the european union:econmic,socity and polity

8/2/2019 the european union:econmic,socity and polity

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by

Andrs Rodrguez-Pose

London School of Economics

Oxford University PressISBN 0-19-874286-X

THE EUROPEAN UNION:

ECONOMY, SOCIETY, AND

POLITY


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Part I

ECONOMY


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Chapter 1

Competitiveness


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The stages of economic

integration Free trade areas:

Free trade between members, different external tariffs

Little or no institutional co-ordination

Customs union: Free trade between members and common external trade

restriction

Common regulatory bodies

Common (or single) markets: Removal of all barriers to free factor mobility

Free mobility of goods, capital, labour, and services

Greater level of regulation and strong institutions tomonitor decisions adopted by member states


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integration (II) Economic union:

Harmonisation of economic policies (generallymonetary or fiscal policy)

Members give up powers. Strong central

institutions which dictate common economicpolicy

Complete economic integration: All economic policy areas are harmonised

The capacity of states to implement independentpolicies disappears

Central institutions become the centres ofeconomic decision-making


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integration in the EU

Level of integration Main features Period

Free trade area Free trade among members From 1958 to the early

1960s

Customs union Free trade with a commonexternal tariff

In theory from 1958, inreality from the early 1960s

until 1993

Common market Free mobility of factors across

member states

1993-1999

Economic union Harmonization of economic

policy

Early stages in 1993.

Partial economic union in

1999

Economic integration Completely unified economic

policy

Not yet achieved


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Economic integration to

achieve competitiveness Why did a customs union (the EC) decide to

increase the pace of economic integrationduring the 1980s and 1990s?

Increasing globalisation of the world economy

(increased competition, especially from the US,Japan, and the NICs)

More sophisticated systems to dodge tradebarriers (multinational corporations)

Belief that market fragmentation (nationallydivided markets) was reducing economies ofscale


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GDP per capita (2000) in

Europe, the US and JapanCountry

Total GDP in2000 (billions

of )

% of the EUeconomy

Austria 205.5 2.42

Belgium 244.0 2.87

Denmark 174.2 2.05

Finland 131.2 1.54

France 1399.2 16.47

Germany 2036.0 23.97

Greece 120.7 1.42

Ireland 101.1 1.19

Italy 1152.3 13.57

Luxembourg 19.9 0.23

Netherlands 399.1 4.70Portugal 112.3 1.32

Spain 605.7 7.13

Sweden 248.8 2.93

United kingdom 1543.0 18.17

European Union 8493.0 100.00

United States 10738.7 126.44

Japan 5163.2 60.79


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The limits of European

competitiveness The costs of the non-Europe (Cecchini, 1991):

Physical barriers: Intra-European stoppages,

controls at border checkpoints, red-tape, different

currencies

Technical barriers: Different national productstandards and technical regulations across

Member States

Fiscal barriers: Lack of fiscal harmonisation


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Physical barriers

Custom related costs: Customs controls, border stoppages

Paperwork and red-tape

Exchange of low-value added perishable goods

suffered as a result

High administrative costs and regulatory

hassles: Higher cost of red-tape of SMEs (higher

proportion of their business volume, and lack ofexpertise and human resources)


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Physical barriers (II)

Protected markets (II): Fear of foreign dependence leads to protection of

national strategic sectors

Many sectors fall under this umbrella:

petrochemical industries, shipbuilding, iron andsteel, tobacco, car manufacturing,telecommunications, air transport,...

Formation of monopolies (BT, Deutsche Telekom,SIP, Air France, Iberia,...) or oligopolies

Cost of protection born by the consumer:

Lack of competition and underperforming industries

And companies:

Higher prices for services than their competitors


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Physical barriers (III)

Different currencies:

Transaction costs of changing currencies

Higher costs of holding higher international

reserves

Costs associated to exchange rate volatility

Higher interest rates in many countries


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Technical barriers

Different product standards and technicalregulations: Problems and additional costs for consumers

Cost for firms which had to adapt their products

to different national standards Cost premium for SMEs

Protected public-sector procurement: Government supply and construction contrast

restricted to national firms Or technical regulations discriminating against

foreign bidders


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Fiscal barriers

Different fiscal regimes: Different regimes for companies

Different VAT rates

Different national accounting standards:

Duplication or multiplication of accountingstandards for multinational companies

Fiscal suspicion by national authorities inorder to prevent tax evasion

Premium for SMEs


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The expected benefits of

economic integration Cecchini report (1988). Cost saving effects:

Static trade effect: benefits reaped from allowingpublic authorities to buy from the cheapest suppliers

Competitioneffect: Downward pressure on prices

as a result of greater competition Restructuringeffect: Reorganisation of industrial

sectors and individual companies as a result ofgreater competition

Other possible benefits: Benefits on investment, innovation (rationalisation

of R&D expenditure) and growth

Savings for the public sector (lower governmentsubsidies for inefficient firms


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economic integration (II) Combination of cost saving effects results

in two kinds of benefits: Direct benefits: from the eradication of

economic borders

Indirect benefits: from economic restructuring,increases in trade and competition and greatereconomies of scale

Result:

The emergence of virtuous cycles of innovationand competition

Lowering of prices for consumers

Greater job creation


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Estimation of benefits

Cecchini (1988): 4 to 7% ofEuropes GDP

Baldwin:


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monetary union For all Member States adopting the Euro:

Price transparency across borders, inducing a greatercompetitioneffect

Elimination of transaction costs of changing

currencies Savings through holding lower international reserves

Reduction of uncertainty caused by exchange ratevolatility

Specific benefits for peripheral economies: Image premium and credibility in international

markets

Monetary and macroeconomic stability (lower

inflation, deficit, debt, and interest rates)


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The possible impact of

monetary union Possible impact:

Large benefits expected

But Commission reluctant to issue estimates (as

was the case of with the Single Market)


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The impact of economic

integration Is European economic integration delivering

the benefits predicted by its supporters?

Has the EU experienced the increases intrade, the more efficient allocation of

resources, and the greater growth andwelfare gains expected?

Have European economies become morecompetitive?


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Trade

Sizeable increase in trade across the EU Greater expansion in absolute terms than in other

developed areas of the world

But not in relative terms, where the US has

expanded more (but not Japan) This means that in a world context the evolution

of European trade has been rather disappointing,especially in comparison with countries likeCanada or Mexico, which have undergone milder

processes of integration


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Exports of goods and

services as a share of GDP

1988 1991 1994 1997 Change

1988-97

% Change

EU 26.80 26.26 27.79 31.73 4.93 18.40

US 8.99 10.37 10.54 12.09 3.10 34.48

Japan 10.02 10.19 9.27 11.11 1.09 10.88

OECD 17.31 17.89 17.92 21.02 3.71 21.43


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Trade at a national level

Several countries have experiencedsignificant increases: Countries with relatively open economies:

Ireland

Countries which were relatively closed: Finland,Sweden, Spain, or Italy

The trend is far from universal: Germany, Greece, and Portugal have seen their

exports as a share of GDP decline Luxembourg, Greece, and Portugal have seen a

decline in their import share

The lack of a clear pattern in the evolution oftrade suggests that no greater territorial

specialization is evident


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Changes in trade patterns

Increase in intra-industry trade But, stability of inter-industry trade

This has prevented a further concentration ofcapital intensive industries in core countries to

the detriment of the periphery Former lagging countries such as Ireland and

Spain have profited from integration to expandtrade and attract capital intensive industries

Portugal and Greece have been less successful

The level of intra-industry trade suggeststhat the expected specialization may bestarting to happen


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Foreign direct investment

Early stages of integration seem to have had alower impact on FDI than on trade Net inflows of FDI oscillate with economic cycles

Flows of FDI reached their peak around 1990

After the implementation of the Single Market theyfollowed a downward trend

In international comparisons the EU does notscore favourably

When compared to the US, net inflows of FDI into theEU have declined with respect to the period before 1993.

