Labour Mobility in the European Union: A tool to weather the next recession?
January 6, 2020
The European Economic Area (EEA) is the world’s biggest laboratory on labour migration. It provides a test case of what happens when people can move to take up job and business opportunities with almost zero costs under different economic and social conditions.
The past 15 years have seen a series of natural experiments confront the bloc. In the mid-2000s, eastern EU enlargement raised concerns about the impact of large waves of East-West movements driven by exceptional opportunity differentials; second, the 2007 global financial crisis and subsequent recessions sparked fears of a ‘lost generation’ of youth in Southern Europe and other badly afflicted countries; and third, the migration crisis brought rising mixed migration flows, pressures on infrastructure, and a vociferous public backlash that swept EU movers up in its wake.
While governments have contested aspects of intra-EU mobility—such as the rules governing access to welfare benefits —no country (except the United Kingdom) has questioned the fundamental rationale of free movement : that it offers a powerful tool for circulating skills, knowledge, and ideas around the bloc and for balancing out uneven effects of skills shortages and surpluses. Because free movement cannot by definition be calibrated to the needs of countries or regions, it may lead to localised costs, whether congestion in receiving communities or the adverse effects of depopulation in ‘sending’ regions and countries.
Signs of a potential recession ahead have cast light on the role free movement could play in the future to dampen the effects of the economic cycle. Last time round, free movement played only a limited role in mitigating the effects of the 2007 recession and subsequent economic downturn: soaring unemployment in southern European Member States led to little additional mobility, East-West flows remained fairly constant, and returns from crisis-ridden countries such as Ireland were limited. While this has dampened expectations on labour mobility as a remedy to crisis, it has also encouraged an examination of persistent obstacles, as well as actions to reduce them. Meanwhile, it is unclear whether these fundamental principles of labour mobility will hold true, in the future. Europe is undergoing structural changes to its labour force and supply which may make free movement more vital as a tool to stimulate growth—but also reveal its limitations. Globalisation, population ageing, and automation and digitisation are all reshaping the skills on offer and in demand in Europe’s labour markets.
This policy brief examines the role of free movement against this backdrop. It first sets out the current role that labour mobility plays in the bloc, and then turns to possible policy approaches to improve its functioning. It ends with some conclusions.