Study on behalf of DG EMPLOYMENT by ÖIR - Österreichisches Institut für Raumplanung (AT) in association with IfS Institut für Stadtforschung und Strukturpolitik (DE), RWI - Rheinisch-Westfälisches Institut für Wirtschaftsforschung (DE) Sosiaalikehitys Oy (FI) Impact of Economic and Social Integration on Employment in the Context of Enlargement

The Study 1. Sectoral Case Studies: Automotive Industry Financial Services 2. Regional Case Studies: Finland - Baltic Sea Area Saxony - Czech Republic Wien - Bratislava - Brno - Györ Region 3. Literature Survey 4. Research Needs

Contents of my presentation 1. Impact of Integration on Employment 2. The Context of Enlargement - the Acquis 3. The Employment situation in Europe on the Eve of Accession 4. Accession related Labour Market Issues 5. Impacts of Accession on the Labour Markets 6. Conclusions - Contribution of Enlargement to the solution of Employment Problems

1. Impact of Integration on Employment Product and capital markets dominant  Accession will not induce substantial changes to conditions for trade and capital movements European labour markets lag far behind in the degree of integration  Low transnational labour mobility  Different tax and social security systems  Qualification mismatch similar in all MS  Institutional, cultural, language barriers

Impact of Integration on Employment/2 Integration and positive effects on income and productivity  low returns on employment Even more so –in advanced economies –under sluggish demand conditions –in the production sector –under conditions of fast structural change Econometric analysis: –positive, though small long-term overall effect of integration on employment

Enlargement - a process and not as an event Take account of diversity of the AC (8) size –economic structure –development path during transition –geographical position –labour market system EES (in the AC) –JAP –JIM –agricultural sector 2. The Context of Enlargement

Single Market Europe Agreements Accession AT, FI, SE Agenda 2000 Euro (WWU) for 12 MS Accession of 10 Access.: RO, BG, HR? Lisabon Strategie JAP/JIM Reform SF Cohesion report Steps of European Integration EES

The Acquis and the Labour Markets Enlargement as threat to labour market (eg A, D) Transitional regulations - free movement of persons –treatment of workers from new MS like other foreign workers –2 years + 3 years (review) + 2yrs (serious problems) Relief of pressure on governments Gateway to co-operation and mutual information No transitional regulations in DK, UK

3. The Employment Situation in Europe on the Eve of Accession Max. (by country) average Min. (by country) Legend: Employment rates 2001Unemployment rates 2001

Labour Productivity and Growth

The Employment Situation in Europe on the Eve of Accession Major differences between MS and AC Levels of indicators Gender differences Economic growth pattern Labour Market Policy Liberal vs.welfare state approach Active labour market policy still little developed Expenditure levels much lower (about 1/5 relative to GDP) Employment Strategy Jobless growth Problem groups (young, old, unskilled, minorities) More of the same challenges in AC

4. Accession Related Labour Market Issues A)Migration & Commuting B)Wages, Productivity and Qualification C)The Role of FDI D)Regional differentiation

A: Migration Migration between the AC (10) and EU (15) does not seem to be an issue –not in the past and even less so in the future –neither for MS nor for the AC Predictions are hard to make, especially if they concern the future..... –Brücker: p.a., to Germany –UK expect p.a. because of openness –Motives? Destination?

A: Cross-border Commuting Cross-border commuting already observable Figures are fiction!! Commuting potential already partly utilised Future commuting depends on transport infrastructure and transport cost short term fluctuations in labour demand handling of the transitory regulations the progress of real wage convergence

B: Wages, Productivity and Qualification of Labour Force AC - compared to EU(15) Wages (nom)20-40%,  Productivitymuch lower Unit costscomparable Qualificationlargely equivalent (esp. Manuf.) Employment  - due to qualification upgrading Striking:  growth of wages for skilled employees shortages of high skilled employees For mobile/highly skilled AC labour force neighbouring labour markets are no more particularly attractive

C: The Role of FDI Contribution to the restructuring processes Market access non-tradable sector manufacturing with low labour cost relevant (1/5) Increase in volume expected Crucial for convergence technology wages employment (more jobs in foreign owned companies, domestic companies cutting back employment)

The Role of FDI/2 Locational strategies of AC are –heading for high tech in all AC –not for low wage/labour intensive investment - –match with entrepreneurial behaviour (Small scale) FDI across the border have helped SME to enhance or maintain their competitiveness on the global and local markets

D: Regional Differentiation Need for regional differentiation within the AC concerning the different border section Challenge for cohesion policy on national but also European level Prosperity edge “moves” into the individual AC more visible/pronounced in the employment figure than in economic performance/GDP

5. Impacts of Accession on the Labour Markets  in trade (declining transaction cost)  Cross-border market integration will benefit most through arbitrage processes leading to speedier convergence in the AC border regions  of structural change within AC  regional disparities on the nat. labour markets  necessity for cross-border co-operation of labour market institutions

6. Conclusions Challenges for LM similar in AC and MS Employment challenges remain on national level - impact predominant in border regions Transitional arrangements are politically important but economically meaningless Regional differentiated approach is needed for employment policies Integration+enlargement is part of the solution, not the problem

The Contribution of Enlargement to the Solution of Employment Problems Effects on the macro level Opportunities on the micro level The contribution of European Employment Policy Cross-border labour markets emerging

Employment rate and productivity