Sunday, May 17, 2009

A new migration period? - Fears and future of the East

The fear from a mass immigration from the East to the West was always prevalent since the EU accession of the countries in the region became a certainty. Its intensity never really diminished and it surfaces again and again, even though the recent years didn't proved it. For a certain extent quite the contrary happened, the migration was beneficial for both the destination and the country of origin, at least in the short term. But as the intention for migrating is not lower than it was some years ago one can consider it a structural phenomenon in the architecture of the EU, at least for the time being, and with lasting impacts on both the integration and the respective countries.

The main source of and reason for migration from the East to the West is very simple: the possibility to work and earn money, more than it would be possible at home. For a while the system is beneficial not for the countries receiving the wave of migrant and benefiting from the relatively cheap labour, but for the countries in the East, where the bulk of those who try to make a new fortune in the West invest their earnings and savings. Mainly in real estate, but a part of them even start new enterprises as well. But there should be one underlying assupmtion in order to preserve this behaviour: the huge differences have to became more moderate with time and that way enable he migrants to return home and live on their earnings there. (Well, again I know that the whole phenomenon is more complex...)

As far as the accession countries are concerned this last, important precondition was not realized yet. Although for a moment it seemed that soaring wages in some countries (Poland, Romania, the Baltics) can somehow attract the emigrées to return, it proved to be artificial. The raise of wages without the corresponding increase in productivity hurted the competitivity (it was caused by shortages in labour), while the flow of migrants was turned back (at least partially) by the effects of the crisis in the West, that led to the loss of low paid jobs, in a large proportion filled by migrants from the East.

Up to this point it is a rather an ordinary story with ups and downs and I'm not really keen on putting forward the issue of migration and migrants in that context. My aim is to emphasize the structural importance of the phenomenon in the
EU and its significance for its future. As the main reason behind the movement of labour was the huge differences between parts of the EU in a sense it was nothing else than a way to handle the tensions arising from the fact,that the market in Europe is much more integrated than the economic policy and the social systems. While the respective countries in the East were compelled to race for investemnts with relatively cheap labour and it meant low taxes as well, the inflow of money from the West was the only way to raise the standard of living significantly, not only for those in the working age, but for those in the pension systems, as the income for elderly peaple was ridiculous and terrifying at the same time in many cases. On the other hand the migration was in effect a way to deprive those countries from a considerable part of their workeforce, and even if it was not necessarily deliberate, it was an inherent consequence of the accession and the architecture of the EU.

The real problem is, that the countries in the east, even now struggling with the process of ageing, having no good prospects for their future composition of the population in terms of the ratio of active and inactive population are not in a position to make investments in sectors with higher additional value of labour, and there is a fair probability that they will be trapped in this process. They can't provide their population with even the minimal social security (there are countries with an avarage pension at around 100-150 euros per month!) and they could only rely on the migration and the resources sent home by those working in the West. On the other hand migration diminishes the reserves in workforce and soon leads to labour shortages resulting in the raise of wages, unsustainable in terms of competivity, and/or immigration into these countries, very probably leading to social tensions. Moreover, in order to keep the remaining workeforce throgh investment they should provide further tax cuts for companies investing in those countries, eiher for lowering the cost of labour or in the form of a low corporate tax rate. It is almost certainly a vicious circle.

On the other hand migration is not necesserily means of making those countries even poorer subconsciously. The migration can be a way - in this case also not necessarily deliberately - to compell member states to set up a kind of common, or at least harmonized social security system. For the time being migration was only prevalent among those in the working age. But it can evidently lead to the complete failure of the new member states what is a pressure on the whole community and on the other hand there can be a second wave of migrants, this time elderly ones, who are discontent with their situation and perspectives in the respective eastern social security systems and who has a right to settly in the EU anywhere. (Anyway, cynically speaking, as long as the politicians from the West and the Commission urge the Eastern countries to rein in social expenses it also implies that living on 100 euros per month is possible and decent, in compliance with the values of Europe as being an ever growing area of prosperity and therefore the 100 euos pension should be regarded as enough to settle in any other country.) If such a pressure would arise it would simply turn the process, this time the east not exporting the benefits of migration, but the negative effects, and not only in terms of budget expenses, but in terms of social tensions.

It is not a predestined story, of course. But it is certainly among the possible outcomes of an integration where there is no will to resolve the largest divides between new and older members. And as the integration of the capital markets benefited - maybe disproportionately - the older members, the integration of the labour market (more precisely the principle of the free movement of people) could benefit the new member states' population, although in a very peculiar way, clearly distoring the initial intentions behind it.

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