Eastern Enlargement and EU Labour Markets

This paper summarises the key findings of a recent study on the impact of Eastern Enlargement of the European Union (EU) on labour markets in the current Member States. The study focuses on three main channels along which enlargement may affect labour markets in the EU, namely i) trade, ii) foreign direct investment, and iii) migration. A main conclusion of the study is that trade and capital movements are very unlikely to lead to an equalisation of factor prices. Thus, strong economic incentives to migration are bound to be present. The study indicates that such an influx of migrants will have only a moderate impact on wages and employment even in Austria and Germany. European leaders will soon have to formulate a joint position regarding this fundamental issue. The authors argue for keeping actual migration flows under control for a transitional period.