Commentary: migration from Bulgaria and Romania to the UK.

Fic, Tatiana

Bulgaria and Romania joined the EU in 2007. At the end of this year, the seven-year transitional restrictions on the access of Bulgarian and Romanian nationals to the UK labour market will be lifted. Bulgarian and Romanian nationals will be able to settle and take up employment in any country of the EU (as any other EU nationals can settle and take up employment in any other country of the EU). This commentary discusses factors that matter for the assessment of the impacts of potential future migration from Bulgaria and Romania to the UK1 and explains that, although it is difficult to predict future migration flows, both numbers and impacts are likely to be manageable. (2)

Lifting transitional restrictions

The objective of the policy of free movement of workers --unrestricted labour mobility--which is one of the original "Four Freedoms" of the European Union, is to improve the matching of labour supply and demand within the EU, benefiting both businesses and workers throughout Europe.

Despite the general economic consensus about the positive impacts of labour mobility, concerns regarding the immediate impact of opening labour markets have been an issue in all enlargements after the creation of the EU, including the 2007 accession of Bulgaria and Romania. In the latter case concerns have been raised by the large income gap between Bulgaria and Romania and the existing member states (the level of income in both countries is several times lower than the EU27 average) (3) and the size of their countries (about 29 million inhabitants).

As a consequence, the existing members of the EU maintained transitional controls on the mobility of workers from the two acceding countries, although for varying periods of time. Sweden, Finland, Denmark, Greece, Portugal, Spain (4) and Italy opened their labour markets to arrivals from Bulgaria and Romania before the end of the 7-year transitory period, while the UK, Ireland, Germany, Austria, France, Belgium, the Netherlands, and Luxembourg maintained restrictions until the end of this year.

The impact of lifting the restrictions on an existing EU country is in part a function of the response of other EU member states. When the UK opened up its labour market to A8 countries in 2004 it was one of only a few large European countries to do so. The consequence was a large and unexpected inflow of A8 citizens coming to the UK and, partly as a reaction to this, the UK maintained restrictions on Bulgaria and Romania for the maximum period (Wright, 2010). The environment in 2014 will be quite different, as all EU countries will have opened their labour markets to workers from Bulgaria and Romania.

The patterns of Bulgarian and Romanian migration

Historically, the main European destination countries for Bulgarian and Romanian nationals have been the countries of Southern Europe, such as Italy and Spain and, to a lesser extent, Germany.

The stock of migrants in Italy and Spain from Romania is about 40 and 43 per cent of all Romanian migrants residing in another EU country. In the case of migration from Bulgaria, about 38 per cent of Bulgarians have chosen to settle in Spain, 15 per cent in Germany, 13 per cent in Greece and 11 per cent in Italy. The UK ranks fourth as a destination country for Romanian movers attracting 4 per cent of mobile Romanians, and it ranks fifth for Bulgarians--attracting about 6 per cent. Figure 1 shows the number of Bulgarians and Romanians residing in various European countries in 2009. The distributional pattern of Bulgarian and Romanian migrants across Europe has remained broadly unchanged for some time, with Italy and Spain attracting most of them. Moreover, Italy and Spain were the main destination countries for Bulgarian and Romanian migration even before the accession of Bulgaria and Romania to the EU in 2007 (in 2006 about 80 per cent of Romanians and 54 per cent of Bulgarians resided either in Spain or in Italy, and since the early 2000s more than 50 per cent of mobile Bulgarians and Romanians have chosen either Spain or Italy as their destination countries).

[FIGURE 1 OMITTED]

The literature identifies several factors behind Spain and Italy being the preferred destination countries for Romanian and Bulgarian migrants. These encompass their geographic and linguistic accessibility, and the presence of existing migration networks (Drew and Sriskandarajah, 2006; Markova and Black, 2007). Several sources (Iara, 2010; Stanek, 2009) point out the circular character of migration, particularly from Romania to Italy, because of both geographical proximity and the large amount of seasonal work (compare also Mara, 2012).

The potential future migration from Bulgaria and Romania to the UK after the transitional controls are lifted is often referred to in the context of the number of A8 nationals who have chosen to settle in the UK after 2004. It is instructive to compare the numbers of Bulgarian and Romanian nationals residing in the UK with the number of A8 nationals in the UK, as well as with the number of Bulgarian and Romanian nationals residing in Spain and Italy. Figure 2 shows the distribution of A2 and A8 nationals across Spain, Italy, and the UK.

