Ομιλία της προέδρου της "Κοινωνικής Συμφωνίας" στην ημερίδα "The State of the Union" του European University Institute.

Florence, Thursday 9 May 2013

Intervention by Prof. Louka T. Katseli
University of Athens
Ex Minister of Economy, Competitiveness and Shipping
Ex Minister of Labor and Social Security

Migration and the Future of Europe’s Demography and Economy

The central message of this brief intervention is straightforward: how best to manage and integrate migrants in Europe critically depends on the European model we envision and the strategy and policies that are adopted to secure it. As long as severe austerity policies continue in Europe, xenophobia and euroscepticism will rise and smart policies to manage successfully the emerging European and global mobility system will be extremely hard to implement. Such policies can be pursued only if a sustainable pro-growth European strategy is adopted which is consistent and coherent with enhanced labor market access for European citizens and residents and enabling integration policies for migrants.

Europe : an increasingly  segmented and polarized continent

Four years into an unprecedented financial and economic crisis, Europe is at a critical juncture.  The severe economic recession in some member countries, most notably in Greece, Portugal, Ireland, Italy and Spain, produced by extreme and myopic austerity policies, has slowed down European-wide growth and has exacerbated unemployment and overall labor market conditions.

The unemployment rate in 2012 has exceeded 25% in Greece and Spain. One out of two young Greeks or Spaniards are unemployed. Middle class families have seen their personal after-tax disposable income or pension reduced by more than 60% while lower income families have been marginalized .Poverty rates have risen. More than 400.000 families with children in Greece try to make ends meet with no single employed adult in the family. Inequality is on the rise with a small group of people continuing to profit from tax evasion, capital flight in unregulated tax havens, speculation in asset markets, and rushed privatizations of underpriced public assets. Even though data are not available, a growing number of productive-age adults and professionals are seeking employment abroad, most notably in Germany, the UK and other European countries.

In Southern Europe, confidence in the capacity of national governments, traditional political parties and European institutions to produce credible policies to improve standards of living has been seriously eroded. Political instability and social polarization have nurtured xenophobia promoted openly by extreme groups, such as the fascist Golden Dawn in Greece, which, according to the most recent poll, is supported by 13% of the national electorate. Euroscepticism is also on the rise as European policies are perceived as unjust, ineffective and determined unilaterally by the national, industrial and financial interests of powerful member-states, most notably Germany . According to the most recent IPSOS/CGI opinion poll, conducted in April-May, three out of four Europeans believe that the economic crisis will worsen in their own country; they view European institutions as incapable of reversing the trend and  narrowing the growing divide between North and South.

In Northern Europe, Euroscepticism and xenophobia are also on the rise as domestic residents are made to believe that they are paying a high bill to bail-out their profligate European Southern co-members, while they themselves have to cope with worsening economic conditions. Europe is thus becoming rapidly segmented and polarized. So is its labor market. It is in this rapidly deteriorating economic, political and social context, that we need to rethink European policies, including migration policies.

Managing migration: need for national policy coherence in the context of globalized markets

Migration policies by themselves cannot provide the answer. Migration movements are extremely sensitive to underlying economic, political and social conditions in both sending and receiving countries. It is no coincidence that Germany has experienced in 2010 a fivefold increase of migration inflows relative to the corresponding figure for 2009, while migration inflows to Spain were 40% less than in 2008 (OECD, International Migration Outlook ,2012 p.232 and p.272). In 2012 alone, 1.081.000 people, i.e. 369.000 more than in 2011 migrated to Germany, the largest inflow since 1995. The rate of increase of outflows from Southern Europe, namely Greece, Italy and Spain has exceeded 40%.  

It has been shown that perceptions of the migration process and electorate support for immigrants, migration policies and institutions critically depend on the actual and expected   labor market conditions and standards of living as perceived by the native population. When economic conditions deteriorate, xenophobia tends to rise and the management of migration flows becomes more difficult. Therefore, the appropriate design, introduction, acceptance and pace of implementation of migration policies are critically dependent on the scope and effectiveness of other economic policies, including fiscal, industrial, employment, education and social policies.

Migration policies need to be the outcome of new migration thinking. As noted in our book, entitled “Gaining from Migration: Towards a New Mobility System” (OECD Development Centre, 2007) migration, whether we like it or not, is an increasingly central dimension of globalization. European migration policies must be conceptualized as an integral component of an emerging system of international labor mobility, as opposed to national or even European “immigration systems” that can be managed in isolation. The future of both migration flows and policies in Europe will critically depend both on economic and political conditions in Africa, Eastern Europe or Asia as well as on policies that have a bearing on migration in both sending and receiving countries.

Successful management of migration flows: possible only in the context of a European sustainable pro-growth strategy

Integrating migration policies into mainstream national economic and social policies and adopting a global perspective in managing migration flows are indeed huge challenges for European policy makers. They have become even harder to address in view of the present open divergence of opinions about what constitutes an effective European policy agenda for growth, employment and competitiveness.

There are those who espouse a “ national consolidation strategy“ , believing that if only  each member state  assumes its national responsibility to promote  fiscal consolidation, internal devaluation, enhanced flexibility in labor markets and considerable downsizing of its public sector and welfare system, market forces would be unleashed to promote investment and growth.