FDI flows among the member states have lost someimportance...

But, outflows to the rest of the world have increased.


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FDI net inflowsCountry 1980 1985 1990 1994 1997

Austria 0.30 0.26 0.41 1.08 1.20Belgium - - - - -

Denmark - 0.19 0.85 3.31 1.70

Finland 0.05 0.21 0.60 1.53 1.78

France 0.49 0.50 1.10 1.19 1.65

Germany - - - 0.09 -0.02

Greece 1.38 1.10 1.21 0.99 0.86*Ireland 1.43 0.83 1.38 1.55 3.63

Italy 0.13 0.25 0.59 0.21 0.32

Luxembourg - - - - -

Netherlands 1.33 1.17 4.35 2.23 2.42

Portugal 0.55 1.16 3.78 1.44 1.68

Spain 0.70 1.19 2.84 1.94 1.04

Sweden 0.20 0.39 0.86 3.16 4.33

United Kingdom 1.88 1.20 3.33 0.90 2.96

EMU area 0.50 0.56 1.46 0.75 0.83

United States 0.62 0.49 0.86 0.66 1.19

Japan 0.03 0.05 0.06 0.02 0.08* Data from 1996.


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Economies of scale

Ex-ante reports highlighted that economicintegration was to bring about a moreefficient concentration of resources

And a restructuring of companies

Number of mergers and acquisitions hasincreased by more than two and a half timesbetween 1987 and 1998

The bulk of this happened in anticipation of theSingle Market

Transnational M&As have taken off after theSingle Market and in anticipation of EMU.


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Economies of scale (II)

Three stages in the process: National M&As: started to take place during the late1980s in anticipation of the Single Market

European M&As: the percentage of M&A involvingat least one foreign company almost doubled between

1990 and 1998.

Trans-national M&As: Increasingly M&As areglobal. In 1998 one third of all M&As involved atleast one non-EU partner.

During the 1990s there has been an importantincrease in the volume of the deals. The total volume of deals has been multiplied by six

between 1991 and 1998

Greater expansion in outward M&As

M d i iti


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Mergers and acquisitions

(1987-98)

1987 1990 1993 1996 1998

Number 2775 7003 5740 6327 7600

% National 71.6 60.7 63.4 55.7 50.1

% EU 9.6 21.5 15.9 17.4 16.5

% International 18.8 17.8 20.7 26.9 33.4

Source: AMDATA in European Economy (1999)


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Economies of scale (III)

European companies have become moreambitious and aggressive: Probably in connection to the launch of the Euro

But also as a result of the emergence of new TNCsin Europe resulting from previous mergers

New mergers increasingly involve companiesfrom two different European countries: Orange and Mannesman

Vodafone and Mannesman And also truly global M&As:

Daimler-Chriysler

Terra Lycos

Repsol-YPF

V l f b d


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Volume of cross-border

M&A's (Billion US$)Inward

1991 1994 1997 1998 Multiplier

1991-98

EU 38.7 58.4 133.6 223.4 5.8

Rest of Europe 4.1 7.4 14.6 17.6 4.3

North America 26.1 62.9 76.3 218.1 8.4

Rest of the World 16.4 67.7 116.5 98.9 6.0

Total 85.3 196.4 341.0 558.0 6.5

Outward

1991 1994 1997 1998 Multiplier

1991-98

EU 50.5 75.3 127.5 330.6 6.5Rest of Europe 3.4 18.2 42.1 14.4 4.2

North America 15.7 52.0 106.4 175.2 11.2

Rest of the World 15.7 50.9 65.0 37.8 2.4

Total 85.3 196.4 341.0 558.0 6.5

Source: KPMG Corporate Finance (1999).

V l f b d


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Volume of cross-border

M&A's (%)Inward

1991 1994 1997 1998 Change

1991-98

EU 45.4 29.7 39.2 40.4 -5.4

Rest of Europe 4.8 3.8 4.4 3.1 -1.7

North America 30.6 32.0 22.4 39.1 8.5

Rest of the World 19.2 24.5 34.0 17.8 -1.4

Total 100.0 100.0 100.0 100.0 0.0

Outward

1991 1994 1997 1998 Change

1991-98

EU 59.3 38.4 37.4 59.3 0.0Rest of Europe 3.9 9.3 12.4 2.5 -1.4

North America 18.4 26.5 31.9 31.4 13.0

Rest of the World 18.4 24.8 18.3 6.8 -11.6

Total 100.0 100.0 100.0 100.0 0.0

Source: KPMG Corporate Finance (1999).


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Economies of scale (IV)

But have EU companies become theleading actors in international M&As? Despite the increase in numbers and size, EU

companies have lagged behind the US...

And during much of the 1990s also behind Japanand the Asian Dragons

Only the Asian crisis of 1997/98 changed thetide

And a diminishing number of Europeancompanies can be found among the top 50in the world

L ti f th ld'


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Location of the world's

largest 50 corporations

United

States Europe Japan Other

1960 42 8 0 01970 32 14 4 0

1980 23 19 5 3

1990 17 21 10 2

2000 15 16 19 0

Source: Bergesen and Fernndez (1995) and Fortune Global 500.


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Productivity European labour productivity has been

reducing the gap with the US in the post-wardecades

Convergence came to an end in the second halfof the 1980s

Increasing technology gap between the US and the EU

Permanence of fragmented markets in Europe(monopolies which prevented access to new technologies)

Rigidity of European labour markets (which kept the

young out of work) Productivity has grown faster in the US in the

1990s Some encouraging signs for EU (advantage in mobiles)

L b P d ti it


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Labour Productivity

Growth

-4

-2

0

2

4

6

8

10

12

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

1970

1967

1964

1961

%

EU

US

Japan

P d ti it i l t d EU


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Productivity in selected EU

countries

0

20

40

60

80

100

120

140

1960

1965

1970

1975

1980

1985

1990

1995

Changeinprod

uctivi

US=100

France

ItalySpain

UK

United States

Source:World Bank World Development Indicators (2000).


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Growth

On average, the EU has had slightly greatergrowth than the US and lower than Japanduring the post-war decades

Precisely at the time of European economic

integration, the roles have been reversed Greater growth in the US (double that of the EMU

area)

Lower in Japan

Strong internal divergence in growth patterns in theEU

Extremely high growth in Ireland and Luxembourg

Moderate in Austria, Denmark, the Netherlands andPortugal

Low elsewhere in the EU

Average growth in the EU


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Average growth in the EU,

US, and Japan (1960-2000)

-4

-2

0

2

4

6

8

10

12

14

1

960

1

963

1

966

1

969

1

972

1

975

1

978

1

981

1

984

1

987

1

990

1

993

1

996

1

999

%

EU

US

Japan


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Conclusion

The impact of economic integration on theeconomic performance of the EU has notbeen as spectacular and immediate aspredicted by ex-ante studies

The gap between the EU and the US hasincreased in many areas (growth,productivity, trade, M&As)

Different economic cycles may have a lot to

say about diverging economic performances However, economic integration may be

setting the bases for a quicker adaptation bythe EU in the future to new economic

challenges


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Chapter 2

Cohesion


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Introduction

Have the alleged benefits of economicintegration been evenly distributed?

How is uneven development within the

EU likely to affect the competitivenessand further economic and political

integration in the EU?

National disparities in the


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EU

The EU is one of the most developedspaces in the World: GDP per capita below that of the USA and

Japan...

