Select Committee on European Union Fifteenth Report


PART 2: THE LEVEL OF GEOGRAPHICAL MOBILITY IN THE EU

Introduction

THE COMMISSION'S COMMUNICATION

11. The Commission's Communication is based on the premise that the level of geographical mobility in the EU is low—both within and between Member States. "Within regions and within the Member States, it is lower than within the individual states of the US. Within the EU, it is much lower across national borders than within individual member states". It is estimated that annual migration between Member States amounts to around 0.75 per cent of the resident population and perhaps only 0.4 per cent of resident EU nationals. The Commission compares this to the level of geographical mobility in the USA, where similar figures are on average six times greater: approximately 2.4 per cent of the population moves between States in the US on an annual basis. The Communication also notes that the average annual level of geographical mobility between regions within European Member States, while variable, is substantially lower than in the US, where the annual level of geographical mobility between counties within a State is about 3 per cent.

THE HIGH LEVEL TASK FORCE ON SKILLS AND MOBILITY

12. The Task Force's report proceeds in the same manner as the Commission's Communication. It compares the European statistics to the level of geographical mobility in the USA and concludes quite bluntly that "geographic mobility in the Union is too low".[2]

WHY THE ECONOMY NEEDS FLEXIBLE LABOUR MARKETS

13. The Commission is concerned that "several Member States" are "facing emerging skill shortages, across a range of sectors, occupations, and skill levels, which threaten to impede the Union's ability to maximise growth and job creation." The Commission wants to "ensure the effective economic operation of European labour markets in their basic role of matching labour supply and demand". It is argued that the comparatively low level of geographical mobility within EU Member States "constitutes a constraint on economic activity" (pp 38­39).

14. If the single market were functioning perfectly, there would be no significant disparities in economic performance. Yet, as the Institute of Directors (IoD) explains, there is always a risk of "significant disparities in economic performance and disparate unemployment rates because, for example, an external economic shock has adversely affected one Member State more than any other Member States" (p 81). Such an incident (that is, a demand that affects one region or sector more than another) is referred to as an 'asymmetric' shock. As the High Level Task Force on Skills and Mobility set up by the Commission explains, "at any one time, imbalances arise in the location of jobs and the labour available to fill those jobs, giving rise to the coexistence of regions with skill shortages at the same time as others with high unemployment" (op. cit., p 12).

15. The Confederation of British Industry (CBI) argues that geographical mobility—both within and between EU States—is "an essential part of the single market" and can "alleviate regional skill shortages and problems of regional unemployment". The CBI concurs with the view of the OECD that "geographical mobility plays an important part in labour market adjustment in the United States and that, by implication, lower geographical mobility may be an important contributing factor to unemployment problems in Europe". Referring to levels of internal mobility, the CBI uses the example of "Italy, with high levels of unemployment in the south but very low levels of unemployment in the north," and says, "one must conclude that mobility is lower than is ideal" (pp 12-13, Q 58).

GEOGRAPHICAL MOBILITY: BENEFITS TO THE ECONOMY

16. Much of the evidence received by the Committee has drawn the same conclusion from the figures: namely, that geographical mobility in the EU is not only low, but is in some sense too low. The CBI refers to the level of geographical mobility in the EU as "stubbornly low" and goes on to judge this level to be "too low" (Q 58). Monsieur Rousselot, of Eurocadres, the European Council of Professional and Managerial Staff, was quite clear in saying that the EU needs higher rates of geographical mobility both within as well as between countries, whilst counselling that "mobility is not a magic formula that will solve all the problems related to employment or to the labour market" (Q 118).

17. When focusing on internal migration, the Institute of Directors also points to the level in continental Europe being "significantly lower than in the US, Australia and Canada", although they do point out that the "UK's performance is significantly better than the [other] EU countries" in this respect (p 81).

18. Evidence also refers to the fact that both levels of internal mobility within the EU Member States and levels between Member States have tended to decline over recent decades (Task Force, op. cit., p 12; IoD, p 81; CBI, Q 69, p 14). Since migration tends to be highest for young, prime-age workers, the relative ageing of the population also points to a continuing reduction in geographical mobility.