[FIGURE 2 OMITTED]

Measuring migration is difficult, predicting it is even harder, as the 2004 experience shows. Recent NIESR research (Mitchell et al., 2011) has also illustrated the difficulty in modelling migration flows. We therefore do not attempt to forecast the scale of future migration from Bulgaria and Romania to the UK. However, it is informative to look at current numbers of A2 nationals residing in the UK. According to the European Labour Survey, about 26,000 Bulgarians and 80,000 Romanians resided in the UK in 2009. These are relatively modest numbers both compared to the number of Bulgarian and Romanian nationals residing in Spain (168,000 and 823,000, respectively) and Italy (46,000 and 888,000, respectively), as well as to the number of A8 nationals settling in the UK (815,000). According to the British National Insurance Numbers (NINO) data, the numbers of NINO allocated to Bulgarian and Romanian nationals between 2002 and 2012 amounted to 89,000 and 125,000, respectively. This is slightly more than the European data suggest (note the latest data are as of 2009) and can be explained by the fact that the there is no requirement to de-register or re-register following movement out and back in to the UK. In particular, the recent crisis may have induced some return migration or relocation of mobile workers within the EU.

Socio-economic characteristics of Bulgarian and Romanian migrants

Bulgarian and Romanian nationals who decide to migrate to another EU country are young; most of them are under 35 years. The gender balance is even, and most have intermediate qualifications. Among those choosing the UK, men are in small majority.

They have high employment rates because their main reason for moving abroad is to find work. European Commission data show that, over the period 2005-9, a majority of Bulgarian and Romanian citizens residing in other EU countries, about 70 per cent, were employed. The 2009 recession limited employment opportunities for all workers in the EU15 including migrants. Spain and Italy were particularly hard hit by the recession, which led to increases in unemployment among A2 movers (EC, 2012). The rise in the number of unemployed is also explained by their socio-economic characteristics (A2 movers within the EU as a whole are young and low skilled and they tend to be employed in sectors which have been most affected by economic recession, in particular the construction sector).

Mobile workers from Bulgaria and Romania are concentrated in sectors such as construction, activities of households, and accommodation and food service activities. In comparison, A8 nationals are predominantly employed in manufacturing, wholesale and retail trade, and accommodation and food service activities (Holland et al., 2011).

While the socio-demographic characteristics of current migrants from Bulgaria and Romania (who choose Spain and Italy) and migrants from Central and Eastern Europe (who choose the UK and Ireland) differ somewhat (Central and Eastern Europeans are slightly younger and better educated), it seems likely that, once the labour market restrictions are lifted, the population of new A2 migrants in the UK is likely to resemble the A8 migrant population relatively closely. Migrants' characteristics and employment are a function of the receiving country's labour market characteristics and its needs. If there are shortages on the labour market in a particular sector they will be filled by mobile EU citizens with appropriate sets of skills and characteristics (the Spanish construction sector attracts a certain type of migrant, the German health care sector attracts a slightly different type of migrant). Therefore, it is possible that potential future migration to the UK will follow the pattern of A8 migration, predetermined by the characteristics (and needs) of the UK labour market.

The impacts of migration from Bulgaria and Romania

The scale of migration and the profile of migrants determine how big the potential effects of future migration might be, both in terms of macroeconomic impacts and the impacts on public services. (5)

In terms of macroeconomic impacts, NIESR research shows that intra-EU migration has modest positive impacts on economic activity in receiving countries (Holland et al., 2011; Barrell et al., 2010). Holland et al. (2011) show that migration from A2 countries to Spain and Italy resulted in an increase in these countries' GDP of about 1-1.5 per cent over the period 2004-9 (migration from Bulgaria and Romania to other EU countries started well before these countries' accession to the EU in 2007). Over the same period migration from the A8 countries to the UK resulted in an increase in GDP of about 1 per cent. The overall impacts of migration on GDP are thus clearly positive. There may be some adjustments needed in the short run which could result from adjustments in the capital to labour ratio (Barrell et al., 2010), with potential effects varying along the distribution of wages (Dustmann et al., 2008).

Given the likely scale of migration from Bulgaria and Romania to the UK, one can expect that, although positive, the overall impact is highly unlikely to be of major macroeconomic significance. It is unlikely that future migration from Bulgaria and Romania will have a significant impact on public services, although there may be some issues at a local level. Economic migrants are young and healthy and therefore do not make major demands on health services. With regard to education, potential family migration from the A2 countries may potentially increase pressure on school places at primary level in some areas, although the impact is unlikely to be immediate. The impacts on housing markets are unlikely to be significant at a national level; at a local level, impacts depend on the existing supply and the buoyancy of the local housing market. Any increase in demand is likely to be felt mostly in the private rented sector. The demands on housing are highly dependent on the rate of permanent settlement of A2 migrants and particularly family formation.

