Documents considered by the Committee on 21 July 2015 - European Scrutiny Contents


38 Free movement of workers from Croatia

Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; further information requested; drawn to the attention of the Northern Ireland Affairs, Scottish Affairs and Welsh Affairs Committees
Document detailsCommission Report on the Functioning of the Transitional Arrangements on Free Movement of Workers from Croatia (First phase: 1 July 2013 to 30 June 2015)
Legal base
Department

Document numbers

Home Office

(36922), 9653/15 + ADD 1, COM(15) 233

Summary and Committee's conclusions

38.1 Croatia became a member of the European Union on 1 July 2013. The Act setting out the conditions for Croatia's accession to the EU includes a number of transitional measures which allow the application of EU rules in certain areas to be phased in over a period of years.[ 297] One of the areas concerns the free movement of workers. Transitional arrangements allow Member States to restrict access to their labour markets for up to seven years from the date of Croatia's accession to the EU. The Commission Report reviews the operation of these transitional arrangements during the first two years of Croatia's membership of the EU. Member States wishing to maintain restrictions on labour market access beyond this initial two-year period are required to notify the Commission of their intention to do so by 30 June 2015.

38.2 The Commission Report concludes that future potential flows of Croatian workers to other EU Member States are likely to be small and, even in the main destination countries, are unlikely to lead to labour market disturbances. It says that restrictions on labour market access are one of a number of factors influencing labour mobility — employment opportunities, and historical, linguistic and cultural ties are also important. In any event, labour market restrictions in some Member States may have a limited effect as they do not apply to those who are self-employed or are "posted" to another Member State to provide services. The age, educational profile and high employment rate of Croatian workers suggest that they are likely to make a positive economic contribution.

38.3 The Minister for Immigration (James Brokenshire) explains that the labour market restrictions in place in the UK consist of a worker authorisation requirement which limits the employment of Croatian nationals to skilled work. He confirms that the Government will decide whether or not to extend these restrictions for a further three year period, to 30 June 2018, before the deadline of 30 June 2015, but does not indicate what the Government's decision will be.

38.4 The deadline for notifying the Commission of any remaining restrictions on access to the UK labour market has expired. We ask the Minister whether the Government has decided to extend the existing restrictions for a further three-year period.

38.5 We note that the Government has consulted the Devolved Administrations on the Commission Report. We would welcome further information on the views they have expressed on the Government's decision to lift or maintain current labour market restrictions for Croatian nationals.

38.6 Pending the Minister's reply, the Commission Report remains under scrutiny. We draw it to the attention of the Northern Ireland Affairs, Scottish Affairs and Welsh Affairs Committees.

Full details of the documents: Commission Report to the Council on the Functioning of the Transitional Arrangements on Free Movement of Workers from Croatia (First phase: 1 July 2013-30 June 2015): (36922), 9653/15 + ADD 1, COM(15) 233.

Background

38.7 Detailed provisions on the transitional arrangements governing the free movement of workers following Croatia's accession to the EU on 1 July 2013 are contained in Annex V of the Act of Accession. The seven-year transitional period during which Member States may impose restrictions on access to their labour markets is divided into three phases:

·  During the first phase, from 1 July 2013 to 30 June 2015, access to the labour market is governed by national measures in each Member State.

·  During the second phase, from 1 July 2015 to 30 June 2018, Member States may continue to apply national measures to regulate access to their labour markets, but are required to notify the Commission of their intention to do so before the end of the first phase. Restrictions on labour market access can be lifted at any time during this phase.

·  During the third phase, from 1 July 2018 to 30 June 2020, Member States may only apply national measures to regulate access to their labour markets if they notify the Commission that the lifting of these measures would cause, or create the risk of, "serious disturbances" of their labour markets.