19. When responding to the fear that some people have "of having hundreds of potentially unemployed people rushing into their countries", the Commission said that the issue of labour migration "is much more complex than that" (Q 202). Professor Schmidt, of the University of Heidelberg, was also sceptical of the perceived economic disadvantages to migration, saying, "adverse effects, if present at all, are only minor". Moreover, he considered that "almost every economist would agree that, on balance, this type of migration we have seen historically has been beneficial overall for the receiving countries" (QQ 174, 175). The CBI was forthright in saying that fears of the pressure that migrants place on the welfare state were based upon "a fallacy"; they explained that "if you have people coming in, you actually grow the sector rather than stealing jobs from the native workforce" (Q 109). The Government have recently announced that they have funded several studies on "the impact and outcomes of migration in the UK". The outcomes "are consistent with the view that migrants help ease recruitment difficulties and expand sectors, thereby increasing the productivity of the existing population."[3]

GEOGRAPHICAL MOBILITY: BENEFITS TO THE INDIVIDUAL

20. Many witnesses stressed the value of geographical mobility to the individual as well as to employers. Geographical mobility can enable individuals to enjoy a wider range of experiences and thus benefit in terms of personal development. M. Rousselot of Eurocadres felt geographical mobility was good for people "because it is an opportunity to have new experiences, personal experiences, to know other cultures, but also professional experiences" (Q 119). A number of witnesses, including the Government (Q 50), stressed that even if increased geographical mobility was considered to be desirable, it was important that it should in all cases be a voluntary decision. The need to ensure freedom in the decision whether or not to move was also stressed by the European Economic and Social Committee[4] and the European Parliament Committee of Employment and Social Affairs.[5] The Commission stressed that the philosophy behind its Action Plan would be to remove obstacles to movement "so if people want to move they can move. It is not forcing them to move, it is enabling them to move if they so wish […] we also feel that the labour markets in Europe are such that this mobility can help to meet the skills shortages and skills mismatch which we still have". The aim of the Commission "is to enable people to enjoy the freedom which is in the Treaty, which is one of the freedoms of a Single Market, and at the same time to see if by supporting elements for mobility this can help to solve this mismatch problem and the bottleneck problem" (Q 206). The Committee considers it important that those who want to move are not impeded from doing so by barriers.

21. Nonetheless, in the Government's opinion, "a lot of people simply are not interested in moving. They like being where they feel at home, where their families live, where they have all their infrastructure surrounding them, and where they feel comfortable." (Q 2) Yet, as the Commission is aware, "people may not have access to a local labour market, but may nevertheless not wish to move."[6] The Committee is therefore also concerned about those who, in the Task Force's terms, move without having "a 'real choice' between mobility and staying put, as there are insufficient job opportunities in the region of origin" (op. cit., p 11).

CONCLUSION

22. We conclude that it is important to increase choice, not just by removing barriers to geographical mobility, but by creating jobs in the less-developed areas of the Union, for example through regional regeneration schemes. Efforts to increase occupational mobility (see Part 4, below) should also be targeted at the less-advanced regions. However, if, as the Task Force states, people have a "natural reticence to move" (op. cit., p 13), then this should be respected.

23. The Committee recognises that there may be many personal benefits from geographical mobility, and considers that the aim should be to provide a framework within which those wishing to move could do so easily and not to increase geographical mobility for its own sake.

24. It is our opinion that to infer from the figures presented that the level of geographical mobility in the European Union is currently too low requires three assumptions: first, that geographical mobility can be an important factor in increasing labour market flexibility; secondly, that the comparison with the USA is valid and sets a benchmark for the level of geographical mobility the EU; and thirdly, that the data are sound.

25. The Committee therefore pursued three lines of inquiry on the statistical evidence: to determine the relative importance of geographical mobility to other elements of a flexible labour market; to establish whether there is a benchmark for an appropriate level of geographical mobility in the EU; and to determine the quality of the data on which policy decisions are being made.

