The integration of Europe’s labor market is forcing the Nordic countries to find a balance between recruiting foreign workers and protecting their own domestic workers from competition. A substantial influx of workers from Central and Eastern Europe and labor market regulations in the European Union such as the directive on posting of workers have challenged the national wage level and working conditions in the Nordic countries. A lack of highly skilled workers and professionals to keep industrial development going is another challenge. And many Nordic countries have established regulations that make it much easier for workers from developing coun-tries to get a job in a Nordic country if they are professionals with higher levels of education.
The question is: Will the Nordic countries keep out the unskilled from the developing world and still take part in the global quest for knowledge, or instead can the concept of “circular migration” open a door for unskilled labor migrants from developing countries to immigrate to Scandinavia and then return home to build strong cross-economic and cross-cultural links?
The Nordic countries—Denmark, Finland, Iceland, Norway, and Sweden—confront three main challenges in common with other European countries:
- How to handle an open European labor market
- How to attract high-skilled workers from countries outside the European labor market
- How to prevent the immigration of unskilled workers from developing countries
Let’s look at each of these challenges in turn.
The enlargement of the European Union to countries in Central and Eastern Europe in 2004 caused a strong outmigration of labor from Poland, Estonia, Latvia, and Lithuania to Western Europe. By 2007, more than 150,000 immigrants had been granted first-time work permits in the Nordic countries combined, and more than half of these permits were renewed. In addition, many posted workers and service providers from these countries have entered the Nordic labor markets. To help protect their local labor markets from an influx of low-priced foreign labor, Denmark, Iceland, Norway, and Finland all adopted transitional arrangements. Sweden, alternatively, did not adopt such an arrangement.
Comparing the two immigration policy choices reveals that the number of immigrants as a share of the total population of each Nordic country shows little correlation with the presence of transitional arrangements in the countries concerned. Influx has been strongest to Norway and Iceland, while Denmark saw an increase after the first years. The transitional arrangements were repealed in Finland and Iceland in 2006 and in Norway and Denmark in 2009.
The migration of workers within the European labor marked has in general had a positive effect on the economies of the Nordic countries. In Norway, where more work permits have been issued than in all the other Nordic countries combined, industries such as construction and ship building have benefited largely. But the influx of cheap labor has challenged the bargain system of wage regulation, and resulted in cases of wage dumping and illegal working conditions. According to the regulations, work immigrants from the new EU countries should have wages and working conditions equal to those common in Norway. When the transitional arrangements were lifted in 2009, EU regulations stated that a minimum wage level should apply for EU immigrants and workers temporarily posted in Norway.
Norway, however, has no statutory minimum wage. A minimum-wage floor is established through the collective agreements of different industries. In order to gain control over wage dumping and ensure that the wage levels and labor conditions offered to foreign workers are equal to those of Norwegian employees, the Norwegian government made use of statutory extension of collective bargaining agreements in specific industries. By this measure, the provisions of a valid collective agreement are made applicable to all workers, unionized and nonunionized alike, who perform work of the same type in a specific industry.
The effects of these regulations are uncertain. Different studies suggest that the effect of the extension mechanism is stronger in certain parts of the industry. As in other European countries, the Norwegian government’s goal has been to facilitate employment cross boarders in the European labor market but avoid unacceptable or illegal working conditions for immigrants.
Then there are the rules governing immigration from countries outside of the EU. In accordance with the European regulation of immigration, Nordic countries have restricted work immigration from third-world countries that are not part of the European Union. Yet employers in the Nordic countries have been in need of highly educated professionals from labor markets outside the EU, and have put pressure on the Nordic governments to renew the legislation. The Nordic governments want to facilitate employment of educated professionals from other countries and have issued special regulations for skilled workers and specialists. Compared to the numbers of migrants from within the EU, labor migration from other countries has been very limited. In Norway the quota of five thousand per year has not been filled. Nevertheless, the industry has benefited from the possibility of easy recruitment of specialists and key personnel globally.
In the near future we cannot expect to see any change. But Norway and Sweden are among countries in the Nordic region that are paying more attention to the concept of circular migration, or the idea that migrants returning to their country of origin after a period of working in a host nation can help spur development by bringing additional knowledge and income back to their home country. With an aging population in Europe the need for unskilled labor will increase in all the Nordic countries. This might, over time, create a new interest for labor migration.
In a Swedish Government Official Report from last year, a Swedish committee expects circular migration to increase in the future. The committee points to the relation between migration and development, and encourages the Swedish government to support and facilitate circular migration. An important goal of the Swedish legislation from 2008 was to make it easier for Swedish employers to employ workers from third countries, a goal that included unskilled workers as well. The legislation does not discriminate against unskilled labor mi-grants as the legislation in the other Nordic countries does.
In Norway the government supports special migration programs for exchange or circular migration. Some of these programs involve unskilled workers, and are established with the intent to promote development. But the track record of these programs has been mixed in Norway. A report from the Fafo Institute for Labour and Social Research examine these programs and concludes that such programs have to expand the number of migrants they take in in order to have a significant impact on development through remittances in the developing world.
To expand the programs have to be adjusted to better meet the needs of Norwegian employers. Today this is not an actual policy. The high cost level in Norway and the comprehensive regulation of wages through collective agreements makes it unrewarding to employ workers without skills and knowledge of language, and there is little political support for a change to these conditions.
Another way to match the interests of labor-sending and labor-receiving countries could be to connect work with education. The Nordic countries need educated workers. Workers in developing countries need more education. Could circular migration connected to education programs become a gate to jobs in the Nordic countries for unskilled labor migrants from developing countries? A circular migration program that gives young workers a chance to finance an education through well-paid work in a developed country, could promote development and cultural understanding. It would give the migrant international work experience and capital to pay for education at home.
Labor migration to the Nordic countries today is based on the common European labor market. In this market unskilled and skilled workers, as well as highly educated professionals, seek opportunities in other countries. In addition to this, employers in the Nordic countries woo the educated professionals from outside countries in order to get access to knowledge. The legislation has been changed in the Nordic countries to facilitate employ-ment of these groups. A fear of competition from cheap labor and of temporary immigration that becomes per-manent has until now prevented similar changes in the regulation covering unskilled workers, perhaps with Sweden as an exception. It’s too early to say whether the new interest in the concept of circular migration will make a change to this.
Åsmund Arup Seip is a researcher at the Fafo Institute for Labour and Social Research in Norway. This column is part of the Just Jobs project at the Center for American Progress.