The European Labour Mobility

The role of EU labour mobility for the Brexit vote, Chance or Risk for the British Economy?


Term Paper (Advanced seminar), 2016
35 Pages, Grade: 2.4

Excerpt

Table of contents

1 Introduction

2 What has the EU membership ever done for the UK?
2.1 Economy, Growth effect, trade boosting
2.2 Education and Research

3 British labour market description
3.1 Impact of the free labour mobility on the British labour market
3.2 Unemployment rate, statistics about different population groups

4 Brexit debates
4.1 Trade and economy
4.2 Immigration question and the position of the UK in the world

5 Meaning of Brexit for the UK economy
5.1 Banking and financial services, corporate finance and taxes
5.2 Employment and unemployment share schemes
5.3 Construction and infrastructure
5.4 Competition, intellectual property and data protection

6 The UK after Brexit
6.1 Two years transition
6.2 Advantages and disadvantages of the Brexit
6.3 Possible scenarios for the British economy

7 Conclusion

8 Literature

9 Ilustrations

1 Introduction

In the December 2015, the EU Referendum Act received the Royal Assent and became more probable. This legislation gave Britain the possibility to organize a Referendum about UK´s continuing the membership in the European Union. The United Kingdom held a referendum on June 1975 to become a member of the European Union and in that year, this referendum was called Common Market referendum and EEC membership. The electorate expressed significant support for the EEC membership, with up to 67 per cent in favour on a 65% turnout. After the EU Referendum Act made the referendum more probable, business and individuals started considering the potential impact of the UK leaving the EU, often referred to as a "Brexit". Former Prime Minister David Cameron with his government started negotiating with the EU representatives about a possible way to give more power back to the UK Government. The negotiations were about some potential changes to the UK´s existing EU membership; new terms have been agreed or more clarity received.

The UK´s relationship with the EU has been controversial ever since the Treaty of Rome established the later (Baimbridge/Whyman 2008, 25). Indeed, public opinion polls since 1992 demonstrate a majority opinion amongst the UK electorate that remains critical of the EU, with a not insignificant number desiring withdrawal (Baimbridge/Whyman 2008, 25). Even successive governments and British establishment e.g. Lord Hanley, 3 July 1995, House of Lords claimed the huge benefit of remaining in the EU, the public opinion wasn´t really pro EU.

The UK Government always got more power and special power about how to regulate its labour market (free mobility from other EU citizens in the UK). As a second economy in the EU, UK had a lot of power to make changes in many legislations and the UK is the one of the country with the most subventions in the EU. Before this analysis moves on to the Brexit, it is very important to state that the UK was always an EU member with special treatment. According to the Telegraph newspaper, Margaret Thatcher negotiated a deal in the year 1984, that allowed Britain to obtain a rebate of its annual contribution to the EU: for example, in 2015, the UK´s full membership fee would have been £17,8 billion, however, Britain didn’t have to pay that full fee, they only paid £12,9 billion. From this perspective, is clear to notice, that the UK received many advantages from the EU, not to mention subventions and being a part of the single market. From all this positive aspect of the UK membership in the European Union, it is quiet irrational or it´s difficult to understand why the Britain voted on June 23rd, 2016 to leave the EU.

To understand this decision, this attitude, this paper tried to focus on one of the main leave argument. Many leave campaigns tried to argument, that UK is better without free labour mobility, because this steals jobs and brings more poverty in the British society. This paper tries to answer the question about the impact of the free mobility Act on the final decision to leave the EU. This topic is significantly important, because it could have a possible impact on the next generations in Europe, not only regarding the freedom, but also in the European identity. There are many reasons that could justify the leave, like the British place in Europe and in the world (its autonomy), or the free mobility and free labour mobility, etc.