Geographical mobility as one element in labour market flexibility

26. When looking at ways to improve the efficiency of labour markets, it is widely recognised that geographical mobility should not be considered in isolation. The Commission's Communication points out that occupational (or skill) mobility should be considered as equally important (p 38). The CBI went further and in a report identified six forms of flexibility, of which geographical mobility was one.[7] The others were:

  • flexibility in working patterns [hours flexibility];
  • wage flexibility [pay];
  • skills flexibility;
  • numerical flexibility [such as limited by employment protection legislation];
  • functional flexibility or internal flexibility [how much people are moving within jobs or within the organisation].

27. They found that "the overall level of flexibility" of labour markets, rather than any single dimension, was important. The contribution of geographical mobility that is necessary to ensure an overall level of labour market flexibility is not fixed. The CBI explained that "different European companies have made use of different combinations of flexibility to deliver employment and growth […] there are many possible combinations of flexibility that will deliver employment and economic growth […] you need some flexibility along all these dimensions, but you do not necessarily need full flexibility in all of them" (Q 67).

28. European policy can be targeted and co-ordinated to address the six forms of flexibility. It is up to the Member States "to decide which flexibilities they want to pursue and which combinations they want to pursue them in" (Q 67). Whilst geographical and occupational mobility constitute the focus of the Commission's Communication, and therefore this inquiry, it should be recognised that these are only two dimensions of flexibility and labour markets. Other factors need to be addressed and progress made in order to ensure truly flexible and mobile labour markets.

29. Evidence pointed to geographical mobility (as well as wage flexibility and other means of adjustment) possibly growing in importance in the context of European Monetary Union (EMU) "as Euroland countries lose the ability to unilaterally loosen monetary and fiscal policy" in response to asymmetric economic shocks (CBI, p 13; IoD, p 81).

30. The CBI was of the opinion that geographical mobility "is important, but it is not the be all and end all." Ms Anderson of the CBI said "geographic mobility is important, but I think it is not nearly as important as some of these other issues needed to address the fundamental issues that we have in terms of having a flexible labour market." The CBI was clear that increasing the European level could have economic benefits, but it should not be so much of a priority (particularly in the UK) as increasing the level of occupational mobility (QQ 102, 104). The Government concurred with this view: "I think we all agree that [geographical] labour market mobility is desirable and it may be essential in some areas. It is not, I think it is fair to say, an end in itself […] it is quite important to say that [geographical] mobility is one part of labour market policy and economic policy." Indeed, for the Government, it "is quite a small part" (QQ 2, 18).

31. In considering flexibility at the level of local labour markets, the High Level Task Force on Skills and Mobility were also keen to stress the interaction between different forms of flexibility and the importance of improving skills through occupational mobility. They reported that "geographic mobility may not in itself solve the underlying imbalance [in the location of jobs and the labour available to fill those jobs], but may allow time for the skills of the local labour force to adapt" (op. cit., p 13). However, not only did the Task Force concede that "occupational and geographical mobility are not a panacea" (op. cit., p 6), they also warned that there is "a danger that greater [geographical] mobility may make disparities [between regions] worse, as those with some skills may move out to other regions with demand for those skills" (op. cit., p 13). This can lead to great regional imbalances of employment and growth. The Government acknowledged that there is "quite a lack of information about differential impacts" of migration (Q 55). Until more research is done to investigate the effect of migration on different regions, the Committee is cautious about endorsing policies designed to promote the level of geographical mobility as a solution to labour market imbalances. Furthermore, policies promoting geographical mobility should include an assessment of their impact on regional development schemes.

