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European labour migration and welfare states
Olaf van Vliet
NISZ, 7 July 2016
Leiden University. The university to discover.
Labour migration in the Netherlands
Source: SEO (2014)
Outline
• Labour market effects
• Welfare state effects
• Some evidence
• Political economy
Labour migration in the EU: economic motives
• EMU – optimum currency area
Mundell criterion
• Increases welfare
Welfare effects of labour migration
• Welfare gains in all countries as a result of better matching on
labour markets
• Redistributive effects (employment, wages) within countries,
variation across:
– Sectors
– Occupation
– Skill-level
At the individual level: “winners and losers”
Migration and welfare states (1)
Efficiency hypothesis:
• ‘bad risks’ are attracted to countries with generous social
security
• ‘good risks’ are attracted to countries with low taxes and
contributions
downwards convergence: ‘social race to the bottom’
Migration and welfare states (2)
Compensation hypothesis:
• Immigration leads to economic insecurity (employment and
wage effects)
• To compensate the increased economic insecurity,
governments provide more social security
Migration and welfare states (3)
Taken together:
• Compensation hypothesis
• Efficiency hypothesis
increased demand for social
security
budget to fulfill this
demand undermined
Dilemma for policy-makers
Evidence: labour market effects in the Netherlands
• Strong heterogeneity across sectors
• SEO (2014): some evidence for displacement effects at the
macro-level (construction, horticulture, road transport); not at
the micro-level.
• International competition: winners and losers
• Bogus constructions: companies circumventing legislation,
false self-employment
Evidence: welfare states
• Many studies on the ‘welfare magnet hypothesis’
Social policy
Migration
• Various push and pull factors
•
Employment and wages are the main driver
• Generosity of social policy: small effects at most
Budgetary effects
Source: SEO (2012)
Public social expenditure (% GDP)
1980
2005
2014
Austria
22.1
26.8
28.4
Belgium
23.5
25.6
30.7
Denmark
24.4
27.3
30.1
Finland
18.0
25.0
31.0
France
20.6
29.6
31.9
Germany
21.8
27.0
25.8
Greece
10.3
21.1
24.0
Ireland
16.0
15.8
21.0
Italy
18.0
24.9
28.6
Luxembourg
20.3
22.0
23.5
Netherlands
24.8
21.8
24.7
9.6
22.8
25.2
Spain
15.4
20.9
26.8
Sweden
26.0
28.7
28.1
United Kingdom
16.3
20.2
21.7
Mean
19.1
24.0
26.8
Standard deviation
4.8
3.6
3.3
Coefficient of variation
0.3
0.2
0.1
Portugal
Source: OECD 2016
Net unemployment benefit replacement rates 2009
Source: Van Vliet en Caminada (2012)
Net unemployment benefit replacement rates
Source: Van Vliet en Caminada (2012)
Net social assistance benefit replacement rates
90
80
70
60
50
40
30
20
10
0
1990
2009
Source: Wang and Van Vliet (2016)
Net social assistance benefit replacement rates
1995
2000
2005
2009
Mean OECD-21
Standard deviation
Coefficient of variation
48.8
9.4
0.19
45.9
9.3
0.20
45.0
9.8
0.22
45.2
12.1
0.27
Mean EU-14
Standard deviation
Coefficient of variation
49.8
9.4
0.19
46.6
9.1
0.20
46.7
9.4
0.20
48.1
11.8
0.25
Source: Wang and Van Vliet (2016)
Political economy
• Efficiency and compensation hypothesis
Migration
Welfare state reform
• Embedded liberalism hypothesis
–
–
–
–
Brexit
EU-Ukraine Association agreement
CETA
TTIP
Political economy (2)
Migration
Welfare state reform
• Not much research yet
• Variation across welfare state programs (social assistance
benefits, unemployment benefits, family benefits, health
care, education)
• Real pressure on welfare states versus perception
• Solidarity
SOLID
• “Solidarity under strain – A legal, criminological, and economic analysis of
welfare states and free movement in the EU”
• Research project 2016 – 2020:
1. Pressure from labour migration on national welfare states
2. Bogus constructions, payrolling and subcontracting
• Leiden University - Leiden Law School:
–
–
–
–
Department of Economics
Department of Labour Law
Department of Criminology
Department of European Law
SOLID