To give a possible answer to this questions about why Britain left the EU, this paper will first try to answer the question about what the UK membership of EU brought to UK. In Chapter 2, this analysis will try to show the impact of the EU membership of the UK in its economy (growth effect, trade boosting), education, research and EU programs such as ERASMUS and Universities collaborations will be considered. Chapter 3 will try to describe the British Labour Market: this part of the analysis will try to show the impact that the free labour mobility had on the British labour market since its accession in the EU; the unemployment rate on population groups segment will be considered; this chapter will use data from the British office of national statistics (ONS). Chapter 4 tends to analyse the Brexit debate, topics like immigration (labour mobility) question, trade and economy, place of the UK in the world will be closely analysed. The Chapter 5 will try to analyse and understand the impact and effects of the Brexit on the British economy, to enable a better understanding of this chapter, this analysis will consider negative impacts on financial services; corporate finance (job creation) and taxes; employment and unemployment share schemes; construction and infrastructure; competition; property rights and intellectual property. The Chapter 6 of this analysis will concentrate on the advantages and disadvantages of the Brexit, even the evidence will show, that without a new deal with the EU it is not possible to measure the advantages of the Brexit. This chapter will consider factors like the two years transition, advantages and disadvantages for British corporations and employees, the disadvantage for the British Labour market and the effect of the British currency and at the final economic options, which UK might use to minimize the risks for its economy.

The structure of this analysis will be more dedicated to the Labour Market mobility as possible cause of the Brexit, because many debates and leave argument show the mobility as a problem and reason of the Brexit, therefore the challenge of this analysis will be to try to show which role the EU labour mobility had on the Brexit decision. Of course there may be many other factors and reasons that make the leave campaign won, but this paper will keep its focus on the labour mobility to show if this had any considerable effect on the leave or not.

2 What has the EU membership ever done for the UK?

Bevor analysing the Brexit, it is really important to analyse the UK´s membership in the EU of the last 40 years. It´s really important to show which surplus the UK obtains from its EU membership. The EU has a set of rules which provide standards safety to consumer goods across the EU. It provides funds for projects in poorer regions to develop their economy and the EU also works in the development and growth in the whole continent.

According to the British Office of National Statistics (ONS) freedom to travel is one of the most exercised benefits of the EU membership, with Britons having made 31 million visits to the EU in 2014 alone that meant 80% of total abroad UK holidays were spent in the EU and this is one benefit of the EU membership. The EU also offers a greater protection from terrorists, paedophiles, people traffickers and cyber-crime.

The EU membership of UK have made life easier across the country and continent and this analysis will not consider all EU membership benefits for UK, it will only choose some sectors such as economy, education and research to prove the benefits the United Kingdom obtained from its EU membership.

2.1 Economy, Growth effect, trade boosting

After the UK´s accession, the tariffs on trade in factories of Great Britain and EU member countries were eliminated, UK quantitative restrictions on EU trade were abolished, UK compelled the Common External Tariff (CET) to import from all countries not belonging to, or enjoying special arrangements with, the EU (Baimbridge/Whyman 2008, 26).

The EU is the first Trade partner of the UK, therefore the UK is deeply involved in the Trading to EU member States and the Brexit could probably make this difficult, because the EU trade remains significant for the UK. Like the following table shows, the UK needs the common market to remain competitive.

Abbildung in dieser Leseprobe nicht enthalten

Illustration 1

According to the statistics above, the question to answer is to know if the 43 years of UK membership to the EU have hurt or helped the British economy. Because 48 (“56,5%”) per cent of the UK trade goes to the EU and that is significant. One thing is definitely sure, the common market brings to any EU country member a high level of competitiveness and also an increase in the innovation level.

To better illustrate what the EU ever did for the UK, please see the graphic from the Financial Times analysis about the benefit of the UK membership in the EU that shows the development of the last decades:

Abbildung in dieser Leseprobe nicht enthalten

Illustration 2

According to the graphic, it can be clearly seen that the growth has been present with more that 4 per cent points of the UK GDP per capita before the financial crisis of 2008-2009. The Financial Times Newspaper said, that Britain joined what was then the European Economic Community in 1973 as “the sick man of Europe”. The gross domestic per head rose 95% per cent in France, West Germany and Italy (three founder members of the EEC) compared to with only 50 per cent in Britain (FT, 24.02.2016).