38.8 All transitional arrangements end on 30 June 2020. For those Member States choosing to apply EU free movement rules during the seven-year transitional period, there is a safeguard procedure which allows the rules to be suspended if there is evidence of labour market disturbances "which could seriously threaten the standard of living or level of employment in a given region or occupation".[ 298] For those maintaining national restrictions, there are provisions to protect individuals already legally working in a Member State at the date of Croatia's accession to the EU, or admitted subsequently, and who have been in employment for an uninterrupted period of at least 12 months. In such cases, the workers concerned continue to enjoy a right of access to the labour market of the Member State in which they are employed, but not to the labour markets of other Member States.

38.9 Croatia is entitled to apply equivalent reciprocal measures restricting access to its own labour market until the end of the seven-year transitional period (or for a shorter period if restrictions on labour market access in other Member States are lifted sooner).

The Commission Report

38.10 The Commission Report is intended to inform the Council's review of the functioning of the transitional provisions on the free movement of workers which must be completed before the end of the first phase.[ 299] It describes the transitional arrangements currently in place, the actual and potential flow of Croatian workers to other Member States, and their expected impact on the economy and the labour market of the destination countries.

MEMBER STATES APPLYING RESTRICTIONS DURING THE FIRST PHASE

38.11 The Report notes that thirteen Member States — including the UK — are applying restrictions on access to their labour markets during the first phase (these generally take the form of a work permit requirement) and that Croatia has likewise introduced reciprocal restrictions. The Commission makes clear, however, that the restrictions do not affect the "fundamental right" of EU citizens to move and reside freely within the EU under Article 21 of the Treaty on the Functioning of the European Union (TFEU), nor do they apply to self-employed workers or those providing services within the EU.[ 300] Similarly, there are no transitional arrangements limiting, for a temporary period, the application of EU rules on the coordination of social security schemes.

LABOUR MOBILITY BETWEEN CROATIA AND OTHER MEMBER STATES

38.12 Croatia has a small population (4.2 million in 2014) representing only 0.8% of the total EU population. Whilst the outflow of its own nationals to other Member States is significant for Croatia, representing around 10% of its working-age population and 2.8% of all mobile EU citizens of working age (15-64), most of these outward flows pre-date Croatia's accession by ten years or more and are concentrated in Germany (68% of mobile Croatians), Austria (17%), Italy (5%), the UK (3%) and Slovenia (2%).

38.13 Since acceding to the EU on 1 July 2013, the Commission Report indicates that there is some evidence of increasing mobility from Croatia, particularly to Member States which already host a large number of Croatians (Austria, Germany, Italy and Slovenia), despite the fact that countries have maintained national restrictions.[ 301] Inflows of Croatian nationals to the UK remain limited. Amongst Member States that have opened their labour markets, inflows of Croatian workers "remain limited in both absolute and relative terms".[ 302]

38.14 Whilst there are, as yet, no comprehensive data on post-accession migratory flows, the Commission suggests that there has not, so far, been "any major diversion of flows" as a result of differences in access to the labour market across EU Member States. Those leaving Croatia since 1 July 2013 have continued to move to traditional destination countries. Comparing the flows of migrants to those generated by the previous enlargements in 2004 and 2007, the Commission concludes:

    "The scale of mobility after Croatia's accession has been small in absolute terms and in relation to the population of the receiving countries."[ 303]

38.15 The Commission expects the outflow of workers from Croatia to other Member States to remain "relatively limited" as a percentage of the EU labour force and of EU migrant labour in the host Member States. In its analysis of the push and pull factors which shape labour migration, the Commission notes that Croatia has the third lowest GDP per capita in the EU, the third highest unemployment and youth unemployment rates, and a larger than average proportion of people at risk of poverty or social exclusion. However, per capita GDP and gross household disposable income are increasing, as is the employment rate, and wages were the second highest amongst central and eastern European Member States in 2013.

