The Economics of European Integration
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1 The Economics of European Integration
2 Chapter 8 Economic 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 14 Unemployment rates (%) Big 3 UK Small 7 New 4 USA
8 Labour Market Rigidities: the Simplest Interpretation Flexible wages deliver full employment
9 Labour Market Rigidities: the Simplest Interpretation Rigid wages result in unemployment Flexible wages deliver 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 Real wage w Collective negotiations lead to higher wages B C S c S Individual supply w A D L L L Employment
12 The Standard Response: Collective Negotiations Real wage w Collective negotiations lead to higher wages and to unemployment B C S c S Individual supply w A D L L L Employment
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 markets on 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) Country Weekly private sector earnings Labour productivity Bulgaria 5 32 Croatia Czech Republic Estonia Hungary Latvia 7 46 Lithuania Poland Romania 7 36 Slovakia Slovenia 33 77
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
Chapter 8 Economic Integration, Labour Markets and Migration
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