After becoming a EEC member, UK slowly began to growth, gross domestic product per head has grown faster than Italy, France and even Germany in the last 42 Years and became the most prosperous EU country in the year 2013, this after more than 48 years. According to the findings, Britain´s performance also surpassed the vast majority of 1,000 other combinations of countries whose record had previously resembled its own (FT, 24.02.2016).

It might be difficult to find a causal relation between growth and UK´s openness of its labour market, but considering the graphic above, it is clear that the year 1992 was turned out to the prosperity, because the EU opened its single market and Britain adopted the single market with labour mobility, which might also have contributed to the growth. Therefore, the year 1992 seemed to be a turn over from the bad economics performances to the positive one, the EU membership seemed to have made the UK more productive.

Daniel Vernezza of UniCredit has shown that UK trade with EU partners grew faster after 1973 than it did with the remaining countries in the European Free Trade Association, the group to which Britain previously belonged to (FT, 24.02.2016). This result showed how important and good the EU membership of Britain is for the trade, because not only the UK benefited from that trade, but also other EU countries. Professor Nick Crafts of the Centre for Competitive Advantage in the Global Economy of Warwick University, Britain´s pre-eminent economic historian also finds out, that opening to trade allowed UK to bounce back after falling behind countries with the same economic conditions such as France, Italy; “Britain´s really, really big problem in the 1960's was very weak competition” he says (2016, 1). This affirmation confirms the evidence of the conference board graphic. The British was pretty poor and weak of competition, and joining the EU and the single market was a major factor in improving competition and growth.

According to the Financial Times, 11 per cent of British companies that trade internationally are responsible for some 60 per cent of the UKs productivity profits. Such companies and economic drivers prefer large geographically concentrated markets such as an EU common market with strong unified regulation, that provides security and make change and trade much easier and bring more national and foreign investment and if this were lost it might bring some insecurity on the market.

The only negative aspects from EU membership for Britain today might be, that 5 per cent of UK residents was born in another EU country (FT, 24.02.2016). Numerous studies have shown that most gains from immigration have fallen to the immigrants themselves, because the migrant’s workers willing to work for relatively low pay and this may allow employers to ignore the productivity and innovation and the unemployment rising. The most benefit immigration brought to UK is the benefit to public finances of importing workers, free movement has not itself obviously increased British people’s prosperity (FT, 24.02.2016).

Summarizing the benefit of free mobility to UK, it is important to mention the economic benefit such as the EU immigrant’s public contribution since 2000 of more than £20bn to the British economy between 2001 and 2011 according to research by UCL. At the same time immigrants also rewarded the country with valuable human capital and vital skill that would have cost the UK £6.8bn in education (UCL, 5.11.2014). The entering influx entering to UK might have also increased in aggregate demand and total spending, because immigrants increased the supply of labour, but they also boost the need for labour and the plausible result in this case is that job opportunities can rise.

2.2 Education and Research

The EU membership of the UK made its qualifications becoming recognized within the EU and also around the world. There are a number of reasons why education also benefits from the Britain membership of the EU. With many exchange programs such as ERASMUS and also some singles secondary education programs with EU subventions, the UK is a part of the huge, cheaper and more international organization, that contributes a large surplus and also provides mobility in Britain. According to the Bologna process report, the UK is the second most popular destination in the world for international students, and the most popular country for study amongst the EU students, who make up approximately 5 per cent students in UK HE institutions (House of Commons, 16.04.2007). Joined the Bologna treaty has never been a disadvantage for the UK, because this has never disturbed or risked the British competitive advantage in education.

In a rapidly developing global market for higher education, however, it would be a mistake to think that the UK is in a sufficiently advantageous position as to be stand aside whilst other countries in the EHEA make progress through the Bologna process (House of Commons, 16.04.2007). That would simply mean that there were and are many advantages for the UK to join the Bologna Treaty. Because the Bologna process helped the UK to protect their national interest and at the same time brought economic advantages such as employment and productivity, besides increasing the competitiveness of the UK higher education sector through promoting the attractiveness and international reputation of the EHEA (House of Commons, 16.04.2007). The UK students have more mobility and large employment opportunities. The universities were more attractive for international students, the chance of sharing of best practice and expertise for university staff in a broad range of areas increased and opportunities for research collaboration across research increased too. Universities also benefited from a large EU subvention programs for research and collaboration.

