow of asylum-seekers around 2000 in the wake of the Kosovo conflict, the period since 2000 was marked by the formation of the new ÖVP-FPÖ coalition government in February 2000 which, at the outset, expressed its willingness to reduce immigration to Austria and to cut 'excessive alien presence' (according to the FPÖ’s rhetoric) in Austria. Despite the government’s programme aimed at a significant reduction in immigration, the number of foreign workers registered in Austria has increased, reaching a peak in 2004 at almost 380,000. This is partially due to increasing numbers of EU nationals (temporarily) working in Austria, and partially a result of the government’s own migration policy of facilitating large-scale recruitment of temporary seasonal workers (AT0403202F).

Impact of immigration on Austria’s economy

Against the background of a public debate launched by the populist FPÖ since the 1980s over alleged 'excessive social costs' caused by foreign nationals, the topic of foreign nationals' impact on the national welfare system has become an issue of interest for certain research institutions during the last two decades.

According to Gudrun Biffl of the Austrian Institute of Economic Research (Österreichisches Institut für Wirtschaftsforschung, WIFO), payments by migrants into the social security system and receipts from the system were - on average - more or less balanced in the 1990s. When making a comprehensive cost-benefit analysis of migrants with regard to social transfers, one has to differentiate between the various branches of social protection (health insurance, pensions insurance, unemployment insurance, public housing contributions, child benefits etc). Research reveals that foreign nationals’ social security contributions and wage taxes were about 24% below the national average due to their on average lower income. Given above-average incidence of unemployment among migrants (according to the principle of employment protection of indigenous workers, compared with foreign workers), unemployment benefits paid out to foreign nationals are somewhat higher than for nationals. Moreover, the former have on average higher birth rates than Austrian nationals, which translates into a higher share of family-related transfer payments to them. On the other hand, since foreign nationals’ entitlement to unemployment benefits is restricted (AT9703104F), which means that most of them are not able to access long-term benefits, the positive differential in total benefit receipts of migrants remains minimal. Furthermore, foreign workers have to pay into a public housing fund, generally without being able to draw benefits from these contributions, at least as long as they are aliens. When one takes into account that educational and medical resources spent on migrants are below average, the conclusion is that migrants tend to contribute more to social budgets (including educational, health and care infrastructure) than they take out.

Regarding migrants’ impact on Austria’s employment situation, the role and function of migrants has changed over time. As outlined above, the guest worker system prevailing during the 1960s and 1970s was successively replaced by a more restrictive quota system for new residence permits, whose aim is thoroughly to regulate net immigration into Austria. This shift in Austria’s immigration policy occurred in the context of changing economic requirements.

In recently published research findings, Ms Biffl indicates that the original objective of migration policy was to enhance the competitiveness of export industries. The Austrian migration system channels migrants mainly into industries that produce 'tradeables', eg manufacturing with a low capital to labour ratio, and in particular labour-intensive industries like clothing, leather and textiles, as well as tourism. To a lesser extent, migrants flow into 'non-tradeables', in particular construction, personal, health and domestic services (see 'The impact of immigration on Austria’s society: the economy', G. Biffl, in NCPA, cited above). This is related to the fact that the 'exposed' sector that uses labour-intensive technology in the production of goods can take greater advantage of cheap migrant labour than the non-tradeable sector, which cannot reduce costs via technology to the same extent as the former and has to secure a certain level of service quality. Pressure to keep costs down is thus the major rationale for migrant labour in the personal services sector, which may lead to labour scarcities due to low pay. As Ms Biffl states, in order to ensure sufficient labour supply, migrants are employed - ie migrant labour represents a means to keep costs of non-tradeables low. This explains why migrants are employed disproportionately in low-wage/low-skilled jobs in the area of non-tradeables, eg cleaning, nursing and domestic services.

In general, migrants are complementary to, rather than substitutes for, Austrian natives, such that in most sectors the latter tend to 'profit' from migrant labour in terms of both job opportunities and relative pay, according to the research. Due to a pronounced segmentation of Austria’s labour market there is little competition between immigrants and residents, mostly in low-wage labour market segments requiring only low skills. This segmentation has given rise to a social and economic stratification new to Austria, which tends to further exacerbate inequalities in labour market access. As a result, the unemployment rates among migrants tend to be higher than that among natives, due to declining employment mainly in manufacturing in the wake of technological innovations and restructuring. These tendencies, in particular growing unemployment rates among foreign workers, have - during recent years - prompted the Austrian government further to restrict legal labour immigration.


In order to utilise the 'international labour supply system' for national welfare purposes, Austrian migration policy has since the 1960s aimed to provide sufficient supply of cheap workers. This means that during periods of economic upswing and full employment, so-called guest workers were actively recruited. By contrast, since the 1980s, when the need for foreign labour was more or less met as a result of large-scale inflows, the Austrian administration began increasingly to restrict labour immigration. As a consequence, a system of yearly quotas for residence permits was introduced which allowed flexible accommodation of net immigration to business demand.

There has always been a common view in post-war Austria, including the large political parties as well as the social partners, that Austrian nationals should be favoured on the Austrian labour market. In practice, this means that 'third-country nationals' are permitted to be employed only if no more Austrian nationals are available for certain segments of the labour market. Notably, both research institutions and political decision-makers have mainly focused their interests on how to 'functionalise' foreign nationals in favour of Austrian nationals, but they have paid hardly any attention to their actual living and working conditions. In practice, most 'third-country' employees and their families, in particular those equipped only with short-term employment permits, are permanently under threat of losing their residential permits and - as a consequence - in danger of being expelled from the country in the event of a longer period of unemployment and attendant destitution. Residential insecurity translates into pressure to find a job quickly in the event of unemployment and to hold on to the job as long as possible, even under the worst working conditions. Inconsistent regulations based on the residence legislation and the AuslBG are thought to contribute to a lack of wage assimilation of 'third-country' workers, even after some years of legal employment. The inconsistency of regulations thus enables employers to exploit non-EU nationals by informally linking pay to residency rights for them. This is done by giving residency security in exchange for a deduction from the wage.

It is a long-standing feature of Austria’s migration policy that employment protection is provided mainly for indigenous workers. Traditionally, immigration policy is designed to recruit migrant workers primarily for the lowest wage segments (currently almost exclusively harvest helpers and seasonal workers) and - to a minimal extent - for key positions for which domestic labour supply is scarce. This has continuously exacerbated the segmentation of the labour market and adds up to a further segregation of Austrian society alongside ethno-cultural 'essentials'. With respect to national migration policies, there is only little prospect of change. As regards participation and co-determination rights of 'third-country nationals', however, the case law of the European Court of Justice may require the Austrian legislator partially to improve the legal situation of foreign nationals (AT0306203F). (Georg Adam, University of Vienna)

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