32. Only the TUC sounded a note of caution over the importance of flexible labour markets, suggesting that the premise that a "higher rate of labour mobility in the USA, compared to the EU, is a driver of job creation" may be false since according to their study the "US record of job creation was not, in fact, significantly better than that of many EU Member States". The TUC argues that "labour markets in Europe remain essentially national in character" (p 85).[8]

33. The Committee accepts that a degree of geographical mobility is desirable for European labour markets to work efficiently and thus for the economy to be prosperous. Furthermore, we recognise that an increase in the current European level of geographical mobility is generally perceived to be beneficial to the economy, although witnesses did not provide any research showing how great an increase would be best for the European Union (see paragraphs 35-41, below). Moreover, we did not receive evidence to suggest that the current EU-level of geographical mobility is, in itself, an urgent economic problem. Nor did the Committee see evidence that increasing the level of geographical mobility is the only response to the current economic situation in the European Union or indeed a necessary priority.

34. The Committee considers that it is important to place geographical mobility alongside other elements of labour market flexibility and not consider it in isolation, but believes that more work needs to be done to identify its contribution more precisely and to understand any potential social costs.

What would be an appropriate level of geographical mobility in the EU?

35. Establishing an appropriate benchmark for the level of geographical mobility in the EU proved difficult. We tried to identify the robustness of the comparison with the United States and the extent to which the level of geographical mobility in the EU can be ascribed to the existence of barriers to movement.

36. The comparison with the US is made widely in the literature and has been quoted in all the evidence and by all witnesses. None of the witnesses provided a convincing argument for the comparison. The CBI did believe that the US experience was useful to look at, but said "that precise comparison of levels of European and US geographical mobility is complicated by the fact that inter­regional mobility (or internal mobility) is measured differently from country to country" (p 14).

37. In their Memorandum, the Commission noted that "when the data are adjusted for comparable distances/units, the differences are less than often asserted. In particular, even in the US, most changes of residence are carried out for domestic or family reasons, and [geographical] mobility for strictly labour market reasons is less than 10% of all moves" (p 63). The Task Force notes that "in the US only a small proportion of those moved for labour market reasons" (op. cit., p 12). In their oral evidence, the Commission confirmed that "the comparability with the US is a complex one because there are a series of other factors and labour mobility in the US is not as big as has always been felt" (Q 200).

38. Evidence suggesting that geographical mobility in the US is less for work­related reasons than for other reasons also means that it is not clear that geographical mobility is the main factor in ensuring flexibility and lower unemployment rates. Madame Quintin, the Director-General of the Employment and Social Affairs Directorate-General in the Commission, argued that "the comparison is not so much with the mobility element because it is related to different elements […]. It is much more related to the adaptability of the labour market and to the skill shortages. […] I would not argue the traditional comparison between the US and Europe only on [geographical] mobility but more on labour market modernisation, adaptability and skill mismatches. We emphasise here that geographic but also professional mobility can play a big role" (Q 205). Again, geographical mobility does not appear to be the most important issue in improving labour market flexibility.

39. Eurocadres said that "comparisons with the USA concerning the level of mobility are not relevant because the European Union is not a 'nation', with a common language" (p 31). The Committee considers the fact that Europe is a collection of nation states, without a common language or tax system, throws into doubt the validity of the comparison between the levels of geographical mobility in the USA and the European Union. The CBI also said that "we should recognise that there are issues within the EU which mean that we are probably never going to have their levels of mobility". For instance, in the US they "have evolved a regional specialisation [of the labour markets], so that all the high-tech industries are based in Silicone Valley; finance is in New York; car manufacture traditionally in Detroit" (Q 102). We do not tend to have this "very regionalised specialisation" in Europe. Geographical mobility is thus arguably more necessary in the US to achieve labour market equilibrium without creating excessively high regional unemployment. In the EU, asymmetric shocks between sectors are more likely to be absorbed within regions, and certainly within countries. A related issue is whether or not the lower level of social security and welfare provisions in the US encourages people to move. However, whilst accepting that social security provision may influence the unemployed to move, it does not explain the different mobility rates of those in work. Professor Schmidt also drew attention to evidence from both the US and Germany that migrants do not appear to move in response to the existence of differential welfare benefits. Indeed, when the empirical evidence has been carried out to ensure a comparison of like with like, migrants are shown to have lower unemployment rates and lower dependency on welfare (Q 167).

