The Nordic labour market models and European mobility: Opportunities and challenges

Line Eldring, Fafo

EURES Mobility Conference in Reykjavik, 22nd June 2007

Nordic working group follows the EU enlargement

• Appointed by the Nordic Council of Ministers, Fafo is coordinating the group

• The group is following the development in the Nordic labour markets after the EU enlargement

• Last report was published September 2006: http://www.norden.org/pub/velfaerd/arbetsmarknad/sk/TN2006558.pdf

• Next report will be published autumn 2007

The Nordic countries: More labour migrants are needed..

• 2004: Concerns for waves of migrants, social dumping, social tourism

• 2007: Concerns for ageing population, lack of manpower and increased competition on European labour

• Some sectors are now dependent on EU-10 labour

”The Norwegian Minister of Finance states that the government relies on labour migration to be able to fulfill their goals.” ( Foto: HÅKON LARSEN / SCANPIX ) Aftenposten 7.10.2006

Poland: Shortage of labour..

• Crisis in Polish construction 2000-2005:

– Employment reduced by 300 000 persons

– EU enlargement created new opportunities for Polish construction workers; at least 250 000 have emigrated

• 2006-7: Boom in Polish construction– 19 % growth in 2006– 100 000 more employed– increase in wages– major concerns for lack of labour in

construction– educational crisis

Mikołaj Chylak, Dzwigi i ludzie (Cranes & People)

Mobility of services

• No transitonal rules, free flow from 1 May 2004

• Free access for posted workers and service providers

Mobility of persons

• Transitional rules

Division of the labour market?

Different regimes for mobility of labour and services from EU-8 (10):

Grey zonesillegal work

2004-2011: Towards free movement

2004 2006 2009 2011

Free mobilityof services ………………………………………………………………………………D/Au?………….>

Free mobility 2007: of persons UK, Irl, Sw, ……………………Bulg/Romania? ………………………………………………>

Fl, Icl, Gr, Sp, P, It, Nl….......……………………………………….>

DK, N, Fr, B, mfl….....………………….>

De/Austria…….>

Opening of labour the markets – increased competition on labour

Nordic transitional regimes after 1 May 2006

• During the first 2 years after enlargement, concerns shifted from fear of social tourism to concerns about lack of labour

• Iceland and Finland repealed their transitional arrangements, but introduced special regulations on information and registration

• Denmark and Norway continued their regimes (some amendments in Denmark)

• Sweden – opened for free movement from 1 May 2004

No possibility for transitional regulations on the free movement of services

Wage regulation mechanisms in the Nordic countries

Collective agreementcoverage in private sector

Extension of collective agreements

Other mechanisms

Type of regime

Denmark 77% NoAccession agreements with local negotiations, or entry into employers’ org., making collective agreement mandatory

Auto-nomouscollective agreementmodel

Sweden 90% NoAccession agreementsLex Britannia

Norway 53%Yes, some

(construction)Mixed model

Finland 90%Yes,

widespreadTariff wages required by the Posting of Workers Act

Regulation by law (and strong unions)

Iceland 90% YesTariff wages required by the Posting of Workers Act

Rise in registered individual migration from EU-8 to the Nordic countries

• Surprising Nordic differences in individual migration

• Norway issued most permits

• Strongest growth in Iceland and Norway; high demand for labour

• The transitional regimes have had very different effects, and only cover a small part of the whole picture

Photo: Geir Bølstad, Dagbladet

Issued work permits to individual labour migrants from EU-8 to Nordic countries 1 May 2004 – 30 April 2006

41 731

10 598 10 671

5 605 5 845

2 690

27 259

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

Norway Sweden Denmark Finland Iceland

Nu

mb

er

of

perm

its

First time permits

Renewals

Issued work permits to individual labour migrants from EU-8 to Nordic countries January-April 2007

9553

5782

3052

1599

9497

0

2000

4000

6000

8000

10000

12000

Norway Denmark Sweden Iceland

First time permits

Renewals

The monitoring challenge

”We do not know the number of labour migrants to Norway”. (Norwegian authorities)

