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Economic Integration: Labour Market Dynamics & Migration Controversies

Explore the intricate relationship between economic integration, labor markets, migration, and the controversies that arise. Understand the importance of labor costs, mobility, and the impact of competitiveness on productivity. Delve into the complexities of wage rigidity, collective negotiations, and social dumping. Gain insights into how economic integration affects winners and losers in the labor market and the necessity for safety nets. Examine migration frameworks, including gains and losses for home and foreign workers. This chapter sheds light on why labor markets matter in the context of European integration.

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Economic Integration: Labour Market Dynamics & Migration Controversies

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  1. The Economics of European Integration

  2. Chapter 8Economic Integration, Labour Markets and Migration

  3. Why Labour Markets Matter • Labour costs: key for international competitiveness • Half of all production costs • Set nationally • Labour markets are indirectly in competition via goods markets • Labour mobility • One aspect of this competition • Also helps know each other

  4. Controversies Abound • Economic logic sometimes clashes with social logic • Effectiveness sometimes clashes with equity • Solidarity clashes with individualism • Acquired advantages under threat

  5. Plan • Unemployment • Economic integration and the Labour markets • Migration

  6. Unemployment

  7. Some Facts Unemployment: a symptom

  8. Labour Market Rigidities: the Simplest Interpretation Flexible wagesdeliver “full employment”

  9. Labour Market Rigidities: the Simplest Interpretation Rigid wages result in unemployment Flexible wagesdeliver “full employment”

  10. Why wage rigidity? • Labour markets are different • Domination by one side • Information asymmetries • Losing a job is a major vulnerability • Human capital and special skills • Social imperatives • Fairness • Need for income stability • Need for job security

  11. The Standard Response:Collective Negotiations Collective negotiations lead to higher wages Individual supply

  12. The Standard Response:Collective Negotiations Collective negotiations lead to higher wages and to unemployment Individual supply

  13. Economic Integration and Labour Markets A two-way relationship

  14. Effects of economic integration on the labour markets • More competition on the goods market means that labour costs are a strategic issue • Goods market integration indirectly leads to labour market integration. • It also calls for faster reaction to shocks: flexibility is at a premium

  15. Effects of the labour marketson economic integration • Economic integration creates winners and losers • Willingness to undertake economic integration depends on the winners readiness to compensate the losers • This calls for safety nets that make labour markets more rigid and less able to face competition

  16. The case of social dumping Wages and productivity in 2005 (Germany = 100)

  17. Migration Western fears of Eastern Hordes

  18. Immigration: Facts

  19. Immigration: Facts (cont.)

  20. Migration: The Simplest Framework Initial situation

  21. Migration: The Simplest Framework Post-migration situation

  22. Migration: The Simplest Framework Loss of home workers

  23. Migration: The Simplest Framework Gain of home capital-owners

  24. Migration: The Simplest Framework Loss of foreign capital-owners

  25. Migration: The Simplest Framework Gain of foreign-workers staying abroad

  26. Migration: The Simplest Framework Gain of migrant workers Gain of foreign-workers staying abroad

  27. Migration: The Simplest Framework Home gains Foreign gains

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