EU should refine its welfare policy
The European Union is underpinned by the so-called “four freedoms”: the free movement of goods, services, capital and people. There’s little controversy over the first three. But the free movement of people has become a hot political issue in many countries, often whipped up by nationalist parties. Some people who want to keep immigrants out are racists. There are also two supposed arguments for keeping foreigners out: that they take both “our jobs” and “our benefits”.
Immigration is a particularly live issue in the UK. In the European Commission’s latest Eurobarometer survey, 32 percent of the British people questioned thought it was one of the two most important issues facing the country. The average for the EU as a whole was 10 percent.
In a poll for The Independent last month, two-thirds of those questioned thought British firms should give UK citizens priority over other candidates from elsewhere in Europe when hiring new workers – even if this meant Britain had to leave the EU. Just 16 percent disagreed. The UK Independence Party, which wants Britain to quit the EU, has heightened anxiety by arguing that there will be a wave of immigrants from Romania and Bulgaria after the last restrictions on their citizens’ movements are lifted at the end of this year.
The free movement of people is one of the EU’s biggest pluses. And the number of EU citizens who engage in so-called “welfare tourism” – travelling to other countries to live off benefits – is exaggerated. However, it has become such a hot potato that it would be wise to tighten up the EU’s rules on immigrants’ access benefits. This is especially so in the UK, where David Cameron suggested last week in an interview with The Times that doing so could help sway a planned referendum on whether to stay in the EU.
First, though, look at the facts. Eight Eastern European countries, led by Poland, the so-called “A8” countries, joined the EU in 2004. A wave of migrants left for richer countries, especially the UK which didn’t impose any temporary restrictions. This was beneficial for the economy because most of the immigrants were skilled and hard-working. Most weren’t so young that the state needed to pay for their education or so old that it had to pay much for their healthcare.
The A8 immigrants are 59 percent less likely than natives to receive state benefits or tax credits and 57 percent less likely to live in social housing, according to a 2010 study by the Institute of Fiscal Studies. They also make a positive contribution to the public finances – unlike the native population which consumes more in benefits than it pays in taxes.
Although the Eastern European immigrants also have a lower unemployment rate than the natives, they don’t seem to be taking British jobs either. In some cases, they have been doing jobs that local people don’t want to do such as farming.
Between 1997 and 2011, the UK created 3 million jobs. But British citizens have often lacked the skills and incentives to grab these opportunities. Immigration from the rest of the EU and further afield has filled the gap. Between 2008 and 2011, during the worst of the recession when unemployment rose by 1.1 million, the employment of Eastern Europeans in the UK rose by only around 100,000, according to Open Europe, a free-market think-tank. So EU immigration can, at the most, have been responsible for a minor part of the increased unemployment.
In fact, the arrival of skilled hard-working immigrants has probably been good for jobs. This is because it has improved the competitiveness of British-based businesses so helped them expand and because the Eastern Europeans themselves have spent money in Britain.
So much for the facts. What about policy?
The key EU law is the so-called Free Movement Directive. This doesn’t oblige a country to provide “social assistance” (things like housing benefit) to foreign nationals during their first three months – or if their only reason for staying after three months is because they are looking for a job. Unfortunately, there is another EU regulation that covers “social security benefits” (things like unemployment benefit). These benefits have to be offered to all EU citizens who are “habitually resident” in a country without discrimination.
The basic principle should be that people are free to move around the EU to work, study or retire but not to live off benefits. One way of achieving this objective, advocated by Open Europe, is as follows: only people who are self-sufficient or in work should have the right to live in another EU country, unless they have already been working there for a period; and only those who have the right to live in another EU country should have the right to get benefits. People could still go to another country to look for work but they wouldn’t have the right to any benefits during that period.
Though the UK is the country most exercised by this issue, it is not alone. Two years ago, 13 countries, including Germany, called for further discussion on the interaction between the principle of free movement and access to benefits. This year, the Dutch government said it was necessary to combat “the abuse of social security systems.”
Welfare tourism isn’t a big economic problem. But it is a political problem which could ultimately become a big economic one if it helped trigger Britain’s exit from the EU. Tightening up the rules is a priority.