Poor statistics on volume, especially on mobility of services (in all European countries)

”I think there can be as many as 120 000-130 000 Poles in Norway”. (Szostak, Embassy of Poland)

(Aftenposten 3. September 2006)

Photo: Carl Martin Nordby, Aftenposten, 3.9.2006

Labour supply: Employers’ new strategic choices

(1) Hiring individual job-seekers looking for employment in a Nordic firm; (2) Hiring temporary service providers or contractors with posted workers;

(3) Hiring employees from temporary work agencies;

(4) Hiring independent single-person firms offering temporary services; (5) Direct foreign investment, outsourcing and leasing production in EU-8

Still huge gaps in labour costs compared to Nordic levels.

Norwegian companies’ use of labour from EU-8

10%

10%

15%

19%

15%

0 10 20 30 40 50

Cleaning

Hotels andrestaurants

Manufacturing

Construction

Totalt (N=5104)

Prosent

Source: Fafo 2006

GROWTH IN 2007!

Employment, hire or subcontracting?

41 46 13

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

Cleaning

Hotels and restaurants

Manufacturing

Construction

Total

Individual employment Services Both

Source: Fafo 2006

Regulations and realities

• Large control problems in all Nordic countries, regardless of level of regulations

• Numerous stories on social dumping and low wage competition

• Minimum wage level lower than national market level

• Labour inspectorates, tax authorities, police and trade unions all experience major capacity problems

• Unsolved problems related to efficient sanctions

Oslo survey: Gendered labour market • 26% of polish migrants in Oslo are women (average 10 years younger than men)

• Practically all men work in construction, 4 out of 5 women work in cleaning – mostly for private households

• 70% in construction are skilled workers. 30 of women have higher education

92

3

1

72

7

24

0 % 20 % 40 % 60 % 80 % 100 %

Men

Women

Construction Cleaning Other

Source: Fafo PMO-survey (2007)

Oslo survey: Medium to long term migration

27

34

34

23

15

52

41

52

63

56

21

25

14

14

29

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

Total

Self employed

Posted workers

Nor manpower agency

Employed by Nor company

Return within a year Don't know when they will return Will not return

Most people plan to stay for years – not months. 1 in 5 plan not to return – most plan to return, but don’t know when. Real short term: ca 10%

Migration perspective: No substantial difference between labor and service mobility

”Bogus posting” – Only 15 % of posted workers was employed by same company in Poland

Source: Fafo PMO-survey (2007)

Working conditions for Poles in Oslo

Legally hired by Norwegian companies (with recidency permit)

Better pay – ”normal” working hours

Job security

Holiday, sickleave, pensions

Access to health and welfare services

Posted

Self employed

Illegal workers

Lower pay – longer hours

Less job security

No rights to holiday, sickleave or pension

No access to health and welfare services

Legally hired by Norwegian companies (with recidency permit)

Better pay – ”normal” working hours

Job security

Holiday, sickleave, pensions

Access to health and welfare services

Posted

Self employed

Illegal workers

Lower pay – longer hours

Less job security

No rights to holiday, sickleave or pension

No access to health and welfare services

Generally lower wages and longer working hours than Norwegians

Feeling of discrimination increases by duration of stay

Transitional Restrictions push migration into alternative channels

dual labor market for migrants

Source: Fafo PMO-survey (2007)

Challenges ahead

• Differences in regulatory framework for different kinds of migrant labour have caused substition effects and control problems in all Nordic countries

• Need for further development and strengthening of national wage regimes for posted workers

• Unsolved monitoring problem; need for more and better statistics, and better registration routines

• Need for improvement of:– access to information on wages and employment conditions– control of temporary work agencies– strengthening of control mechanisms and labour inspectorates

Nordic companies and authorities are eager to keep EU-10 workers and to recruit even more in the years to come.

More information:

Nordic Council of Ministers’ Report:http://www.norden.org/pub/velfaerd/arbetsmarknad/sk/TN2006558.pdf

Fafo’s Forum on EU Enlargement: http://www.fafo.no/Oestforum

line.eldring@fafo.no