But well above any other large area of the world However, wealth is and has been unevenly

distributed across the EU: Until recently a core/periphery was visible

The core: Austria, Belgium, Denmark, Finland,France, Germany, Luxembourg, the Netherlands,Sweden, the UK, and Northern Italy

The periphery: Greece, Ireland, Portugal, Spain,and Southern Italy



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EU (II)

Recent changes have led to a blurring ofthe distinction between core and

periphery:

Poor economic performance of some of the

countries of the core (Finland, Sweden and the

UK)

High growth in the periphery (Ireland)

National disparities in GDP per


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National disparities in GDP per

capita and unemploymentGDP per capita 1985 Unemploymentrate 1985 GDP per capita 2000 Unemploymentrate 2000

EUR15=100

PPS

EUR15=100

%

EUR15=100

PPS

EUR15=100

%

European

Union

100.0 100.0 10.7 100.0 100.0 8.4

Austria 108.4 108.2 4.4 113.0 111.7 3.3

Belgium 102.3 105.5 8.9 106.2 110.7 8.6

Denmark 140.7 112.5 5.7 145.3 119.0 4.8

Finland 135.2 101.6 14.8 112.9 103.7 9.8

France 117.4 112.0 12.0 102.3 99.0 9.8

Germany 125.9 117.9 9.8 110.4 106.3 8.3

Greece 49.2 60.6 9.6 51.0 67.2 11.2

Ireland 65.9 60.9 10.1 118.9 118.8 4.2

Italy 91.9 101.5 12.3 89.0 98.7 10.5

Luxembourg 128.9 131.3 2.5 200.8 187.9 2.0

Netherlands 109.7 103.4 5.2 111.7 114.0 2.6

Portugal 29.1 55.1 6.7 50.0 75.7 4.0

Spain 53.8 70.5 21.1 68.4 83.0 14.2

Sweden 149.3 113.6 10.4 125.0 104.1 6.4

United

Kingdom

100.1 98.4 7.1 115.2 103.1 5.6

Regional disparities in the


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EU

Strong national contrasts hide even greaterregional contrasts: In 1998, the GDP per capita of Luxembourg was 3.8

times greater than that of Portugal

Hamburgs GDP was 6.7 times higher than that ofIpeiros (Greece)

Andalusia and Extremadura had unemployment rates of32.4 and 30.2%, whereas Salzburg or Belluno had amere 2.2 and 2.3% respectively.

Internal economic disparities are evident inalmost every single country in the EU Italy (GDP Lombardy 132.5 .... Calabria 59.2)

(Unemployment Trentino 3.8% .... Campania 25%)



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EU (II)

Strong regional contrasts also in: Portugal (Lisbon and the North vs. the South and

Centre)

France (Paris vs. the rest)

Spain (Northeast and Madrid vs. South and West) UK (South vs. North)

Germany (South vs. North)

Sweden (South vs. North)

Belgium (North vs. South) No regional contrasts in:

The Netherlands

GDP per capita, 1998


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GDP per capita, 1998

EUR15=100

More than 130

115 to 130

100 to 115

85 to 100

70 to 85

less than 70

Factors behind the existence


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Factors behind the existence

of territorial disparities

Factor endowment: Inherited economic situation: GDP per capita

Quality and quantity of human capital:Skilled labour, matching skills with labour

demands Accessibility: Infrastructure endowment

Innovation: Generation and assimilation ofinnovation. Investment in R&D

Sectoral structure


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The need for intervention

Do territorial differences in factorendowment justify the implementation of

European development policies?

Is a development policy really necessary?


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The economic debate Endogenous growth theory and new economic

geography: Greater accessibility, higher skills, and greater capacity

to generate and assimilate innovation will lead to theconcentration of economic activity

A development policy is needed in order tocounterbalance this tendency

Classical Ricardian trade theory: Factor endowment is less important

Integration leads to a rearrangement of economic activity Investment and innovation will flow to low cost areas

Labour will flow to high cost areas

Disparities will even out and policies are not needed


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The economic debate (II)

Neoclassical growth theories: Decreasing returns to scale will lead to

convergence

Even without economic integration

No need for development policies

Economic theory is inconclusive about the

territorial impact of economic integration


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The political debate

Economic integration is likely to enhanceterritorial disparities

A development policy is needed in order toachieve greater economic and social cohesion

This has been the dominating view since theSingle European Act

Each additional step towards economicintegration has been accompanied by

cohesion policies: Single European Market Reform of Structural

Funds

EMU Cohesion Fund

The history of EU


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The history of EU

development policies

Disregard for supra-national developmentpolicies in the 1960s: High levels of economic growth (ca. 6% per

annum)

Regional convergence

Strong national development policies

Establishment of an early regional policyin the 1970s (ERDF):

Change of the political orientation of Europeangovernments

British membership

Power struggle between the Commission and thestates

The impact of the early


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The impact of the early

regional policy

The early European regional policy failed tocorrect economic disparities: Disparities did not shrink, they expanded during the

late 1970s and early 1980s

The reasons for the failure: Lack of financial resources: Modest amount of

funds

Lack of continuity of regional actions: Five

different stages between 1975 and 1989 Excessive extent of the range of operations and

investments: Projects funded in almost every region

Absence of a clearly defined structure and of asystem of priorities: 41,051 projects funded

The principles of the reform


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of the Structural Funds

The principle of concentration 3 objectives:

Objective 1: Promoting the development andstructural adjustment of regions whose

development is lagging behind (for regionsbelow the 75% threshold of the EU GDP percapita)

Objective 2: Supporting the economic and socialconversion of areas facing structural difficulties

(Industrial and rural areas with high-long termunemployment and or high poverty levels)

Objective 3: Adapting and modernizing policiesand systems of education, training, and

employment



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of the Structural Funds (II)

The principle of programming Individual projects should be included within adevelopment plan

Much greater emphasis of the design and implementationof coherent development strategies through multi-annual

programming

Stages: Regional development plans

Community Support Framework

Operations programmes The principle of partnership

Involving as many actors as possible in the process

Aim: to achieve close co-operation between the

Commission and national, regional, and local institutions



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of the Structural Funds (III)

The principle of additionality In order to prevent European development

policies from becoming mere substitutes of

national development efforts

The principle of efficiency To guarantee the correct management and to

monitor the efficiency of the implementation of

European development actions


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The Cohesion Fund

Political belief that EMU is likely to leadto a concentration of economic activity

Cohesion Fund established to providefinancial contribution to projects in the

fields of environment and trans-Europeannetworks

Four beneficiaries: countries whose GNPper capita is below 90% of the EU average

Ireland Greece

Portugal

Spain

The efficiency of EU


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Development policies are, behind the CAP,the second most important set of policiesin the EU One third to 36% of the EU budget; 0.38 of EU

GDP Has this effort paid off?

Have the reform of the Structural Fundsand the introduction of a Cohesion Fund

led to greater territorial cohesion?



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Before the Reform, little or no catch-up inthe cohesion countries No convergence in Greece or Spain

Slow convergence in Ireland and Portugal

Since the Reform, the four Cohesioncountries have converged to the EU average Greatest convergence in Ireland

Lowest convergence in Spain

Convergence has also been fuelled by sloweconomic growth in the core Especially in Finland, Germany, Italy, and Sweden

Evolution of GDP per capita in


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Evolution of GDP per capita in

the Cohesion countries

50

60

70

80

90

100

110

120

1977

1980

1983

1986

1989

1992

1995

1998

EUR15=10

0EUR15

Greece

Spain

Ireland

Portugal

Before the Reform After the Reform



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development policies (II)

The catch-up since the Reform of the StructuralFunds has led some authors to claim thatregional intervention in the EU has been asuccess

The picture is, however, not as simple A closer look at development within the

Cohesion countries reveals a more complexpattern

The higher growth has taken place in some of the mostadvanced regions (Madrid, Catalonia, Dublin, Lisbon)

Large concentration of company headquarters, R&Dcentres, financial , insurance, and real estate

