EU enlargement fuels concerns over free movement of workers

The latest accession of the two eastern European countries, Romania and Bulgaria, to the EU on 1 January 2007 has triggered new fears of migration from less developed to more developed Member States. Prior to the 2004 enlargement of the EU, Hungary had actively argued against limiting the free movement of labour from the new to the older Member States. However, during the recent wave of enlargement, Hungary and Malta were the only countries of the ten new Member States that joined in 2004 to set restrictions on the gradual opening up of their labour markets.

Background to EU enlargement

A central issue for discussion during the transitional process to EU enlargement was the free movement of workers from the new and less affluent eastern European Member States to the older and more prosperous EU Member States. Although one of the four basic liberties of the EU is the free movement of its citizens, in reality this provision has raised political fears of immigration, arising from the potential economic and labour market impact of free movement of workers.

In 2006, similar to the previous enlargement period in 2004 when the potential large-scale migration of workers from the new to the old Member States fuelled anxieties, restrictions on the free movement of labour emerged on the agenda once again. The so-called ‘transitional clause’ of the treaties governing accession allows all EU countries to restrict the free movement of labour from EU accession countries for up to seven years. In 2004, most of the original 15 EU Member States (EU15) – with the exception of Ireland, Sweden and the UK – applied so-called ‘transitional clauses’ towards eastern European countries. The impact of such policies has since been studied, and particular attention paid to the consequences of the liberal immigration policies of Ireland and the UK. At the same time, lessons have been learned, with evidence emerging of the benefits and limitations of the free movement of labour. Nevertheless, most of the EU15 countries ‘opened their gates’ after the first two years of the transitional period, with the exception of Germany and Austria, two important destinations for eastern European workers: these countries imposed further restrictions on their labour markets and extended the transitional period.

The economies of the new EU countries, Romania and Bulgaria, which joined the EU on 1 January 2007, are far weaker than those of the older Member States: the gross domestic product (GDP) of these two countries is well below the EU15 average and even below that of eight of the new Member States that joined the EU in 2004. Assuming that the basic drive behind migration is the difference in GDP levels between the countries of origin and recipient countries, or the expected net wage gain in a given time period, it is reasonable to expect significant migration from these lower-GDP countries. In the case of Romania and Bulgaria, most of the EU15 countries, with the exception of Finland and Sweden, have applied the ‘transitional clause’. However, eight of the ten new EU Member States have introduced a liberal regime, allowing for the free movement of labour. The remaining two countries have applied the transitional arrangements: Malta has opted for restricted access and Hungary for partially restricted access (see the decisions of the 25 Member States (EU25) on the EU Commission’s website)

Position of Hungarian government

Prior to its accession to the EU, Hungary strived to dispel fears about considerable migration pressures and argued strongly against the unavoidable ‘transitional clause’. When it was eventually imposed, only a few of the new Member States (NMS) – including Hungary, Poland and Slovenia – applied the ‘principle of reciprocity’, thus curbing the free movement of labour from the EU15. Although Slovenia recently lifted this restriction, Hungary and Poland continue to impose it. While it has never been applied, another measure that exists in eight of the NMS restricts the free movement of workers in the event of unexpected labour migration from another new Member State. In Hungary, this possibility was considered when a sudden increase was noted in the number of mostly ethnic Hungarians with Slovakian citizenship who were commuting to work in Hungary.

In September 2006, the Hungarian Ministry of Social Affairs and Labour (Szociális és Munkaügyi Minisztérium, SZMM) prepared a draft proposal on the free movement of workers. This document supported the partial opening up of Hungary’s labour market to workers from Bulgaria and Romania. A final decision was to be made in late December 2006, prior to the impending EU enlargement.

In mid November 2006, bilateral negotiations took place between the Romanian and Hungarian prime ministers on the free movement of workers as well as other topics. Somewhat surprisingly, the Hungarian Prime Minister, Ferenc Gyurcsány, subsequently announced that Hungary would partially lift restrictions on its labour market. The two prime ministers also announced that the citizens of the two countries could cross the Romanian–Hungarian border using their domestic identification cards, which in practice meant that former restrictions imposed on informal labour from Transylvania in Romania to Hungary would cease to exist.

