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ResearchFebruary 21, 2014

More labor mobility would alleviate asymmetric shocks in Europe

Free mobility of labor, one of the pillars of the European Union, has experienced a decrease in popularity in several European countries. Indeed, Swiss citizens in a very recent referendum voted to impose quotas on immigrants from EU countries. Especially migration from recent Central and Eastern European accession countries has raised concerns in many European countries about increasing pressure in labor markets and social security systems.

In their IZA Discussion Paper “Migration as an Adjustment Mechanism in the Crisis? A Comparison of Europe and the United States” Julia Jauer, Thomas Liebig, John P. Martin, and Patrick A. Puhani show that free labor mobility contributed to alleviating asymmetric labor market shocks in Europe, especially during the financial crisis since 2008. The data for almost 300 European and more than 500 American regions are drawn from the European Labor Force Survey and the American Community Survey.

The authors find that recent migration flows have reacted quite significantly to the EU enlargements in 2004 and 2007 and to changes in labor market conditions. Indeed, in contrast to the pre-crisis situation and the findings of previous empirical studies, there is tentative evidence that the migration response to the crisis has been considerable in Europe. This contrasts with the experience of the United States, where the crisis and subsequent sluggish recovery were not accompanied by greater interregional labor mobility in reaction to labor market shocks.

The estimates suggest that, if all measured population changes in Europe’s regions were due to migration for employment purposes – i.e. an upper-bound estimate – up to about a quarter of the asymmetric labor market shock would be absorbed by migration within a year.

In Europe’s free mobility area, it is often overlooked that migrants exhibit higher employment rates than non-mobile Europeans. This is especially true for migrants with EU-10 (central European recent EU accession countries) citizenship. Citizens from southern Europe moving to another Eurozone country, however, have relatively low employment rates. For the Eurozone to function well as a common currency area, raising the contribution of Eurozone citizens to labor market adjustment requires a continued move towards freer movement of labor within Europe.

IZA Discussion Paper No. 7921 Migration as an Adjustment Mechanism in the Crisis? A Comparison of Europe and the United States Julia Jauer, Thomas Liebig, John P. Martin, Patrick A. Puhani

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  • Europe
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