38.16 The factors most likely to influence future mobility are the availability of jobs, higher wages and better working conditions, but geographical proximity, cultural and historical links and existing "networks" of compatriots in other Member States are also likely to play a part in the choice of destination country. Drawing on an analysis of these factors, as well as survey evidence, the Commission suggests that "post-accession mobility from Croatia is likely to be small, whatever the legal regime on access to work". It cites forecasts indicating that net migration from Croatia to the other 27 Member States ("EU-27") during the period 2013-19 will be within a range of +166,000 (if existing labour market restrictions are maintained) and +217,000 (if all Member States open their labour markets on 1 July 2015), constituting between 0.03% and 0.04% of the total EU-27 population. The Commission anticipates that Germany, Austria and Italy are likely to receive more than 80% of these net flows, regardless of whether they decide to lift or maintain restrictions on labour market access.

THE ECONOMIC AND LABOUR MARKET IMPACT OF MIGRATION

38.17 The Commission observes that the impact of migration in the main destination countries depends, to a large extent, on the characteristics of those who have recently migrated. In the case of Croatia, they tend to be "predominantly young" — 62% of recent movers were aged between 15 and 34 — relatively well-educated and economically productive, with a "higher employment and lower inactivity rate than average".[ 304] These factors point to "a potential positive impact" for the destination countries, although the Commission acknowledges that it is too soon to estimate the actual economic, labour market and fiscal impacts of mobility from Croatia since 1 July 2013. It suggests that most studies of earlier waves of migration have found, however, that labour migration within the EU has a positive economic and fiscal impact, and that the impact on wages and unemployment (at least in the long-run) in the host Member States is marginal.

38.18 Turning to the impact on Croatia, the Commission observes that the outward flow of predominantly young and well-educated people could worsen both its demographic profile and growth prospects. It suggests, however, that "bottlenecks" and skills shortages within particular sectors can be attributed to inadequate planning and "a lack of technical and workplace competencies" rather than emigration. The Commission underlines the importance of labour mobility as "an economic adjustment mechanism", highlights "the potential benefits of people being employed in another Member State compared to remaining unemployed at home", and notes that migration is often "circular", enabling migrants to return home with valuable experience and skills.[ 305] In addition, remittances are estimated to have contributed 1.6% of Croatia's GDP in 2013, to have "helped decrease the level, depth and severity of poverty in Croatia", and to have boosted savings and investment and contributed to stabilising the economy.[ 306]

The Minister's Explanatory Memorandum of 24 June 2015

38.19 The Minister notes that the Commission Report "is purely informative and does not have any binding legal effects".[ 307]

38.20 He explains that the national measures applicable in the UK during the first phase of the seven-year transitional period are contained in the Accession of Croatia (Immigration and Worker Authorisation) Regulations 2013 and subsequent amending Regulations, and consist of a worker authorisation requirement. He continues:

    "Their effect is to restrict Croatian nationals' employment to skilled work, which may be subject to a labour market test, for the first 12 months of their employment in the UK."[ 308]

38.21 The Minister says that the Government will decide whether or not to extend these restrictions on labour market access for a further three year period, to 30 June 2018, before the deadline of 30 June 2015. He does not indicate what the Government's decision will be.

Previous Committee Reports

None.



297   See Article 18 and Annex V of the Act of Accession.  Back

298   The decision to suspend the application of EU free movement rules is taken by the Commission, but may be amended or annulled at the request of a Member State by the Council, acting by a qualified majority.  Back

299   See para 2(3) of Annex V to Croatia's Act of Accession.  Back

300   The right to reside is already subject to various limitations and conditions set out in EU secondary legislation. Croatia's Act of Accession also includes some limited transitional arrangements restricting the posting of workers from companies based in Croatia to certain service sectors in Austria and Germany. Back

301   The increase is more marked amongst those who are self-employed and to whom the labour market restrictions do not apply.  Back

302   See p.6 of the Commission Report.  Back

303   See p.6 of the Commission Report.  Back

304   See p. 8 of the Commission report.  Back

305   See p.11 of the Commission report.  Back

306   Ibid.  Back

307   See para 1 of the Minister's Explanatory Memorandum.  Back

308   See para 15 of the Minister's Explanatory Memorandum. Back


 
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Prepared 30 July 2015