In contrast, many Objective 1 regions have lagged behind

European ButEU


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convergence divergence

within

states0

100

200

0 100 200

GDP per capita in 1977

Meanannualgrowth

between1977and1986

EU

0

100

200

0 100 200


Meanannualgrowth

between1986and1993

EU

0

100

200

0 100 200


Meanannualgrow

th

between1993and1998

Italy Spain


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50

100

150

50 100 150

GD per capita in 1980

Meanannualgrowth

between1980and1986

Italy

50

100

150

50 100 150


Meanan

nualgrowth

between1

986and1993

Italy

50

100

150

50 100 150


Meanannualgrow

th

between1993and1998

50

100

150

50 100 150


Meanannualgrowth

between1980and1986

Spain

50

100

150

50 100 150


Meanan

nualgrowth

between1

986and1993

Spain

50

100

150

50 100 150

GDP per capita en 1993

Meanannualgrow

th

between1993and1998

Greece

1508

6

UK


66/191

50

100

50 100 150


Meanannualgrowth

between1980and198

Greece

50

100

150

50 100 150


Meanannualgrowth

between198

6and1993

Greece

50

100

150

50 100 150


Meanannualgrowth

between1993and1998

50

100

150

50 100 150


Meanannualgrowth

between1980and1986

UK

50

100

150

50 100 150

GDP per capita en 1986

Meanann

ualgrowth

between19

86and1993

UK

50

100

150

50 100 150


Meanannualgrowth

between1993and1998



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development policies (III)

Many assisted regions have not performedparticularly well Growth in parts of Southern Italy has been

sluggish

Tendency towards greater polarization in manyEuropean countries

Since the implementation of the Reform,mixture of national convergence and

regional divergence Inequalities across States have fallen by 25%,but regional inequalities within states have risenby 10%

GDP growth, 1985-98

EUR15=100


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EUR15=100

more than 130115 to 130100 to 11585 to 10070 to 85

less than 70No data available



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y U

development policies (IV)

Over time, there has been no change in theCohesion States

The number of regions qualifying forObjective 1 has remained stable

If anything, the number has increased Many regions of core countries (Merseyside, South

Yorkshire, Burgenland) have been incorporated..

But few peripheral regions (only Abruzzo, with

parts of Ireland and Lisbonamong othersbeingphased out)

The analysis of unemployment trendshighlights divergence

Greater polarization in unemployment rates

C l i


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Conclusion

European development policies haveevolved from a minor and ratherhaphazard policy in the 1980s to thesecond most important policy of the EU

Achieving economic cohesion is, however,proven more elusive than expected National convergence...

But regional divergence

There are voices starting to question thisdegree of intervention, since it may lead tothe formation of sheltered economies


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Chapter 3

Ageing

I t d ti


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Introduction

Western Europe is ageingAs a consequence of:

Higher life expectancy

Falling birth and fertility rates

Ageing is likely to become a seriouseconomic, social, and political problemonce the baby boomers start retiring Pressure on the already well-developed European

welfare systems Consequences for the economic potential of the

EU

Countries are setting policies in motion in

order to curb ageing

Demographic change in the


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g p g

EU (I)

The EU is still the most populous among themajor world economic powers.

375 million vs 278 in the US and 117 in Japan

But the US has been catching up rapidly with theEU (57% of the population in 1960, 74% in 2000)

Low rates of population growth during thesecond half of the 20th century

Since 1960 the population of Europe never roseby more than 1% in a single year

In contrast, this rate was achieved 18 times in theUS and 8 in Japan

Population growth in Europe has been decliningsteadily

Average annual population growth in


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0

0.5

1

1.5

2

2.5

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

EU15

Japan

USA

Average annual population growth in

the EU, Japan and the USA

Demographic change in the


75/191

g p g

EU (II)

Prospects are bleak: According to the UN report on Replacement

Migration will peak in 2005

By 2050 the EU will have 44 million less than in

2000 (a loss of 12%) It will have 18 million less than the US

Twelve out of the fifteen current member stateswill lose population (exceptions: Ireland,Luxembourg, and France)

Population loss in Italy, Spain, and Greece willbe in excess of 20%

Th d li i bi th t (I)


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The decline in birth rates (I)

The second demographic transition: Fall in birth rates

Lower number of marriages and marriages later

in life

Unstable marriages and growing divorce rates

Increase in cohabitation

Increase in the number of children born out of

wedlock

The decline in birth rates


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(II)

Three types of demographic patterns: Population growth (France, the Netherlands,

Ireland, US):

Early decline in birth rates, but births have stabilizedand remain above the number of deaths

Still natural growth

Early zero growth (Austria, Denmark, Sweden,UK):

Early decline in birth rates without stabilization

Negative growth rates which caused a reaction and arebound of birth rates

Late zero growth (Italy, Greece, Spain,Portugal, Japan):

Late, but sharp decline in birth rates

Zero growth since the early 1990s

DENMARK ITALY

Evolution of birth and death


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FRANCE

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

NETHERLANDS

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

AUSTRIA

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

0

5

10

15

20

25

19

60

19

64

19

68

19

72

19

76

19

80

19

84

19

88

19

92

19

96

Birth r.

Death r.

SWEDEN

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

UK

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

GREECE

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

0

5

10

15

20

25

1

960

1

964

1

968

1

972

1

976

1

980

1

984

1

988

1

992

1

996

Birth r.

Death r.

USA

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

JAPAN

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

SPAIN

0

5

10

15

20

25

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Birth r.

Death r.

rates in selected European

countries, the US, and Japan

1960-97

The decline in birth rates


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(III)

National demographic patterns hideimportant intranational differences:

Significant internal contrasts in birth rates

in:

Italy (North/South division)

Germany (East/West division)

and, to a lesser extent, in other EU countries

Regional crude birth rate in the EU, 1997


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Crude Birth Rate

1997

more than 13

12 to 13

11 to 1210 to 119 to 10

less than 9

g

The decline in fertility rates


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The decline in fertility rates

Women (and families) are deciding to have lesschildren than ever before:

Total fertility rates in the EU are the lowest inthe world, bar some countries in Eastern Europeand Japan

Fertility decline started in the mid 1960s Early declines in the North (Denmark, Finland,

Germany, Luxembourg and Sweden): Demographiccore/periphery divide

Subsequent and more dramatic decline in the

Mediterranean countries (Italy and Spain now withsome of the lowest TFR in the world)

Short-lived rebound of fertility rates in Sweden andother Scandinavian countries in the early 1990s

Evolution of fertility rates


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Evolution of fertility rates

Country Name 1970 1980 1990 1995 1997 Fertility in 1997

as a % of 1970

Austria 2.29 1.62 1.45 1.40 1.37 59.83Belgium 2.20 1.67 1.62 1.57 1.60 72.73

Denmark 1.95 1.55 1.67 1.79 1.75 89.74

Finland 1.83 1.63 1.78 1.81 1.85 101.20

France 2.48 1.95 1.78 1.66 1.71 68.84

Germany 2.03 1.44 1.45 1.25 1.35 66.50

Greece 2.34 2.23 1.40 1.32 1.30 55.63Ireland 3.93 3.23 2.12 1.87 1.91 48.60

Italy 2.42 1.64 1.26 1.17 1.20 49.48

Luxembourg 1.98 1.50 1.62 1.68 1.71 86.36

Netherlands 2.57 1.60 1.62 1.53 1.53 59.49

Portugal 2.76 2.19 1.43 1.45 1.44 52.19

Spain 2.84 2.22 1.33 1.19 1.15 40.55Sweden 1.94 1.68 2.13 1.74 1.74 89.74

United Kingdom 2.44 1.89 1.83 1.71 1.70 69.76

Japan 2.13 1.75 1.54 1.42 1.39 65.11

United States 2.48 1.84 2.08 2.06 1.99 80.24

Source: World Bank World

Development Indicators (2000)

Evolution of total fertility rates in selected


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1

1.5

2

2.5

3

3.5

4

4.5

1960

1966

1972

1978

1984

1990

1996

TotalFertilityR

ate

France

Germany

Spain

Sweden

Ireland

Evolution of total fertility rates in selected

European countries

The ageing of the EUs


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population (I)

The decline in birth and fertility rates isprofoundly altering Europes age structure

