Economics (AS & A Level) · Oct / Nov 2021 · Paper 43 · Question 1

The effects of European Union (EU) labour migration In 2016 in the EU labour market there was free movement of people seeking work among the EU’s 28 member countries. One country reported that an extra 252 000 workers from other EU countries came to work there during 2014–2015. This meant that the total number of EU workers was 2.1 million, or 6.8% of the country’s workforce. The eight Eastern European countries that joined the EU in 2004 supplied 987 000 of those workers by 2015. A critic of this free movement of labour stated that “It is the workers on low pay in the receiving country – and those out of work – who feel the consequences of uncontrolled migration. They are forced to compete for jobs with thousands of people from abroad, and they suffer downward pressures on their wages.” In contrast, other studies have shown that migration of workers has been good for both economic growth and public finances. These studies reported “There is no correlation between high migration and unemployment. Unemployment fell significantly as total migration rose to a record level of 392 000 in May 2014. Migration is acknowledged to be positive for public finances. In the EU, migrants contributed US$25 billion more in taxes in the decade to 2011 than they used in welfare and public services. Wages may have been affected for low-skilled workers but only marginally downward.” Other economists have argued that, in theory, “the impacts of immigration on wages and employment critically depends on whether migrants’ skills are complements to, or substitutes for, the skills of existing workers. These impacts vary between the short run and long run. In the short run if the skills of migrants and existing workers are substitutes, immigration can be expected to increase competition in the labour market and drive down wages. If, on the other hand, the skills of migrants are complementary to those of existing workers, all workers experience increased productivity which can be expected to lead to a rise in wages of existing workers. In the long run the economy can adjust to the increase in labour supply.” Some governments have introduced a minimum wage to help those workers on low pay. The wage is set to increase to match any increase in inflation. Sources: The Times, 18 May 2016, Daily Telegraph, 18 May 2016, BBC, 19 May 2016

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