While most of the new Member States declared an unrestricted regime, the Hungarian government officially announced before the end of December 2006 that it would only partially open its labour market to workers from Romania and Bulgaria; in practice, this would give free access to workers engaged in some 219 occupations, selected on the basis of official information regarding labour market shortages. The quotas on traineeship and seasonal work, which attract only limited interest, remained unchanged.

Views of social partners

The government’s position runs contrary to expert opinion, as well as to the positions of both employer and employee representatives. In response to SZMM’s draft proposal, the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA) immediately declared its support for the free movement and equal treatment of workers and rejected the proposed restrictions on the labour market. LIGA’s position reflected the opinion adopted by the trade unions when the free movement of Hungarian workers was restricted by the EU15, as well as the view of the union members who opposed the policy of restrictions when this issue had been discussed internally. The largest private sector trade union, the National Association of Hungarian Trade Unions (Magyar Szakszervezetek Országos Szövetsége, MSZOSZ), took a similar position at its presidency meeting in late November 2006. However, the two trade union confederations also agreed that the registration of foreign employees arriving to the country would be crucial.

Employer organisations were also in favour of lifting restrictions on the labour market, expecting that it would allow for a general increase in labour supply, and in particular the alleviation of skills shortages in certain occupations. At the same time, they called for the compulsory registration of migrant workers and the possibility to impose sanctions in cases where the regulations were being breached.

On 1 December 2006, the issue was discussed at the plenary session of the National Interest Reconciliation Council (Országos Érdekegyezteto Tanács, OÉT). According to the minutes of the meeting, the trade unions unanimously supported the free movement of labour – a decision which was somewhat surprising. A number of employer representatives also supported this position, although not as strongly as the trade unions, leaving the final decision to the government. Given that the 2007 wage negotiations were a central priority at the meeting and that the government’s approach had already been announced, the issue of the free movement of labour did not receive as much attention. However, the trade unions criticised the government for circumventing tripartite negotiations on this issue. A number of days later, a final round of negotiations was held to which Prime Minister Gyurcsány invited representatives of parliamentary parties and the spokespersons of social partners in OÉT.

Partial opening up of labour market

Hungary’s somewhat unfavourable economic situation – characterised by high government debt, stringent economic measures, and an increasing unemployment rate which is nonetheless below the EU level – along with its firmly divided political scene, has created unfavourable circumstances for adopting a liberal policy towards new Member States with regard to the free movement of workers. In line with the original plans for the partial opening up of Hungary’s labour market, it was planned to make 140 professions accessible to foreign workers; however, this figure was gradually increased to 219 professions within a short space of time. The detailed list of professions covered the majority of the labour market segments likely to be affected, and the Romanian political and minority representatives who were mainly concerned evaluated the decision as a promising start for both sides. Although the list of professions was based on labour market observations and registered vacancies, an elaborate labour market forecast and detailed labour market analysis were not carried out. The list goes into considerable detail, down to four-digit categories of professions. A host of high-skilled professions and non-manual secondary level professions, as well as skilled and unskilled manual professions, are included, sometimes encompassing rather surprising professions such as philosophers, astronomers and various artistic professions. The list will be revised continuously, based on available labour market information.

Commentary

The issue of the free movement of labour is peculiar in Hungary, since most foreign workers are ethnic Hungarians holding citizenship from the neighbouring states – the overwhelming majority coming from Transylvania in Romania. On the other hand, most of the foreign labour has been employed in Hungary in some form, either legally or illegally. Political disputes in the early 2000s revealed the ambiguous approach of the Hungarian government to opening up the country’s labour market. Prior to the introduction of the so-called ‘status law’ – designed to provide ethnic Hungarians with a preferred status in the Hungarian labour market on a short-term basis – and the referendum on granting citizenship to ethnic Hungarians living outside of Hungary, heated political debates were fuelled by fears of a considerable labour inflow (HU0501101N). Politicians at the time argued that Romania’s entry into the EU would eliminate the problem of differing ethnicity and citizenship; thus, a decision on the issue was put off until the next wave of EU enlargement. Similar arguments were made during debates on the recent EU enlargement; however, it is unlikely that the actual migration will be of a massive scale or that it will disrupt the Hungarian labour market considerably.

Ágnes Hárs and László Neumann, Institute of Political Science, Hungarian Academy of Sciences

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