Younger population cohorts are becomingsmaller than older ones

The population cohort of those aged between 30 and

34 is 50% larger than those aged between 0 and 4 There are more 55 to 59 year olds than children

between 0 and 4

Life expectancy is increasing Women in most countries of the EU can now expect to

live until the age of 80 Male life expectancy in all countries bar Portugal

above 72

Life expectancy at birth, 1970-1997


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p y ,1970 1980 1990 1997 Change

1970-97(in %)

Austria 70.3 72.7 75.7 77.3 10.0Belgium 71.2 73.2 76.0 76.8 7.9

Denmark 73.3 74.3 74.7 75.3 2.8

Finland 70.3 73.2 75.1 76.9 9.4

France 72.0 74.3 76.8 78.1 8.4

Germany 70.5 72.6 75.1 76.7 8.8

Greece 71.8 74.4 76.9 77.7 8.2Ireland 71.1 72.7 74.6 75.9 6.8

Italy 71.9 73.9 77.1 78.2 8.8

Luxembourg 70.3 72.7 75.2 76.5 8.7

Netherlands 73.5 75.7 76.9 77.5 5.4

Portugal 67.4 71.4 73.7 75.0 11.2

Spain 72.3 75.5 76.7 77.9 7.7Sweden 74.5 75.9 77.5 79.1 6.2

United Kingdom 71.7 73.8 75.6 77.1 7.6

United States 70.8 73.7 75.2 76.1 7.5

Japan 71.9 76.0 78.8 80.0 11.2

Source: World Bank World Development Indicators (2000).

The ageing of the EUs


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population (II)

Europe is ageing There are now 41.5 people million more over 70

than in 1980 (an increase of 40%)

The percentage of the elderly has risenconsiderably everywhere, bar Ireland

In Greece, Finland and Portugal the percentageof the population aged 65 and above doubledbetween 1960 and 1997

Italy and Spain were not far behind

Population projections predict that the process ofageing is far from over

According to the UN the over 65 will rise to 95.6million in 2050 (29% of the population)

Population aged 65 and above (% of total)


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1960 1970 1980 1997 Change

1960-97

(in %)

Change

1980-97

(in %)

Austria 12.0 14.1 15.4 14.8 23.3 -3.5Belgium 12.0 13.4 14.3 16.0 34.1 12.0

Denmark 10.6 12.3 14.4 14.7 39.2 2.2

Finland 7.2 9.2 12.0 14.4 99.2 20.0

France 11.6 12.9 14.0 15.4 31.9 10.0

Germany 11.5 13.7 15.6 15.5 34.5 -0.7

Greece 8.2 11.1 13.2 16.6 100.9 26.0

Ireland 11.2 11.3 10.7 11.3 1.0 5.2

Italy 9.3 10.9 13.2 16.6 78.2 26.1

Luxembourg 10.8 12.0 13.5 13.9 28.6 3.4

Netherlands 9.0 10.2 11.5 13.4 49.0 16.5

Portugal 8.0 9.2 10.5 16.1 101.2 53.6

Spain 8.2 9.8 10.7 15.9 93.9 49.1

Sweden 12.0 13.7 16.3 17.3 44.4 6.1

United Kingdom 11.7 12.9 15.1 15.8 35.0 4.7

United States 9.2 9.8 11.2 12.3 34.1 9.9

Japan 5.7 7.1 9.0 15.5 169.8 71.1

P di t d l ti f th t t l d ld l l ti


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Predicted evolution of the total and elderly population

in selected European countries, the EU and the US

2000-50

Total population Pop.

Change

Elderly population

(65+)

% Elderly Support ratio (15-

64/65+)

2000 2050 2000-05 2000 2050 2000 2050 2000 2050

France 59.08 59.88 1.35 9.41 15.26 15.93 25.48 4.10 2.26

Germany 82.22 73.30 -10.85 13.44 20.79 16.35 28.36 4.17 2.05

Italy 57.30 41.20 -28.10 10.41 14.37 18.17 34.88 3.72 1.52

UK 58.83 56.68 -3.65 9.43 14.11 16.03 24.89 4.06 2.37

EU 375.28 331.31 -11.72 61.60 95.60 16.41 28.86 4.08 1.96

USA 278.35 349.32 25.50 34.83 75.90 12.51 21.73 5.28 2.82

Population in millions

Source: Own elaboration with United Nations Population Division data. Medium variant.

Regional share of senior citizens, 1998


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Population 65 and ove

(% of total) 1998

more than 21 %

19 to 21 %

17 to 19 %15 to 17 %13 to 15 %

less than13 %

The factors behind the


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ageing process (I)

Causes for higher life expectancy Advancement of medicine and health:

Eradication of many infectious and contagious diseases

Advancement in the treatment of degenerative diseases

Nutritional and health improvements Social factors:

Relative wealth of European societies

Reduction in the number of hours worked during life



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ageing process (II)

Causes behind the decline in fertility Advances and greater availability of

contraceptive methods (M. Murphy) (althoughfor some this is not a cause)

Economic factors:

Pecuniary and time cost of having children

Children cannot longer be regarded as sources forfuture family support

Opportunity costs of having children in societies with ahigh female participation in the labour market. This

has become more evident recently: Decline in job stability in Europe (relying on one salary

is not enough!)



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ageing process (III)

Sociological factors: The gap in educational attainment between men and

women in western Europe has disappeared

Female employment has increased dramatically

Female employment is regarded as the main

determinant in the fall of fertility rates The opportunity cost of having a child increases

Especially, and despite some changes in male attitudes,since the burden of child-bearing still greatly falls onwomen

The opportunity cost of having a child increases as

womens wages rise However this argument is found wanting when we

notice that the countries with the lowest fertility ratesalso have the lowest female employment

Evolution of female employment, 1970-1997


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Female

emp. 1970

(%)

Female

emp. 1997

(%)

Male emp.

1997 (%)

Increase in

female emp.

1970-97

Female as a %

of male emp.

(1997)

Austria 38.4 46.2 65.6 20.3 70.4

Belgium 30.5 36.3 56.4 19.0 64.4

Denmark 36.1 55.2 68.8 52.9 80.2

Finland 43.7 46.6 56.1 6.6 83.1

France 36.2 41.2 56.3 13.8 73.2

Germany 38.6 43.1 61.5 11.7 70.1

Greece 25.7 30.8 59.0 19.8 52.2

Ireland 26.2 38.3 61.5 46.2 62.3

Italy 28.5 28.9 55.8 1.4 51.8

Luxembourg 26.7 36.8 63.5 37.8 58.0

Netherlands 25.9 46.8 68.4 80.7 68.4

Portugal 25.4 45.7 63.2 79.9 72.3Spain 24.4 26.4 52.1 8.2 50.7

Sweden 35.8 49.2 57.3 37.4 85.9

United Kingdom 35.6 50.0 64.9 40.4 77.0

EU - 39.9 59.5 - 67.1


Family policies (I)


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Family policies (I)

European governments have adopteddifferent policies to tackle decliningfertility: Very high support in Sweden (and Denmark and

Finland): Generous child benefit package Generous public childcare provision

Lengthy maternity and paternity leaves

Austria and Germany

Generous policies Greatest support for mothers who stay at home to look

after children

Family policies (II)


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Family policies (II)

France (and Belgium and Luxembourg) Horizontal and vertical redistribution of resources to

families with children (especially for families withthree children)

UK

Means testing and tackling child policy Low-income mothers benefit the most from support

meassures

Lower support in the Netherlands, Ireland, andMediterranean countries

Family policies (III)


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Family policies (III)

Have family policies contributed toredress the decline in fertility? Some claim that the impact has been weak

(Gauthier; Hoem)

Others suggest that family policies have had animpact

The actual evidence is inconclusive

Lack of adequate family policies may have contributedto the decline in fertility in southern Europe

Some countries with more generous family policies(Sweden, Finland, Denmark, France, the UK) tend tohave slightly higher fertility rates

But countries with similar family policy regimes differin their fertility rates

Social policies for old age


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Social policies for old age

The process of ageing is putting Europeansocial services under considerable stress: Social policies for old age have become one of

the most important areas of public policy

Old age expenditure (as a % of GDP) has risensignificantly since the 1980s and remained stableduring much of the 1990s

Old age expenditure represents two fifths of allsocial expenditure (highest incidence in Italy,

Greece, and Spain)

Old age expenditure in the EU


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Source: EUROSTAT data.