40. On the basis of this evidence, the Committee has serious reservations about the appropriateness of the comparison with the US as giving any indication to a desirable level of geographical mobility for the EU.

41. The Committee recognises that geographical mobility in Europe has potential advantages—both for individuals and for employers. Professor Schmidt argued that "from an economic perspective, perhaps the primary function of migration is to equilibrate labour markets […] from an aggregate economic perspective, it would be quite beneficial if we could somehow make the labour market more fluid and also make the internal movements more fluid between European countries" (Q 164). The Government said "it is a relatively small number of people or businesses that are affected by problems." However, they go on to say that "there is a general feeling that, where barriers have been identified, we should try to tackle them, even if the numbers are relatively small, because it does help to create both fulfilling work for individuals and also a better functioning labour market and a more skilled and accessible labour market for employers" (Q 44). The Committee accepts the arguments in favour of the desirability of geographical mobility for personal development, calls on the Commission and Member States to tackle the barriers that impede individuals and employers (see Part 4, below), and sees positive advantages in the provision of better information on opportunities (see Part 6, below).

The quality of data on geographical mobility

42. The lack of quality data on geographical mobility hindered the work of the Committee. For instance, Eurocadres pointed out that there are no "fully reliable" statistics regarding geographical mobility, "even on people working in a country other than their native country" (p 31). The Committee is extremely concerned that policy is being drafted despite the absence of significant statistical information in this area.

43. Professor Schmidt and Mr Fertig pointed out that the raw data on geographical mobility has to be treated with some care since the "figures do not report short term moves of individuals" nor "any information about cross-border commuters or seasonal workers". Their evidence also indicates that there may be many different and more complex reasons for individuals deciding to move, or not to move, than the traditional analysis of aggregate flows of migrants responding to "differential developments of economic activity (per capita), unemployment rates and other socio-economic factors" (pp 45-46).

44. Witnesses also held that there is no evidence of the extent to which UK­based firms actively seek labour in other EU labour markets, nor of the extent to which firms overseas are recruiting from the UK (QQ 59, 63).

45. Perhaps the Committee's most serious concern from the long-term perspective of the formulation of policy is the lack of evidence on the factors influencing people not to move. The extent to which geographical mobility is artificially restricted by barriers is not known. Several witnesses provided anecdotal evidence, but there is a recognised absence of any systematic data on individual perceptions and experiences of geographical mobility.

46. When asked whether it is known how many people would like to move if they could, the Commission said that it had never carried out any surveys to find this out, but agreed that "it is a very good question" and concurred that the Commission do "need to do" such a survey (Q 202). Dr Rolfe, of the National Institute of Economic and Social Research, bemoans the fact that "whilst many reports have speculated on the role of such factors [as language, mutual recognition, etc.] in discouraging [geographical] mobility, there is almost no research on the attitude of the general public towards [geographical] mobility" (p 83). In their written evidence, the Commission admit that "it is difficult to say to what extent each of these categories of obstacles works as a restriction to [geographical] mobility, as no general survey exists on these issues" (p 64). Eurocadres identified the consequent inability to make comparisons on the situation in particular occupations or particular regions as a continuing problem (Q 120-21).

47. Professor Schmidt identified the problem of inadequate data in his evidence and said that data deficiencies mean that "we can only give a speculative set of answers" as to the reasons why people do or do not move. He made a strong case for developing representative data at the individual or household level for each of the countries in the European Union. This would require enough people to be selected in the samples to ensure inclusion of a sizeable number of possible migrants, such that these people could be contacted again and their experiences followed though. He suggested that by relying on conventional data "it would be very difficult to learn anything in the future", but by setting up the kind of database he proposed, in which it would be possible to try and identify people both before and after migration, "we would have more chance of understanding the process" (Q 177).

