European
European Commission report says free movement of workers since the 2004 enlargement had a positive impact ; 2.8% of the Irish workforce non-EU nationals
By Finfacts Team
Feb 8, 2006, 11:20

A European Commission report published today says that workers’ mobility from the EU Member States in Central and Eastern Europe to EU15 has had mostly positive effects and has been in most countries quantitatively less important than foreseen.

Workers from EU10 helped to relieve labour market shortages and contributed to better economic performance in Europe. Countries that have not applied restrictions after May 2004 (UK, Ireland and Sweden) have experienced high economic growth, a drop of unemployment and a rise of employment. As to the 12 EU countries using transitional arrangements, where workers managed to obtain access legally, this has contributed to a smooth integration into the labour market. However, evidence suggests that some of these countries may also have faced undesirable side-effects, such as higher levels of undeclared work and bogus self-employed work. For the EU as a whole, flows of workers have been rather limited.

The report's statistics, submitted by the EU member states themselves, show most countries having seen lower than expected labour flows from Central and Eastern Europe. There was no evidence of a surge in either numbers of workers or welfare expenditure following enlargement, compared to the previous two years. New Member State (EU10) nationals represented less than 1% of the working age population in all countries except Austria (1,4% in 2005) and Ireland (3.8 % in 2005). Ireland has seen relatively the largest inflow of workers. This contributed to its very good economic performance. EU10 workers alleviated skills bottlenecks, and had a much lower percentage of unskilled workers than the national equivalent according to the 'Report on the Functioning of Transitional Arrangements'.

While fully acknowledging Member States’ right to decide on the further use of transitional arrangements, Vladimír Špidla, EU Commissioner for Employment, Social Affairs and Equal Opportunities, nevertheless, recommends Member States to carefully consider whether the continuation of transitional arrangements is needed, in the light of their labour market development and the evidence of this report: 'Free movement of workers is one of the four fundamental freedoms of the EU. This report clearly shows that the movement of free workers has not had disruptive effects on EU15 labour market. Quite the contrary individual countries and Europe as a whole has benefited from it,' he said.

National restrictions have had little direct effect on controlling workers’ movement, the report indicates.

'Concerning transitional arrangements, the evidence shows that there is no direct link between the magnitude of mobility flows from EU10 Member States and the transitional arrangements in place.

Ultimately, mobility flows are driven by factors related to supply and demand conditions,' it states. Many of the work permits which were issued were for short term or seasonal work.

According to the Accession Treaty signed on 16 April 2003, Member States have until 30 April 2006 to decide whether to lift national restrictions on workers' free movement in the EU. These were introduced in May 2004 by all old (EU 15) Member States (except Ireland, Sweden and the UK) on workers from the eight new EU Central and Eastern European countries. Reciprocal restrictions on labour flows in the opposite direction were imposed by three new Member States: Hungary, Poland and Slovenia (see MEMO/06/64 for full country details).

The Commission’s report, as required by the Accession Treaty, highlights statistics and experiences of labour flows from new to old EU Member States since enlargement in May 2004. It is designed to provide Member States with a factual basis when deciding on whether to continue with national labour markets restrictions on workers' movement.

Download report.

FAQ on the Commission's free movement of workers report

What does the report contain?

The Commission's report contains information on any administrative, legal or technical issues observed in the imposing the restrictions and will also has a statistical element, showing labour flow information.

Why has it been published?

The report is required under the 2003 Accession Treaty, which formalised the EU's enlargement by 10 new Members.

Can it influence whether EU countries decide to maintain restrictions?

The individual EU-15 Member States decide whether to continue applying restrictions for the second phase of the transitional arrangements. This report is designed to give the state of play of the migration flows across the EU25 countries. It looks at the consequences of both imposing and not imposing restrictions, is based on objective information and draws conclusions from the information supplied by the Member States.

When does the decision on whether to keep restrictions have to be made?

Member States have until April 30 2006 to communicate to the Commission whether they wish to retain restrictions. If a Member States chooses not to communicate any proposed restrictions before April 30, 2006, Community law comes into force for that Member State (in other words, no restrictions apply).

How long can restrictions remain in place?

If a State wishes to maintain restrictions on access to its labour market, this will apply for the period from May 2006 to 30 April 2009. Thereafter, they could be renewed for a further, final period of two years, but only if there is evidence that labour flows had disrupted (or were threatening to disrupt) a country's labour market. For more information, see the 'Legal Framework' sheet below.

Why does the Commission consider it important that Member States drop the transitional arrangements restrictions?