Studying for a degree or post-graduated qualification is more expensive in the UK than anywhere else except for private US Universities (House of Commons, 16.04.2007), this is favourable for those UK students, who are not able to afford the same study in UK to go aboard and study. International students also constitute more than a quarter of post-graduate students in the UK and more than 50 per cent of post-graduates in six broad subject areas (House of Commons 2007, 8). That means that international student are maintaining the viability of some subjects for post-graduate study in the UK. Another advantage is that English became the teaching language around the globe and the UK maintained its popularity.

The benefit, in purely financial terms, of being the choice of place of study for 100,000 EU students and over 200,000 non EU students is enormous. (House of Commons 2007, 8). The higher Education policy institute has recently calculated that the net direct cash benefit from fee income and living expenditure of EU students is at least £800 million per year, for non-EU students the figure is £3.3 billion. EU and non-EU students who go on to work in the UK after graduating are calculated to increase GDP in £2bn per year (House of Commons 2007, 7). This is a considerable amount of money inflow to British Universities and for the wider economy of the United Kingdom.

3 British labour market description

The British Labour market looks pretty good compared to the labour market of many other countries in the EU. According to the ONS, the employment rate in May 2016 was 4.9 per cent from the UK population from the age of 16 and over. Between the 3 months of February 2016, and March to May 2016, i.e., before the Brexit, the number of people working increased and the number of unemployed people decreased (ONS. 3.08.2016). There were 31.10 million people working, 176,000 more than for the 3 months to February 2016 and 624,000 more than a year earlier (ONS, 2016). A year earlier, 23,19 million people were working full-time, 401,000 more than a year earlier. 8,52 million people were working part-time, 223 more than a year earlier (ONS. 2016).

According to the statistics above, it is clear that labour could have been the reason for the Brexit, because there is no evidence, that the immigration steals jobs to native British citizens, because the Labour Force survey defined and measured unemployment and unemployed people as those without a job who have been actively seeking work in the past 4 weeks and are available to start work in the next two weeks, and it also includes those who are out of work but have found a job and are waiting to start in the next 2 weeks (ONS, 2016). The motivation of the leave campaign saying the labour mobility policy weakens the British economy might be true and the next chapter of this reflection will try to use some analysis evidence to explain the impact of the labour mobility policy on the UK leave.

3.1 Impact of the free labour mobility on the British labour market

After the UK opened its labour market, the number of foreign-born people working in the UK increased from 2.9 million in 1993 to 6.6 million in 2014 (LFS, 2015). In the year 2006, the number of foreign-born workers in the UK increased significantly and this corresponds to the opening of the UK labour market to workers from the A8 countries (Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia and Slovenia) in mid-2004. Since 2006, the possible negative effects of immigration on wages and employment outcomes of British native workers is the core concern in the political and public debates in the UK. Models assuming limited flexibility of output mix or closeness to international trade tend to predict that immigration will have long-run wage and employment effects. Such features are typical of the underlying framework used as a motivation for empirical work in this literature; see, for example, the models of Borjas (1999) or Card (2001). On the other hand, models assuming a sufficiently high degree of flexibility in the mix of output produced in the traded goods sector predict an absence of long-run effects on labour market outcomes, at least to small scale immigration (C. Dustmann/F.Fabbri/I. Preston 2005, F326).

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Excerpt out of 35 pages

Details

Title
The European Labour Mobility
Subtitle
The role of EU labour mobility for the Brexit vote, Chance or Risk for the British Economy?
College
Ruhr-University of Bochum  (Lehrstuhl für Sozialpolitik und Öffentliche Finanzen)
Course
Labour Mobility: An Economic Perspective
Grade
2.4
Author
Year
2016
Pages
35
Catalog Number
V344882
ISBN (eBook)
9783668349100
ISBN (Book)
9783668349117
File size
1070 KB
Language
English
Tags
EU, Brexit, London, UK, government
Quote paper
Rodrigue Bienvenue Nanfack (Author), 2016, The European Labour Mobility, Munich, GRIN Verlag, https://www.grin.com/document/344882

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