Old age expenditure as apercentage of GDP

Old age expenditure as apercentage of social

expenditure

1997 1993 1980 1997 1993 1980EUR15 10.9 10.7 - 38.3 36.8 -

Austria 10.6 10.5 9.0 36.8 36.4 34.0

Belgium 8.5 8.5 6.8 30.1 29.0 -

Denmark 11.6 10.7 - 38.2 33.5 -

Finland 8.5 9.5 6.1 29.1 27.5 30.9

France 11.0 10.5 8.1 35.6 33.9 -

Germany 11.5 11.1 10.8 38.4 38.3 40.5

Greece 9.8 9.0 - 41.4 40.5 -

Ireland 3.2 4.3 4.7 18.1 20.8 -

Italy 13.4 12.8 8.3 51.6 49.0 -

Luxembourg 7.1 7.1 8.0 28.6 29.0 -Netherlands 9.3 10.2 7.5 30.8 30.3 -

Portugal 7.0 6.1 - 31.0 29.0 -

Spain 8.7 8.4 6.2 40.8 35.2 35.3

Sweden 12.3 13.0 - 36.6 33.8 -

United Kingdom 10.1 10.2 - 36.3 34.5 -

Conclusion


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Conclusion

Ageing poses a serious challenge for thefuture of European societies: Society may become more conservative and risk-

averse, less open to innovation and foreigninfluences, and less dynamic and able to compete

Ageing represents a challenge for public finances

More and better targeted policies may beneeded

Even if the perception of an aged society as a

less dynamic society may be rather reductionist.


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Chapter 4

Migration and

xenophobia

Introduction


101/191

Introduction

While Europe ages, neighbouringcountries have young and dynamicpopulations who find few outlets in theirlocal labour markets:

Result: development of large migration flowstowards Europe Many see this trend as a solution for population ageing

and to ease social and economic pressure in thecountry of origin of migrants

Many others see migration as a threat, leading toxenophobia and the emergence of racist attitudes andparties

European legislation has been tightened in orderto restrict migration into Europe

Migration and its forms (I)


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Migration and its forms (I)

Definition of migration: The movement or displacement of a person or a

number of persons from one place to another.

Forms of migration:

Individual or group migration Regional, inter-regional, international or

intercontinental

Temporary or permanent

Legal and illegal

Migration and its forms (II)


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Migration and its forms (II)

Forms of migration (II): Economic migration: when people move in

search of jobs and/or a better life

Types of economic migration: Migrant or employer-initiated

Economic migration is closely linked to long-termeconomic cycles

Non-economic migration: Causes Natural disaster (the destruction of the island of

Montserrat by a volcanic eruption, floods, earthquakes,droughts)

War

Political and/or social persecution (political andreligious beliefs, race, ethnicity, gender)

Division between political refugees and asylum seekers

Mass migration in post-warE (I)


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Europe (I)

In modern times migration out of Europehas predominated: America, Australia and South Africa as the main

destinations

At the beginning of the 20th century more than amillion Europeans a year were leaving theContinent

The second half of the 20th century hasseen a reversal of this trend Outward migration has been replaced by

migration within and into Western Europe

First, 25 million refugees back to their places of origin(mainly flow east-west, including 12 million Germans)

Then migration from former Communist regimes to theWest 3.8 million East Germans until the erection of

Mass migration in post-warE (II)


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Europe (II)

Since the 1950s emergence of South/Northeconomic migration Basically in low-skilled and poorly paid sectors

(rejected by the local workforce)

Several waves and destination: 1950s: Italians moving to Germany, Switzerland, andFrance

Late 1950s and 1960s: Spaniards and Portuguese(same destinations)

1960s: Turks and Yugoslavs (to Germany) andworkers from the Maghreb (to France)

Irish to Britain and Finns to Sweden

Migration very often employer-initiated andstate-managed

Large volumes of migration:

Mass migration in post-warE (III)


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Europe (III)

Jobs for migrants varied: West Germany: Jobs in manufacturing (15% inconstruction)

France: 30% in construction. Smaller proportion ashealth workers and manufacturing

UK: West Indians as civil servants, South Asians intextiles

As did the formal rights of immigrants:

Germany, Austria and Switzerland: Gastarbeiters(high levels of job security but low protection withoutjob contract)

UK, France and the Netherlands: Rights of immigrantsto stay, generally more developed (possibility to applyfor citizenship after a period living in the country)

The crisis of the 1970s brought

South/North migration in Europe almost

The renewal of migration inth 1990


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the 1990s

Several factors have led to a renewal ofmigration in the 1990s: Economic and social factors:

The economic bonanza of the second half of the 1990s

The reduction of unemployment rates associated to the

introduction a labour market flexibility The higher level of qualification of local workers

The demographic boom in neighbouring areas of theworld

Political factors:

The fall of the Berlin Wall The implementation of the principle of free movement

of people after the Single Market.

Foreign or foreign-born populationForeign population

% f l l i


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Foreign population

in thousands% of total population

1987 1997 1987 1997

Austria 326 733 4.3 9.1

Belgium 863 903 8.7 8.9

Denmark 136 250 2.7 4.7

Finland 18 81 0.4 1.6

France 3714 3597 6.8 6.3

Germany 4241 7366 6.9 9.0

Ireland 77 114 2.2 3.1

Italy 572 1341 1.0 2.2Luxembourg 103 148 26.8 34.9

Netherlands 592 678 4.0 4.4

Portugal 95 175 1.0 1.8

Spain 335 610 0.9 1.5

Sweden 401 522 4.8 6.0

UK 1839 2066 3.2 3.6

EU 13312 18584 3.6 4.9

Australia* 3247 3908 20.8 21.1

Canada* 3908 4971 15.4 17.4

US* 14080 24600 6.2 9.3

*Data for Austalia, Canada, and the US refer to foreign-born populationin 1986 and 1996

Source: SOPEMI, 1999.

migration in the 1950s and


109/191

g

1990s (I) The traditional North/South division has beencompletely slashed:

Finland, Greece, Ireland, Italy, Portugal andSpain are no longer sources of emigrants, buthave positive migration balances (in the case of

Italy since as early as 1972) Intra-EU migration is no longer South/North but

occurs in both directions (case of Ireland, Sun-belt phenomena)

The Mediterranean sea (and the former IronCurtain) are becoming the new Rio Grande ofEurope



110/191

g

1990s (II) Employer initiated migration has almost becomea thing of the past:

In contrast to more common practices in the US,Canada, or Australia.

European employers and governments are more

reluctant to initiate migration. Some exceptions: Attempt by the German government

in 2000 to recruit IT experts in India

Migration has become almost exclusively

migrant-initiated



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g

1990s (III) Increase of clandestine and illegal immigration As a result of the tightening of national and

European immigration legislation

More migrants decide to come and stay inEurope illegally:

Flourishing of mafias, racketeers and organised crimesyndicates trying to smuggle immigrants into Europe

Diversification of immigrant groups

Highly qualified migrants

Low-skilled economic migrants and clandestines Refugees and asylum seekers

Migration of the highlylifi d (I)


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qualified (I)

Migration of the highly qualified has flourishedduring the 1990s:

Basically in sectors such as finance, banks,insurance, and business services

But increasingly also in fashion, design and R&D

The main beneficiaries has been the financialcentres and large urban areas of the Continent(London, Paris, Frankfurt, Berlin, Madrid, Milan,Amsterdam)

Increasing importance of airport hubs

Recruitment in many of these sectors isincreasingly happening at a European, if notglobal, level

Migration of the highlylifi d (II)


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qualified (II)

One of the triggers of the increased mobility hasbeen the implementation of the principle of freemobility of labour in the SEM.

