Seven Years after the Eastern European Enlargement

Carlos Vargas-Silva

On 1 May 2004 eight Eastern European countries joined the EU. These countries as a group are commonly known as the A8 countries. As members of the EU, citizens of the A8 have the right of mobility within the EU. However, the accession agreements allowed the 15 pre-existing EU member states to impose restrictions on the employment of citizens from the A8 countries for a maximum of seven years.

There was speculation of large migration movements after accession from the eight new member states to the old member states. It was not surprising, therefore, that most existing members chose to impose restrictions on the movement of these workers. Only Ireland, Sweden and the UK opened their labour markets to workers from the A8 countries immediately upon EU enlargement.

In the UK, A8 workers were able to freely and legally take up employment since May 2004 as long as they registered with the Worker Registration Scheme, a simple procedure. The opening of the UK labour market to workers from these countries led to a surge of immigration. During 2004-2009, net-migration (inflow minus outflows) of A8 migrants to the UK was about 304,000 and A8 migrants accounted for about 25 percent of all net-migration to the UK during that period.

Migration in the UK has always been a controversial political issue and a large majority of the British public has been opposed to more immigration since at least the 1960s. But the surge in immigration after the accession of the Eastern European countries led to migration becoming one of the main political issues during the 2010 general election and to David Cameron becoming prime minister, in part, by promising to control immigration and reducing net-migration from the “hundreds of thousands” to the “tens of thousands”.

The restrictions for movement of A8 workers to other EU countries terminated this year. Therefore, this is an ideal time to identify potential lessons.


The need for caution and gradualism in immigration policy
Before the A8 countries joined the EU, there was a high degree of uncertainty on the future level of immigration from these countries after accession. The major econometric analysis commissioned by the UK government suggested that flows were going to be much smaller than in reality, in the order of 5,000 to 13,000 net-immigrants per year and that even in the worst case scenario, migration to the UK as a result of the enlargement was not likely to be significant. Part of the problem with the projections was the lack of historical data on migration from A8 countries to the UK.  It was also not completely clear at the time what other countries were going to do in order to restrict their labour markets to A8 workers. The authors of the report suggested that the estimations should be evaluated with caution given the methodological limitations.

The large-scale immigration that resulted from the A8 entrance to the EU also contrasted with previous EU accessions. The previous enlargement saw the accession of Austria, Finland, and Sweden to the EU and resulted in no significant migration movements. However, these countries had per capita income levels similar to those of the existing EU members and enjoyed freedom of movement with the EU. In order to find a somewhat better comparison it was necessary to look at the enlargement of the EU that involved the accession of Spain and Portugal. Given the considerable existing income per capita differentials between these two countries and the EU at the time, transitional arrangements were agreed in order to minimize the possibility of mass immigration immediately after accession. Yet, even after the end of the transitional period there were no major immigration movements from these two countries to the rest of the EU.

The experience from previous accessions suggested low levels of migration after accession. Nonetheless, even in the case of Spain and Portugal, income differentials were small compared to the income differentials between the EU and the A8 countries. Moreover, contrary to the A8 countries, Spain and Portugal had well developed market economies at the time of accession. As a result, the experiences from the previous EU enlargements provided a poor guide towards possible immigration patterns after the entrance of the A8 countries to the EU.

The UK government was forced to make a decision on A8 immigration restrictions under considerable uncertainty, due to a lack of a pre-accession history of immigration movements and comparable precedents and limited information on the intentions of other key countries. Under situations of uncertainty, it is reasonable for decision makers to adopt a cautious approach, especially, if it is possible to gradually adjust the strategy later on.

Instead of following the cautious approach of imposing serious restrictions for at least the first two years, the UK decided to open labour markets to A8 workers with just a few restrictions in place, resulting in high immigration. The speed, size and, overall, unexpected nature of the large immigration flow, resulted in a strong backlash against the UK Labour government. Therefore, a potential first lesson from the EU Eastern Europe enlargement is the importance of gradual approaches in changing immigration policy.


Different types of migrants, different types of issues
The immigration to the UK that resulted from the A8 countries entrance to the EU was different from previous immigrations to the UK. A defining characteristic of the A8 migrants in the UK are their high employment rates. Until 2004 those born in the A8 countries working in the UK had employment rates well below those of the UK-born and of those born in the other old EU member states. However, from the second quarter of 2004 onwards (i.e. after accession), the A8 population in the UK becomes the leading group in terms of employment rates. The employment rates for this group (first quarter 2011) stand close to 82 percent (compared to 67 percent for all non-UK born and 71 percent for the UK-born). These figures suggest that in terms of labour market dynamics, A8 workers migrating to the UK from 2004 onwards are different from previous A8 migrants, from the whole migrant population of the UK and from the UK-born.

Employment rates are not the only difference between A8 workers and other migrants. The geographical dispersion of A8 migrants is very high in comparison to other migrants that tend to concentrate in London and other urban centres. A8 migrants are also relatively young and well educated, although they tend to find work in low paying jobs. Their lack of fluency in English is likely to explain the low earnings return to their education.

As a result, the UK had not only to deal with a large immigration flow, but with immigration of a different type. While some previous migrant groups in the UK were characterized by low employment rates and low educational levels, this was not the case of the average A8 worker. These workers were clearly looking for job opportunities and these opportunities are often found outside the locations were migrants typically concentrate and in which labour markets are extremely crowded.

A consequence of this geographic dispersion is that regions in which international immigration was historically very low, experience a significant relative increase in its migrant population. This resulted in a demand for “migrant-related” services, such as translation services in medical facilities and school teachers with specialization in teaching children whose first language is not English, for which many local governments were not prepared.

Accordingly, the second important lesson from A8 migration to the UK is that policy planning with regards to migration is not just about the absolute number of migrants coming into the country, but also about migrants’ characteristics and their potential geographic distribution.


Catching up: the slow process of macroeconomic convergence
In the second quarter of 2009 there were an estimated 518,000 A8 workers in employment in the UK. Yet, the number of A8 workers in employment in the UK decreased consecutively during the last two quarters of 2009, reaching 478,000 by the fourth quarter. However, A8 immigration has picked up again and the number of A8 workers on employment in the UK stands at around 629,000 (first quarter of 2011).

Immigration flows may fluctuate, but if there is a permanent income gap between the countries and free movement of workers, immigration is likely to continue in the long-term. The income per capita of the A8 countries is still well below UK levels, and it is likely to stay there for the foreseeable future. Therefore, the last lesson from the EU enlargement is that income gaps can take a very long time to close even with free trade and free mobility of labour. As such a long-term perspective of the possible scenarios must be adopted while making decisions on immigration policy. Immigration policy decisions are hard to reverse and macroeconomic convergence can be very slow. Only time will tell how long it will take for the economic gap between the UK and the A8 countries to disappear (if it ever does!).