Erik is currently working on a bachelor thesis in economics and worked part time at the Bertil Ohlin Institute, a think tank located in Stockholm and part of European Liberal Forum.
The financial crisis of 2008 made it obvious that the existing framework of the Eurozone is not equipped with sufficient tools to counter economic crises. The tragedies in Greece never seems to end even though it was more than a half decade ago that the Eurozone crisis started. Since 1999, the per capita production in Greek has stagnated and in Italy it is 5 percent lower now compared to 1999.
On the other side of the pond the United States, where the financial crises started, has returned to growth and unemployment rate is at a mere 5.3 percent.
Just like Greece and Italy however, some US states have been growing slowly economically since 1999 (the year of the euro’s introduction). Georgia, Delaware and Nevada have all contracted during this period. This means that the average production per person has in fact decreased in a 16 years period, in the case of Nevada by as much as 19 percent. This asymmetrical growth between the different US States is seldom, if ever, reported on in European press.
The need for labour mobility
Much talk have been focused on the need of a fiscal union to complement the single currency by increasing the demand in the regions hit hard by asymmetrical shocks. This is indeed important but something just as important if the leaders in Europe are serious about fixing the existing flaws of the Euro is to increase the labour mobility within the Eurozone.
A study made by OECD shows that labour mobility within the Eurozone is still low, substantially lower than in the United States.
The high labour mobility in the US means that the booming North Dakota, which increased its per capita GDP by 94% since 1999 (almost doubling production in 16 years) is having an influx of labour from other parts of the country, for example Michigan, which was hit harder by the crisis. This makes the difference in unemployment rate in US much more even between the states compared to in the Eurozone.
The OECD report also shows that labour mobility in the EU as a whole is higher than within the Eurozone. This is mainly due to the migration from the younger EU member countries in the east to the more prosperous parts of West Europe. Even though the labour mobility in the Eurozone has increased during the crisis it is worrisome that it still is so low bearing in mind that the unemployment rate is over 20 percent in Greece and Spain at the same time as it’s around 5 percent in Germany and Austria.
Promoting labour mobility
There are a numerous of different ways to promote labour mobility. One study points to the need of making the pension entitlements “portable” across EU member countries. In 2014 steps were made in this direction when the European parliament adopted a directive on rights for citizens to supplementary pension rights when working in another EU-country.
The biggest barrier for labour mobility though is language, which in the case of Europe is extra hard to overcome since Europe has such a vast variety of languages.
Even though learning the local language is of vital importance in order to work and fully integrate into a country, a high English proficiency both for the person moving and among the population of the destination country means that the barriers of moving gets lower. If the bureaucracy, workforce and education system of a country have high proficiently in English it means that a migrant can independently take his or her first steps by using English before learning the local language.
It is therefore good news that Europe has a comparably high proficiency in English. EF English index is an index measuring English proficiency in 63 countries. 19 of the top 22 best performing countries in the study are located in Europe. Even better, Europe keeps improving at a comparably fast rate. English proficiency increases particularly fast in Spain, Poland and Hungary. The biggest worry seems to be France where it has stagnated since 2007.
When it comes to secondary education Europe has taken steps in this direction too. There are today more than 4500 courses in English in continental Europe. The Erasmus program helps thousands of people every year with their exchange programs.
I am of the opinion that all of this point to that mobility is bound to be higher sooner or later in Europe and the Eurozone. It is important though that the leaders of Europe show concrete proposals for this to happen.
Because of Europe’s low birth-rates, immigration will be necessary in order to avoid decreasing population and labour force. Immigration is also a solution for the problem of low labour mobility in Europe. Immigrants are, compared to the native European, more flexible where to work and live. New immigrants arriving to Europe will surely choose EU-countries with lower unemployment and more opportunities.
Increasing Labour mobility is not only important for jobs and growth but also vital for deepening the integration of Europe. The European identity will evolve among the people crossing borders in search of opportunities. It is also these people that will see the benefits of the European Union.