There is unlikely to be any major pressure on the benefit system; A8 and A2 migrants are less likely to claim benefits than other migrant groups or the native UK population. Of those A8 and A2 migrants who claim benefits, the majority claim child benefits. Previous research suggests that A8 migrants contribute substantially more through tax than they cost in terms of benefits and public services; on average, this seems likely to be the case for A2 migrants as well (Dustmann et al., 2010).

Conclusion

Overall, as discussed above, the available research evidence suggests that concerns about the impact of the ending of transitional controls on Bulgarians and Romanians moving to the UK are exaggerated. Numbers are hard to predict, but unlikely to be large; consequently, economic impacts are likely to be positive, but very modest, while there is no reason to think that the impact on public services cannot be managed.

REFERENCES

Barrell R., Fitzgerald J. and Riley R. (2010), 'EU enlargement and migration: assessing the macroeconomic impacts', Journal of Common Market Studies, 48(2), pp. 373-95.

Drew C. and Sriskandarajah D. (2006), EU enlargement: Bulgaria and Romania--Migration Implications for the UK: an IPPR Fact File, IPPR, London

Dustmann C., Frattini T. and Halls C. (2010), 'Assessing the fiscal costs and benefits of A8 migration to the UK', Fiscal Studies, 31(I), pp. 1-41.

Dustmann C., Frattini T. and Preston I. (2008), 'The effect of immigration along the distribution of wages', CREAM DP 03/08.

European Commission (2012), Mobility in Europe, Employment, Social Affairs and Equal Opportunities.

Holland, D., Fic, T., Rincon-Aznar, A., Stokes, L. and Paluchowski, P., (201 I), Labour Mobility Within the EU, Report to the European Commission.

Iara I. (2010), 'The economic crisis and Romanian returnees from Spain and Italy', presented at European Job Mobility Day, Brussels, November.

Manacorda, M., Manning A. and Wadsworth J. (2012), 'The impact of immigration on the structure of male wages: theory and evidence from Britain', Journal of the European Economic Association, 10(I), pp. 120-51.

Mara I. (2012), Surveying Romanian Migrants in Italy Before and After the EU Accession: Migration Plans, Labour Market Features and Social Inclusion, wiiw Research Report no. 378, July.

Markova, E. and Black, R. (2007), East European Immigration and Community Cohesion, Joseph Rowntree Foundation.

Mitchell, J., Pain, N. and Riley, R. (2011), 'The drivers of international migration to the UK: a panel-based Bayesian model averaging approach', Economic Journal, 121 (557), pp. 1398-444, December.

Peri G. (2012), 'Immigration, labour markets and productivity', Cato Journal 32(I), pp. 35-53.

Rolfe H., Fic T., Lalani M., Roman M., Prohaska, M. and Doudeva, L. (2013), Potential Impacts on the UK of Future Migration from Bulgaria and Romania, NIESR Report to the Foreign and Commonwealth Office, http://www.niesr.ac.uk/publications/ potential-impacts-uk-future-migration-bulgaria-and-romania#.UXFWyKJwphd.

Stanek, M. (2009), 'Patterns of Romanian and Bulgarian migration to Spain', Europe-Asia Studies, 61(9), pp. 1627-44.

Wright, C. (2010), 'The regulation of European labour mobililty: national policy responses to the free movement of labour transition arrangements of recent EU enlargements', SEER Journal for Labour and Social Affairs in Eastern Europe, 2/2010.

NOTES

(1) Throughout the text the A2 is used to designate Bulgaria and Romania, and the A8 is used to designate the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.

(2) This commentary is based on recent research on 'Potential impacts on the UK of future migration from Bulgaria and Romania' conducted by NIESR (T. Fic, M. Lalani, H. Rolfe) and researchers from Romania and Bulgaria (M. Roman, M. Prohaska, L. Doudeva). See Rolfe et al. (2013).

(3) About five times lower as measured in euro per inhabitant, and about 2 times lower as measured in PPS per inhabitant (calculations on the basis of Eurostat data, as of 2010).

(4) Spain temporarily introduced restrictions for workers from Romania from July 201 I.

(5) This commentary focuses on macroeconomic and public services impacts. For a discussion of distributional effects see e.g. Dustmann et al. (2008), Manacorda et al. (2012). For a recent interesting discussion of the labour market impacts and productivity see Peri (2012).

Tatiana Fic, National Institute of Economic and Social Research. E-mail: [email protected]. I would like to thank Jonathan Portes for invaluable comments and members of the Editorial Board for their helpful remarks and discussion.