Background

1. Mobility of labour and services across the Baltic Sea after EU enlargement: Nordic differences and commonalitiesLine Eldring, Fafo Reykjavik 29.9.2005

2. Background • 1 May 2004: Estonia, Latvia, Lituania, Poland, Tsjekkia, Slovakia, Hungary and Slovenia new members of EU • Historical event– final farewell to the iron curtain • Huge potenial of labour migration: 75 million people included in the internal market • 10-20 percent of Nordic costs • Vulnerable spots in the Nordic labour market regulations have been exposed • ”Old problems”, as in construction sector, have been revitalised

3. Nordic working group follows the EU enlargement • Appointed by the Nordic Council of Ministers, Fafo is coordinating the group • The group is following the development in the Nordic labour markets after the EU enlargement • First year report published 15th September 2005 • The group will continue its work 2005-2006

4. Hansaforbundet around year 1370 Kilde: Norsk innvandringshistorie, Knut Kjelstadli (red.), Pax Forlag 2003

5. Svenske rallare i sving på Bergensbanen Kilde: Norsk innvandringshistorie, Knut Kjelstadli (red.), Pax Forlag 2003

6. Transitional regimes on individual labour migr ation • Restrictive access: EU-8 citizens only have the same rights as third country citizens, and get access to the labour market if there is no available labour supply nationally or from EU-15; Belgium, Finland, France, Germany, Greece, Iceland, Luxembourg, Spain. • Restrictive access with quotas: Same rules as above, but with quotas for citizens from EU-8; Austria, Italy, The Netherlands, Portugal. • General access on conditions: Regimes which give general access to the labour market if certain national conditions (as regard wages, full time employment) are fulfilled, or/and with some restrictions on access to welfare benefits for citizens from EU-8; Denmark, Norway (and with respect to social rights, Great Britain, Ireland) • Free movement (no transitional regime); Sweden (Great Britain, Ireland)

7. Nordic transitional regimes • Concerns about possible flows of labour migrants, social dumping and welfare tourism • National disputes on transitional regimes resulted in different regimes: • Sweden – free movement from day 1 • Finland and Iceland – continuation of earlier strict regimes, free movement for some groups in Finland • Denmark and Norway – job seeking opportunities for 6 months, work permit if full time job pain in accordance with “national standards” • No possibility for transitional regulations on the free movement of services

8. Labour supply: Employers’ new strategic choices (1) Hiring individual job-seekers looking for employment in a Nordic firm; (2) Hiring temporary service providers or contractors with posted workers; (3) Hiring employees from temporary work agencies; (4) Hiring independent single-person firms offering temporary services; (5) Direct foreign investment, outsourcing and leasing production in EU-8 Huge gaps in labour costs; 10-15 % in EU-8 compared to Nordic level.

9. Skilled worker 6 Latvians for the price of 1 Norwegian? (Source: Mercer 2005) Source: Mercer 2005 – Report on international geographic salary differentials

11. What has happened the first year: Individual labour migration • Surprising Nordic differences: • Iceland – ca 1 000 per July-05 • Sweden – ’free flow’, but few registered individual labour migrants • Norway ca 37,000permits per July-05 • Denmark, Finland, Iceland, Sweden ca 14,000 • Norway – over 60% of Nordic permits for work over 3 months • UK 176,000 march05, Irland ca 60,000 July-05 • The transitional regimes have very different effects, and only cover a small part of the whole picture

12. Issued work permits to individual labour migrants from EU-8 to Nordic countries, in 2003, 2004 and 2005

13. Number of new permits to EU-8 citizens from May 2004 to March 2005 (Source: UDI)

14. Individual migration characteristics • Mostly male ”guest workers” on short term basis • Typical unskilled, low paid jobs in sectors with huge demand for manpower • No signs of increased use of welfare benefits or imbalances in the labour markets • Reports on a growing informal/black labour market – difficult for East-Europeans to get employment on regular terms? What will happen when the Nordic transitional regulations expire – continuity or shift in migration patterns?