There are others, including myself, who maintain that this is a recipe for disaster and for the dissolution of Europe. Europe can enhance its weight in world affairs not on the basis of population and demographic factors; it can do so only if it remains a prosperous, dynamic and social Europe. European competitiveness and cohesion can be enhanced only through a ‘coordinated , sustainable pro-growth strategy” which requires   increases in productivity, the continuous upgrading of  skills and  the promotion of  investment, research and innovation. Only the resumption of sustainable investment and growth which are compatible with expectations of improved livelihoods  can enhance saving, secure adequate financing and permit effective and sustainable fiscal consolidation. The pursuit of severe austerity measures that kill internal demand , plunge Europe into a recession and  give rise to unacceptable increases in unemployment, poverty  and inequality , exacerbates fiscal imbalances and the debt overhang and  erodes trust in the functioning of European institutions and in Europe itself.

Adopting a sustainable pro-growth agenda requires the exercise of leadership and political will from European leaders to  address jointly  systemic macroeconomic imbalances, share equitably  the burden of adjustment, coordinate more closely economic, employment and social policies ,restructure and mutualize the debt overhang and secure that a transparent, appropriately regulated  and well capitalized  European banking system channels needed liquidity in the real economy . Active employment policies, infrastructure and human capital development, tax and regulatory reform and the introduction of a European social protection floor are some of the major policy priorities in the context of this strategy.  So is better harmonization of migration policies across EU member states and greater coherence across migration, trade, security and development agendas.

Immigrants will be seen as an additional burden in our societies if we do not adequately address our own workforce needs and allow unemployment among European nationals to rise to unacceptable levels. Ensuring, through appropriate policies and a sustainable pro-growth strategy that European workers have fair access to fulfilling employment,is a prerequisite for successful acceptance by the public of fair and effective migration systems.

Building a Fair and Effective European Migration Management System

For the public to accept that any   system is indeed both fair and effective, it needs to be convinced that benefits outweigh costs both in design and in actual implementation. This is especially true in the case of migration management systems where public policy failures coupled with extreme populism have eroded public confidence that  the system is indeed manageable.  

For this reason, reducing irregular and illegal migration through an orderly and flexible European mobility and integration management system is critical not only to protect the rights of migrants in precarious circumstances but to reassure constituents that their governments can indeed manage migration flows. The development of an integrated European-wide migration monitoring system, the introduction of rules rewarding those that abide by them with renewed and/or extended access to European labor markets and the introduction of multi-annual or temporary visas to promote circular or repetitive migration as opposed to permanent residence are constructive suggestions in this direction.

There is no doubt that almost all European countries will experience rapid ageing of their populations and declining workforces in the coming decades. Shortages and mismatches will intensify across the whole skills spectrum. During these decades high population growth rates in Africa are expected to continue far ahead of economic growth while unemployed and underemployed workers from the less advanced economies east of the European Union and increasingly from Asia will seek employment opportunities in the EU. Expanding the channels and opportunities for legal immigration into Europe and harmonizing procedures across member–states will facilitate enormously the management of migration flows as well as the integration of European labour markets.

These realities imply that the EU and its member states will need a rational system of orderly, safe and well-regulated labor mobility covering the whole spectrum of skills and human capital. One can start with extending fair and equal access to the labor market and to the educational system to all family members of legal migrants at the earliest possible stage in the immigration experience; this would be a step of critical importance for the effective integration of families in a continent where family migration constitutes more than 45% of permanent migration flows. In addition, we should start thinking of shifting  the focus of policies from the often  fuzzy distinction between “high” and “low skilled” workers - the current standard measures of educational or vocational attainment and the basis of selection policies- to “critical occupational categories” in EU labor markets.  Science and medicine for example are rightly recognized as requiring highly skilled workers .Labor needs however in construction, tourism, agriculture or care for the elderly, do not always correspond to traditional definitions of skilled work but they are of value and increasing significance for most EU countries. Whereas low or mid-skilled immigration cannot stop the outsourcing of labor to low-wage countries in the context of globalization, it can enhance the flexibility of Europe’s labor markets and fill real gaps across the entire skills spectrum.

It is evident from the above, that the answers provided to the four questions raised for this session critically depend on the view and strategy adopted for promoting European growth and employment. For proponents of the “national consolidation strategy” who believe that the activation of the domestic labor force is driven and maintained through keeping wages low and labor markets unregulated, immigration should only secure the skilled labor base of the economy in light of the decline in the working-age population and in response to national labor market needs. For proponents of a “coordinated sustainable European pro-growth strategy” who maintain that, in the face of globalization,  the European competitiveness battle cannot  be gained or lost on the basis of low wages but only on the basis of productivity- enhancement, innovation  and technological change , immigration across the skill spectrum will be  needed. If properly managed, such immigration can assist European economies to fill actual labor market needs in both traded and non-traded good sectors and to facilitate the ongoing productive restructuring to upgrade the competitive advantages of European member states.  

It is critical therefore to embed our discussion on migration and the future of Europe’s demography and economy in the wider debate on what kind of Europe we want and how we go about in achieving it.