No longer are work or residence permits neededfor EU nationals who live abroad

Cultural and linguistic barriers are now lessimportant for these groups

Better prepared and better travelled generations

Mutual recognition of qualifications

But also process of globalization

Migration of the highlylifi d (III)


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qualified (III)

Process of globalization: Restructuring of large companies (internationalM&As)

Radical change in the profile of the Europeanmigrant

In contrast to the low-skilled worker from SouthernEurope

We now have highly qualified young professionals

This migration is however tiny in numbers (5.5million EU nationals living outside their country,in comparison with 12 million in the early 1970s)

Migration of the low-skilledand clandestines (I)


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and clandestines (I)

Migration at the lower end of the scale has beentaken over by people from outside the EU

Immigrants escaping poverty to the East andSouth of the EU and hoping to find EldoradoEurope

In comparison, the migration of the Europeanlow skilled has been negligible

Main destination is low-value added service jobs

Pay in these sectors is often so low that European

workers cannot or do not compete for these jobswith immigrants from outside the EU

Migration of the low-skilledand clandestines (II)


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and clandestines (II)

Migration is becoming a truly globalphenomenon

Not only is western Europe receiving moreimmigrants from outside the EU than in the1980s

But the regions of origin of the migrants areincreasingly diversified

Several waves:

Fall of the Berlin Wall: Eastern Europeans

First wave: Poles, Czechs, and Hungarians intoGermany and other European destinations

Followed by former-Yugoslavs, Albanians, Romanians,Bulgarians, Ukranians, and Russians

Migration of the low-skilledand clandestines (III)


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and clandestines (III)

Several waves (II): South/North flows increasing since 1995: Northern and Sub-Saharan Africans

Latin Americans

Central and South East Asians

Chinese

Situation similar to that of the US

Although European borders are more difficult to police

Most migration is likely to be illegal

Overstaying visas

Entering the EU through its Eastern Border

Making perilous Mediterranean sea crossings

Illegal immigration increasingly in the hands of gangsand crime syndicates

Migration of the low-skilledand clandestines (IV)


118/191

and clandestines (IV)

Sectors benefited by migration: Low-value added services: cleaners, waiters,hotel, and chamber maids

Construction

Labour-intensive agriculture

The frequent use of clandestines make them easy preyfor exploitation

Informal sector From working as street sellers

to criminal activities.

Refugees and asylumseekers (I)


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seekers (I)

Boom of refugees and asylum seekers since theend of the 1980s

As a result of increasing conflict and of politicalpersecution elsewhere in the world

But also, some claim, as a result of the increasing

differences in wealth Countries of destination:

Germany at first (more than 100,000 asylumapplications per year at the beginning of the

1990s) The UK since (more than 100,000 applications in

the year 2000)

Belgium, Ireland, and the Netherlands with thehighest relative weight

Refugees and asylumseekers (II)


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seekers (II)

The inclusion of restrictive legislation acrossEurope have contributed to stem the flow

Extension (and co-ordination) of visarequirement to a large number of countries(Schengen)

Restriction of asylum rights to national ofcountries which have not signed the UnitedNations Conventions on Refugees and on HumanRights

Co-ordination of asylum applications acrossEurope

Asylum applications inselected EU countries


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selected EU countries

1985 1988 1992 1996 1999

Belgium 5,387 4,510 17,675 12,433 35,778

France 28,925 34,352 28,872 17,405 30,830

Germany 73,832 103,076 438,191 117,333 95,113

Netherlands 5,644 7,486 20,346 22,857 39,286

Sweden 14,500 19,595 84,018 5,774 11,771

UK 6,200 5,740 32,300 29,640 70,410

EU 159,180 210,740 672,380 227,800 352,380Source : EUROSTAT data.

The European response tomigration (I)


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migration (I) Which has been the reaction of the EU to the

renewal of migration across Europe?

Two positions:

Free mobility of labour for EU nationals

Increasingly restrictive and co-ordinated policies for

non-EU citizens Free mobility of labour for EU nationals:

Abolition of red-tape

Equivalence of qualifications

Social security and welfare recognition Removal of physical border controls

Right of vote to non-nationals in local andEuropean elections

The European response tomigration (II)


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migration (II) Restrictive policies for non-EU citizens

Implementation of harsher national legislativeframeworks both on immigration and asylum

Greater co-ordination of European policies:

Several stages:

Ad hoc groups: Trevi, Ad Hoc Group on Immigration,the Police Working Group on Terrorism

Schengen Group

Treaty of the European Union: Introduction of theThird Pillar on Justice and Home Affairs

Treaty of Amsterdam: partial Europeanization of theThird Pillar

The European response tomigration (III)


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migration (III) Features of a co-ordinated migration policy

Asylum seekers are entitled to have their casesreviewed only by one country

Creation of EURODAC

Homogenization of the EU external borders:

Tougher controls

Common visa policy

Creation of databases containing information onimmigrants

Police co-ordination (Europol)

The emergence of a FortressEurope

Migration and xenophobiain the EU (I)


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in the EU (I) Why this tightening of European laws towards

migration?

Some claim is the result of increasing demandsby the population:

Increasing xenophobia and racist attitudes:

Negative perception of migration by the population insurveys and opinion polls

Immigrants as criminals

Immigrants responsible for unemployment

Immigrants as welfareclaimants

Immigrants as a threat to national culture Emergence of xenophobic and racist parties (France,

Belgium, Austria, Germany, Italy)

Increase in the acts of violence against immigrants(attacks on refugee hostels in Germany, razziasvirtually everywhere else)

Attitudes towards foreigners in the EU


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Number of foreigners living in your country

0%

20%

40%

60%

80%

100%

Gr BI DAF

DK

UK

NLS L P EIRS

FEU

Don't know

Not many

A lot

Too many

Source: Eurobarometer 48.

Migration and xenophobiain the EU (II)


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in the EU (II) Emergence of xenophobic and racist parties:

Front National in France

Freedom party in Austria

Vlaams Blok in Belgium

Neo-nazi groups in Germany

To a lesser extent, the Northern League in Italy Increase in the acts of violence against

immigrants or their descendants Attacks on refugee hostels in Germany (and what has

been considered a lenient attitude by the Courts on

those crimes until recently Racial riots in Northern England

Razzias against immigrants virtually everywhere else(eg.: El Ejido in Spain)

Migration and xenophobiain the EU (III)


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in the EU (III) But it my be also spurred by the securitization

of migration:

Negative portrayal of immigrants in Europeanlegislation.

Immigration as a security issue

Immigration as a cost for European societies Immigration as something to be restricted

Xenophobic discourses by fundamentally right-wing (but not only right-wing) politicians

General portrayal of immigration as a burden, ratherthan as an asset

Conclusion


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Renewal of mass migration in and towards theEU since the 1990s: Qualified migration within EU

Unskilled migration from outside the EU towards it.

Effects of the new migration wave

Western Europe becoming more diverse andcosmopolitan

But also generating rejection: Negative attitude towards migrants and their

descendants in most EU countries

Restrictive migration and asylum laws across the EU

Migration being driven underground


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Chapter 5

Unemployment and

social polarization

Introduction


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The post-war economic boom brought aboutnearly full employment across most ofWestern Europe

However the oil crisis, socio-economic

restructuring, and globalization haveprovoked a radical change in the panorama Greater participation of women in the labour market...

But a significant rise in the levels of structuralunemployment

In the 1990s measures have been adopted toflexibilize labour markets: Unemployment has decreased...