15. New permits May 2004 to March 2005 to Nordic countries, by home country (Source: UDI)

16. What has happened the first year: Mobility of services • No transitional regimes for free movement of services (except Austria & Germany) • Guestimates on numbers of posted workers fom EU-8; • Denmark: 6 000 (June 2005) • Finland: 10 000 (in 2004) • Iceland: Increasing (Kàrahnjùkar) • Norway: 2 170 registered in 2004, 4 252 Jan-Aug 2005 (real numbers much higher) • Production growth in construction 7,5 %, employment growth only 0,9% • Sweden: Increasing (no numbers) • Proposed EU-directive on serrvice mobility has increased tensions concerning posted workers

17. Regulatory mechanisms on wages for posted workers • Discrepant regulatory regimes in the Nordic countries • Different ways of implementing the Posting of Workers Directive 96/71 • No statutory minimum wages • Iceland& Finland: Tradition for generally binding collective agreements (erga omnes, high union density • Denmark & Sweden: Social partners control wage settings, high union density, unions have rights to launch industrial actions and blockades to secure collective agreements with foreign companies • Norway: No tradition for generally binding collective agreements or to force foreign companies into agreements. Lower union density than other Nordic countries

18. Free mobility of services and posted workers – lack of reliable statistics, but indications of growth in all the Nordic countries • Finland and Denmark – estimated a minimum of 2-3 the number of ordinary individual labour migrants • Strategic adjustments – ”post box companies” and selfemployment • Germany and Austria – transitional arrangements for services -> growtht in selfemployment • -> What do we know about the development in Iceland? Norge - registrerte arbeidstakere i utenlandske oppdragsbedrifter etter hjemland, 2003, 2004, 1kvartal 2005 (Kilde: SFU)

19. Bruk av arbeidskraft fra nye EU-land

20. Unpredictable consequenses of growing mobility of services • Capacity effects or subsitution effects – lower purchasing prices, increased production and profits for contracting companies – tougher reality for sub-contractors and their employees • Increased competition among companies and employment forms in the national labour markets – loosers and winners on both sides • Increased pressure on costs, more outsourcing, atypical employment and increased division between core and periphery in the labour market • Social dumping threatens labour standards – and increase existing problems with recruitment and skills development in exposed sectors? • Larger playground for non-serious business and crime?

21. New challenges for goverments and social partners • Statutory minimum wages? • Generally binding collective agreements – a general tool for specific situations? • The Swedish model – what happens after Waxholm? • Europeisation or diversification among the Nordic countries? • Other contested measures; – public procurement regulations (EU-standards/ILO-convention 94), control with company wages, contractor’s responsibilities, regulations on labour hire etc) External liberalisation leads to gradually deregulation or to strengthening of internal control- and regulation mechanisms?

22. How can we increase labour migration and at the same time avoid damaging competition in the labour market? Dilemma: If governments and social partners want increased ordinary labour migration, they could have to choose between liberalising acsess for individual labour migrants or strenghten the conditions for using posted workers…

23. Nordic working life in an extended Europe – long term lines and short term questions • Transitional regimes – what happens after 1 May 2006 – Nordic co-ordination? • How can the goals towards increased mobility of services, national non-discrimination of employees – and an including and developing working life be combined? • An ageing Europa needs more manpower in the long term – can individual nations’ stategies give unintended collective results? • A need for more co-ordinated policy on labour migration in Europe – what is the strategy of the Nordic countries?

24. Conclusions so far… • No labour market shocks in the Nordic countries after the EU enlargement, but huge variations among the countries on inflow of labour migrants • So far, no signs of ”social tourism” • The diverse Nordic transitional regimes have probably contributed to different patterns of migration • Differences in regulatory frameworks, taxation and labour costs between different forms of employment creates significant substitions effects • Wide gaps between strict controlled individual labour migration and free flow of service related labour – control problems, social dumping? • Need for improved coordination and exchange of knowledge across countries

25. More information: • Nordisk Ministerråd Report: http://www.norden.org/pub/sk/showpub.asp?pubnr=2005:566 • Fafo Østforum: http://www.fafo.no/Oestforum