Wednesday, October 24, 2007

Jobs without borders: Nordic nations want Baltic immigrants

From the FT this morning:

Jobs without borders: Nordic nations want Baltic immigrants

By Robert Anderson

Published: October 24 2007 19:59 | Last updated: October 24 2007 19:59

Ginta Yermava remembers bursting into tears when she spread the cash from her first Swedish pay on her bed in the flat she shares with three other Latvian cleaners. “In one week I earned as much as I did in one month as a teacher in Latvia,” she says.

The company Ms Yermava works for, Rent Hos Dig (“clean at your place”), is able to undercut rival cleaning companies by more than half by bringing Latvian women to Stockholm for six-month stints.

Throughout the Nordic region, migrant workers such as Ms Yermava are filling vacancies and providing services. The inflow from the new European Union member states, particularly Poland and the Baltic states, is the largest since the 1970s, when governments shut the door to southern European migrant workers.

Some 75,000 migrants are working legally in Norway – making up 3 per cent of the labour force. Denmark, the second most popular destination, granted 20,000 new work permits last year. Employers – from big companies to the individuals who are Ms Yermava’s customers – welcome them. That is because, across the region, there are labour shortages caused by robust economic growth, ageing populations and labour market rigidities.

That has severe consequences for many companies. “Almost in every sector we have problems now, especially in finding skilled manual workers and engineers,” says Jussi Järventaus, managing director of the Federation of Finnish Enterprises. In Sweden, “large new investments are not being made as firms find it difficult to attract workers to work there quickly enough”, says Stefan Fölster, chief economist of Svenskt Näringsliv, that country’s enterprise confederation.

The labour shortages mean any slowing in economic growth will make it more difficult to finance the region’s generous welfare systems. Workers in the care and health sectors are also needed to look after the fast-ageing populations. Tobias Billstrom, Sweden’s migration minister, says hospitals in southern Sweden would have to close over the summer if it were not for migrant workers.

In Finland, where the demographic problem looms earliest, the number of employed workers to each welfare benefit recipient will drop from 1.7 now to 1.0 by 2030, according to the Organisation for Economic Co-operation and Development. Labour migrants – by filling vacancies, keeping wages competitive, paying taxes and spending their salaries, while drawing few state benefits – could boost economic growth and stave off the need to make fundamental reforms to welfare systems.

“We have been able to keep the wheels running at high speed because we have taken workers from elsewhere in Europe,” says Sigrun Vageng, executive director of NHO, the Norwegian enterprise confederation.

Denmark – whose minority government has relied on the backing of the nationalist People’s party – has tried to tighten asylum procedures while relaxing labour permit rules to allow highly qualified people from outside the EU to seek work. But it restricts jobseekers from the new EU member states and imposes tough skill and salary requirements on those from outside the EU.

Nevertheless, this month the centre-right government announced plans both to launch a publicity campaign to attract migrant workers and to reform the work permit system to make it easier for them to enter. With a snap general election called on Wednesday, if it wins a majority it may move further in this direction. Every Nordic government is now rethinking its migration policies to try to attract more legal workers, targeted at the right sectors.

There are already sizeable flows of workers within the region, with oil-rich Norway drawing some 20,000 migrant Nordic workers. There is also significant migration as well as commuting between southern Sweden and Copenhagen, made easier by the new Oresund bridge. But the real battle is on for cheaper workers from the new member states and highly skilled experts from all over the world.

Unlike the rest of the EU, Sweden and Finland have imposed no restrictions on workers from the new member states. Norway (not an EU member) and Denmark have controls, although in effect they allow migrants to enter to find work but make it difficult for them to claim social benefits.

The Nordic region is not the first choice for migrants from the new EU members, because of its high costs and taxes. Moreover, wages in their home countries are rising so fast – at more than 30 per cent in the last year in Latvia – that migration may soon slow. Highly skilled workers find that salaries at the top end are not competitive in the Nordic region, because income differentials are less than in the rest of western Europe. In fact, all the Nordic nations are losing young workers to countries such as the UK, where real remuneration can be higher. Swedes joke that London is fast becoming the biggest Swedish city after Stockholm because of the number of young workers who have moved there.

Consequently, every Nordic country has recently announced its intention to revamp policies to attract foreign workers. The Swedish government proposed in August to allow companies to seek workers from anywhere without first consulting state agencies and trade unions on whether there was a need. Migrants with special skills would also be allowed to enter on three-month visas to seek work and would be granted 24-month visas once they found a job, with a chance to win an indefinite stay after four years.

Compared with the UK, for example, there is less fear of an immigration wave and more concern that the region’s high taxes will deter migrants. “My worst nightmare is not that we have 300,000 wanting to come in but that we will make all these changes and we still will not be able to attract enough people,” says Mr Billstrom.

“We are opening up,” says Kim Graugaard, deputy director general of Dansk Industri, the Danish industry confederation. “But it’s one thing to open your borders and another thing to attract people to cross them.”

Norway is also beginning to rethink its policy towards workers from outside the EU. Although it has taken in more than half the labour migrants who have gone to the region from the EU’s new member states, last year it handed out only 2,000 of a possible 5,000 permits to workers from outside the EU.

Finland, traditionally a country of emigration rather than immigration, wants to attract workers from the former Soviet Union, where it thinks it stands the best chance. Finland already has some 47,000 Russian-speaking immigrants – about one-third of the total – who have been attracted by the similar climate and the short distance home. “In immigration we are looking eastwards,” says Tarja Cronberg, labour minister.

Yet luring migrant workers could also pose a challenge to the traditional Scandinavian policies of providing refuge for asylum seekers and regulating labour markets. Leftwing parties, which have traditionally dominated the region but are now out of power except in Norway, fear that opening the door to migrant workers could end up closing it for refugees.

Sweden and Norway in particular have a proud asylum record but often refugees have failed to find jobs and have added to the costs of financing the welfare system. Consequently, nationalist parties in Denmark, Norway and Sweden have put pressure on governments to restrict refugee flows.

Some fear the new focus on labour migration could worsen the marginalisation of unemployed refugees and increase popular resentment against them. “We think it is important to have a generous asylum system,” says Erland Olauson, first vice-president of the Swedish trade union confederation. “If you mix it [with labour migration] and there are problems, people will say – like in Denmark – ‘Don’t bring them in, leave them outside’.”

Sweden’s government sees no conflict in having generous asylum and labour migration policies. Indeed, it argues that the two should be complementary. “When Swedes are critical of immigration, they refer to the issue of people not working,” says Mr Billstrom. “Labour migration could drive the integration process of those people who are already here.”

Unions are worried, however, by the threat labour migration poses to wage levels and employment rules. This threat was demonstrated in 2004 when a Latvian company brought in its workers to build a school in the Stockholm suburb of Vaxholm and refused to sign a collective wage agreement.

The company abandoned the contract after unions picketed the site. The enterprise confederation took the case to the European Court of Justice, which this year ruled in a preliminary judgment that under Sweden’s accession treaty with the EU the company should have signed the agreement. “When workers come they should be treated like all the others,” says Mr Olauson. “We don’t accept an apartheid labour market.”

Norway’s Labour government has taken the toughest stand against low-wage migration, with tight checks on employers, subcontractors and recruitment agencies. Even the centre-right Swedish government defended the unions in the Vaxholm case.

Reconciling the need for imported workers with Scandinavia’s labour arrangements is likely to remain the biggest difficulty. Hindering migration flows could undermine welfare financing but too relaxed a regime could hurt popular backing for inward migration.

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