48. Professor Schmidt and Mr Fertig did provide the Committee with some evidence based on an analysis of data from the Eurobarometer survey (pp 46-48). This concerned the attitudes of young people to living and working in another Member State. This suggests that UK youth is considerably less likely to identify the EU as conferring the right to work in another Member State than those from France or Germany, but those still studying and those with more educated parents have a slightly higher tendency to do so. Perhaps unsurprisingly, those who had admitted to having what was referred to as "xenophobic tendencies" (defined in the survey as "the respondent reported that he/she feels uneasy in the presence of a people of another nationality, race, religion or culture") generally had a reduced desire to work in another Member State. Yet the Committee was interested to discover that those who had some experience of another Member State, such as those with foreign language skills or who had visited other countries, have a higher perception of the difficulties involved (see paragraphs 102-05, below).[9]

49. Professor Schmidt provided an outline of an "ideal data set", which would combine two different elements. One element would be to use the work done by the US Panel Study of Income Dynamics (PSID) as an inspiration. This is the most well-known individual personal data set in the United States. It has been collected since 1968 and now provides the possibility for long-term analysis. Professor Schmidt noted that several countries have started collecting data sets with the idea "of copying or at least taking the good aspects of PSID" and gave the examples of the German Socio-Economic Panel and the British Household Panel Study. These studies involve carefully sampled panels of households who participate over a period of time on a voluntary basis. The second, more important aspect is to be able to develop this, in the way that the German Socio-Economic Panel has begun to do in Germany, to provide information on household formation. In this way, individuals who leave one of the sampled households are also included in the sample in subsequent periods. This would enable information to be gathered on those who move to other labour markets. Thus far, the German data only include those moving within Germany, but a co-ordinated approach across the EU would enable the inclusion of those moving across internal borders. "That would get, for example, at this question of temporary migration and it would help us see how people perform in another market" (Q 186).

50. The Commission agreed that "the only information we have is fragmented for the time being." There are some instruments that can be used to provide some information, such as the Labour Force Survey, which is prepared by Eurostat in collaboration with the Member States. The survey now includes some questions related to mobility which give some indication of geographical and occupational mobility. The Commission did, however, announce, that they "plan to get a better picture by including the figures of job vacancies which Eurostat provide. We are thinking more generally in the general survey about employment and social policy more globally, of which mobility could be one element" (Q 207). However, although there have been some studies related to specific elements, such as the constraints on mobility imposed by dual careers, there appear to be no plans for a general survey of the reasons why people do not move (Q 209). The Committee is extremely concerned by this lack of basic information on mobility and recommends that serious consideration be given to supporting the proposal in Professor Schmidt's evidence for the creation of a research network to collect and analyse individual-based data in a co-ordinated way at the European level.

51. Overall, the Committee has felt frustrated by the lack of hard evidence to substantiate the strong claims being made about the need for greater geographical mobility and the significance of the various barriers identified. The proposals made by the High Level Task Force on Skills and Mobility perpetuate a number of claims about both the level of geographical mobility and the constraints on it, without supplying compelling or consistent evidence. The Committee therefore recommends that a significant commitment to research on an improved and co-ordinated collection of data at the individual and household level so as to include information on mobility is needed as part of the Commission's Action Plan.


2   Final report of the High Level Task Force on skills and mobility, 14 December 2001, http://europa.eu.int/comm/employment_social/general/index_en.htm, p.3. Back

3   Secure Borders, Safe Haven: Integration with Diversity in Modern Britain, p. 28. Back

4   CES 1125/2001, p. 6. Back

5   European Parliament report 26 October 2001 (A5-0375/2001), p.7. Back

6   COM (2002) 9 final, p.24. Back

7   Creating a Europe that works: A study of labour market flexibility (CBI: 1999). Back

8   For a full explanation of this argument, see the TUC's report Answering the Flexibility myth (ESAD, 2000). Back

9   Another interesting recent study on the attitudes to, and experience of, mobile workers has been carried out by PricewaterhouseCoopers, Managing Mobility Matters: A European PerspectiveBack


 
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