Freedom of movement is a right for every EU worker and is one of the four fundamental freedoms of the European Union. Also, at the signing of the Accession Treaty, all EU-15 Member States undertook to move as quickly as possible towards the full application of the acquis communautaire (EU law) on free movement of workers.

Who imposed restrictions during the 1 May 2004-30 April 2006 period?

Sweden and Ireland decided not to apply any restrictions on access to their labour market by workers from the Member States that joined the EU on 1 May 2004.

The UK decided not to apply any ex-ante restrictions on access to its labour market but adopted a Worker's Registration Scheme.

Under this scheme workers from 8 of the Member States that joined the EU (all except Cyprus and Malta) must register with the UK Home Office within 30 days of starting their employment in the UK.

The remaining EU-15 Member States informed the Commission that they would for the time being, maintain their work permit system, albeit with some modifications.

Denmark decided to issue work permits to nationals from 8 of the Member States that joined the EU on 1 May 2004, on condition that their work is full-time and governed by a collective labour agreement. There is no need to satisfy a labour market test, but the applicants must also be granted a residence permit before starting their employment in Denmark.

The Netherlands adopted a two-fold procedure. A traditional full work-permit system, including a labour market test, applies for most sectors, but a number of sectors and occupations have been exempted from this regular procedure. If the exemption applies, a work permit can be granted within two weeks without the need for a labour market test. The list of exempted sectors and occupations is reviewed on a three-monthly basis.

France decided to maintain a work permit system but not for example, for work in the research sector.

Belgium, Finland, Greece, Luxembourg and Spain also decided to maintain a traditional work permit system.

Italy decided to keep its work permit system but has issued a special entry quota for workers from the 8 Member States in question.

Legislation in Portugal also provides for a quota system.

Germany and Austria maintained a work permit system, albeit with some modifications. Both countries have also notified the Commission that they are making use of the provision set out in the Accession Treaty which allows them to apply restrictions for cross-border services in certain sensitive sectors, involving the temporary movement of workers.

As for the Member States that joined the EU on 1 May 2004, only Poland, Slovenia and Hungary apply reciprocity vis-ŕ-vis EU-15 Member States that are applying restrictions.

Legal Framework of the Transitional Arrangements ( 1 May 2004- 30 April 2011)

The Treaty of Accession of 2003 sets out transitional arrangements for free movement of persons in the enlarged EU. As a result of these provisions, the application of a part of the community law on free movement of workers across the EU-25 may be deferred for a period of maximum 7 years.

The 2003 Accession Treaty divides the transitional period in three distinct phases, according to the "2-plus 3-plus 2" formula. Different conditions apply during each of these phases.

The first phase of the transitional arrangements started on 1 May 2004 and will end on 30 April 2006. For this first phase the Accession Treaty provides that in order to regulate access to their labour market EU-15 Member States will apply national measures or those resulting from bilateral agreements. Such measures can be applied by EU-15 Member States to workers from all of the Member States that joined the EU on 1 May 2004, except for workers from Cyprus or Malta.

The Accession Treaty stipulates that before the end of this first phase, which is before the 1^st of May 2006, the following actions must be undertaken: (a) the Commission must submit a report to the Council on the functioning of the transitional arrangements; (b) the Council must review the functioning of the transitional arrangements and (c) on completion of this review, the EU-15 Member States shall notify the Commission as to their intentions for the next period, which starts on 1 May 2006 and ends on 30 April 2009. The Accession Treaty specifies that in the absence of notification, Community law on free movement of workers will apply.

As for the second phase of the transitional arrangements, the Accession Treaty states that EU-15 Member States may continue placing restrictions on access to their labour market until the end of the five year period following accession, which is until 30 April 2009. Consequently, the Accession Treaty assumes that in the normal course of events, Community law on free movement of workers should apply for the EU-25 Member States from 1 May 2009 onwards. Nevertheless, the Accession Treaty allows an EU-15 Member State to continue with restrictions in case of serious disturbances (or a threat thereof) of its labour market, in which case restrictions can be applied for the final phase, which is the last two years of the transitional period (from 1 May 2009 to 30 April 2011).

As for the Member States that joined the EU on 1 May 2004, the 2003 Accession Treaty makes a distinction between their relations with the EU-15 Member States on the one hand, and their relations with other Member States that joined the EU on the other. As for their relations which EU-15 Member States, the Accession Treaty allows for reciprocal restrictions vis-ŕ-vis EU-15 Member States applying restrictions. By contrast, the Accession Treaty provides that in principle, Member States that joined the EU on 1 May 2004 should among themselves apply Community law on free movement of workers from the 1^st of May 2004 onwards. There are no transitional arrangements for workers from Cyprus. Malta is allowed to invoke a safeguard clause and keep its work permit system for monitoring purposes.