But social polarization has increased

The process of socio-economic restructuring


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economic restructuring

Collapse of the (Fordist) system of massproduction Demise of the three pillars of the post-war consensus:

full employment, prosperity, and social citizenship

Rise in unemployment levels From unemployment rates below 5% (bar Ireland and

Italy), before 1975

To 23% in Spain, 20% in Finland, and Ireland

By the mid-1990s the main economies in the EU (bar

the UK) had unemployment rates in excess of 10%

Unemployment rates as a Europeanphenomenon: Much lower unemployment rates in the US and Japan

UnemploymentFinland Spain


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0

5

10

15

20

25

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

MaleTotal

France

0

5

10

15

20

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

Male

Total

Italy

0

5

10

15

20

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

Male

Total

0

5

10

15

20

25

30

35

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

MaleTotal

Japan

0

1

2

3

4

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

Male

Total

USA

0

2

4

6

8

10

12

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Female

Male

Total

Unemployment (II)


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Regional unemployment differences areeven greater: Unemployment in excess of 20% in Southern

Italy, Southern and Western Spain, and theformer East Germany

High rates in many old industrial regions ofNorthern France, Belgium, and West Germany

Low unemployment in the peripheries of largeurban regions...

And in many intermediate regions

Regional unemployment1999

more than 2016 to 20

12 to 168 t 12


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8 to 124 to 8

less than 4

The problems of structuralunemployment


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unemployment

Having a large percentage of the populationwilling to work idle represents a waste forany economy Especially since often the unemployed tend to be

younger and better prepared than those employed

Social exclusion Large sections of the population are excluded from

the labour force

Increase in long-term unemployment rates

Serious financial problems for the state Expansion of unemployment benefits

Unemployment benefits disguised as other benefitsin certain countries (Italy and the Netherlands)

Long-term unemployment


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Long-term unemployment is positivelylinked to total unemployment Highest long-term unemployment in the poorest

regions of Spain, Greece, and the South of Italy...

But also in West Germany and Belgium

Lowest long-term unemployment in the UK andScandinavia

And negatively linked to totalemployment levels

Long term unemploy1998


45 to 5040 to 45


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40 to 45

35 to 40

less than 35

Employment shar

(in %) 1998


50 to 55


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45 to 5040 to 45

less than 40

Unemployment in socialexpenditure


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expenditure

Unemployment expenditure as a

percentage of total social expenditure

Evolution of unemployment

expenditure at constant prices.

1990=100

1997 1993 1980 1997 1993 1980

EU 12 7.2 9.1 - 135.8 158.1 -

Austria 5.3 5.4 2.0 149.1 140.2 34.7Finland 13.0 15.6 4.3 274.1 314.1 40.5

France 7.5 8.8 - 115.1 124.6 59.6

Germany 8.7 10.2 3.7 224.1 240.2 53.3

Ireland 15.0 16.2 - 157.4 141.9 47.0

Italy 1.8 2.2 - 127.2 149.2 79.0

Netherlands 10.5 8.8 - 140.7 117.3 58.0Spain 13.8 21.1 15.4 96.5 150.4 55.7

The roots of persistentlyhigh unemployment


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high unemployment The regulation of European labour

markets Taxation:

Overall marginal tax rate higher than 60 percentin most European countries

In contrast, 40% in the USA and 23% in Japan

It could thus be argued that the higher the levelof taxation the higher the level of unemployment

However the relationship is far from perfect:

Relatively low taxation in Spain highunemployment

High taxation in Scandinavia Lower unemploymentthan in other parts of Europe

The roots of persistentlyhigh unemployment (II)


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high unemployment (II) The power of European trade unions

Higher union membership than in the USA or Japan

Different evolution of trade union membershipacross the EU

Decline in France (more than 50%), the UK, and Spain

Moderate increases in Belgium or Scandinavia

Power of trade unions increased by having theirparticipation in centralized collective bargaining bylaw

Trade unions thus represent a much larger share ofthe workforce than their membership may suggest

Trade unions are much less powerful in the US orJapan

The roots of persistentlyhigh unemployment (III)


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high unemployment (III)

The existence of a minimum wage It has been argued that the existence of minimum

wages puts low skilled workers out of the market

This, however, does not always seem to be the case(i.e.: introduction of the minimum wage in Britain in

1998)

More important is the level of the minimumwage

Minimum wages in Europe tend to be much

higher than in the US Countries with the highest minimum wages haveendured high unemployment

The relationships is again far from perfect

The roots of persistentlyhigh unemployment (IV)


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high unemployment (IV) High social benefits:

High social benefits have been accused ofentrapping people in welfare assistance and, thusin unemployment (the povertytrap)

Workers rights Workers rights still reflect the situation of the

post-war social compromise

Mismatch between educational supplyand labour demand

Measures to combat highunemployment


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unemployment Main aim: to make European labour markets

more flexible

Meaning of flexibility: making employees moredisposable:

Easier and cheaper to dismiss Less covered by constraining agreements and regulationsover conditions

Less health, safety, and security offered to workers

Two interpretations of flexibility: Outright labour market deregulation: In the UK The reform of labour market laws and of the welfare

state: Netherlands, followed by Continental Europe Combination of restrictive measures with greater worker training

The impact of labourmarket reform


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a et e o Reduction of unemployment

Britain and the Netherlands (the early adopters) haveenjoyed lower unemployment rates

Spectacular effect in Spain. Between the introduction oflabour market flexibility in 1996/97 and 2000, Spain has

created half of all the new jobs in the EU.Unemployment came down from 22 to 14%

Reduction of unemployment in Germany and France

Reduction even in the countries more reluctant tointroduce flexibility measures: Belgium and Italy

But the timing of the reforms has coincided witha period of economic expansion And in the past economic growth has been associated

with job creation

The impact of labourmarket reform (II)


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( ) The jobs created as a result of flexibilization

are not the same as the previously existingemployment

Emergence of atypical employmenteverywhere in Europe Part time work:

Mainly women: the number of women in part-time jobstriples that of men

Very high in the Netherlands, low in Scandinavia

Temporary or limited contract work: Mainly the young and women Prevalent in new jobs being created in Spain and France

The impact of labourmarket reform (III)


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( ) Other forms of atypical employment:

Self-employment: Basically male, and fundamentally a middle age phenomenon.

Also among immigrant groups and minorities

No sign of the emergence of a new entrepreneurial class

Concentrated in low productive and marginal sectors(agriculture)

High in Greece, Spain, Portugal, and Ireland

Informal employment: Family work

The informal or underground economy: Difficult to calculate, but growing across Europe

Most important in Southern Europe and Scandinavia

The informal economy


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Average

1989/90

Average

1999/00

Increase

1990-2000

Austria 6.9 9.8 2.9

Belgium 19.3 22.2 2.9

Denmark 10.8 18.0 7.2

Germany 11.8 16.0 4.2

Greece 22.6 28.7 6.1

Finland 13.4 18.1 4.7France 9.0 15.2 6.2

Ireland 11.0 15.9 4.9

Italy 22.8 27.1 4.3

Netherlands 11.9 13.1 1.2

Portugal 15.9 22.7 6.8

Spain 16.1 22.7 6.6

Sweden 15.8 19.2 3.4

UK 9.6 12.7 3.1

US 6.7 8.7 2.0

Japan 8.8 11.2 2.4

Source: Schneider (2001)

The impact of labourmarket reform (IV)


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( ) The concentration of atypical employment forms

among women, the young, the elderly, ethnicminorities, and immigrants and the less skilled iscontributing to the segmentation of society: The A-team: Highly qualified stable wage-earners

The B-team: An underclass of unstable and precariousworkers (MacJobs)

According to some (Harvey, 2000) this representsa return to the period prior to the mid-century

compromise Proletarianization of the labour force

Employer having increasing control to the detriment ofworkers rights and stability

Conclusion


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Europe seems to be stuck between a rock

(unemployment) and a hard place(atypical work)

Unemployment has decreased as a resultof the flexibilization of labour markets...

But, inequalities have increased Managerial and executive wages have been

rising at a greater rate than those of stableemployees

And the gap between stable employees and thosein precarious employment has also beenwidening

the european union:econmic,socity and polity

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