MIGRATION AND THE LABOUR MARKET IN CENTRAL EUROPE

===========================================================
NATO ECONOMIC Colloqium, 
30 June, 1 and 2 July 1993, 
Brussels

ECONOMIC DEVELOPMENTS IN COOPERATION PARTNER COUNTRIES
FROM A SECTORAL PERSPECTIVE

EVOLUTION DE LA SITUATION ECONOMIQUE DANS LES PAYS
PARTENAIRES DE LA COOPERATION DU POINT DE VUE SECTORIEL

===========================================================
PANEL II

Economic Aspects of Demographic
Developments, Ethnic Tensions, Migration

Chair: Guillaume Parmentier, Assistant Director,
       NATO Office of Information and Press

Panelists: Lajos Hethy
           Piotr Korcelli
           Oleg Shamshur
           Jonas Widgren
-----------------------------------------------------------
MIGRATION AND THE LABOUR MARKET IN CENTRAL EUROPE*

Lajos Hethy

I. Introduction

The political and economic transformation in Central and
Eastern Europe is creating a new situation for the
migration of labour in Europe. After the  "iron curtain"
has been dismantled and the labour markets of Central and
Eastern European economies have been opened up, new waves
of migration may begin, both within and from the region. In
consequence, politicians and experts have been seeking
answers to such disquieting questions as: what will be the
possible dimension and directions of such a new
"Volkswanderung"? And what kind of strategies, policies and
measures, etc., can be applied to cope with it? For the
moment, no sound, well-founded answers appear to exist.
Views seem to fluctuate between the extremes of
panic-raising forecasts which envisage a couple of million
ex-USSR and other citizens flooding the labour markets of
the Central European countries (and, hence, invading the
European Community), or the self-reassuring confidence
that, after all, such a process will probably not occur,
but, even if it does, at least for the European Community
and Western Europe at large, the bastions of the
anti-migration political and administrative "stronghold"
will be capable of resisting the pressure.


II. What Generates West-Bound Migration?

The explanation for a possible West-bound mass migration of
labour cannot be reduced simply to the economic "push and
pull" effect of classical migration theory. Nevertheless,
the attractiveness of living and working conditions in
Western Europe, coupled with the deterioration (as a result
of the economic crisis) of the situation for large social
groups within Eastern Europe, are likely to provide a
strong undercurrent to migration. Indeed, even countries
such as the Czech and Slovak Republics, Hungary and Poland
may appear to migrant labour as relatively attractive
targets.

The symptoms of the economic crisis, and its consequences
for labour, are manifold, and appear in differing forms and
with differing emphasis in individual countries. Broadly
speaking, however, these include: (1) decline in an already
depressed level of GDP; (2) balance of trade and payment
difficulties; (3) increasing international indebtedness;
(4) over-expenditure by the state, leading to budgetary
deficits; (5) high (two or three digit) rates of inflation;
(6) rapidly increasing unemployment; (7) depressed,
stagnating or declining consumption and real wage levels;
(8) increasing poverty - a growing group within the
population who have incomes below the minimum costs of
living; (9) in some countries, a dramatic shortage of
consumer goods (including even food) and services;
(10) housing shortages; and (11) severe environmental
degradation and unhealthy working conditions. In
comparative terms, it might be noted here that the Czech
Republic and Hungary would appear to stand out as having
the least pressing problems of these kinds.

The consequences of economic crisis for the population have
also recently been accompanied by new waves of ethnic
tensions and conflicts. Contrary to expectations that
political transformation would alleviate earlier hidden
ethnic tensions, conflicts have flared up in a number of
countries. The most tragic events have been taking place in
the multi-national former territories of Yugoslavia and
the Soviet Union. However ethnic tensions haunt Bulgaria,
Czechoslovakia, and Romania as well. In those countries,
considerable ethnic minorities live together with
predominant majority nations, and the rights of such
minorities have become the focus of both political debate
and power struggles. In this context, Hungary appears to be
the "fortunate" exception, having no significant ethnic
minorities. On the other hand, however, it is exposed to
the inflow of refugees of Hungarian ethnic origin from
neighbouring conflict-ridden countries.

Demographic factors, compared with the gloomy economic
situation and perspectives and ethnic conflicts, seem
to have a minor role (except for perhaps Albania and
Romania).

III. The "Buffer Zone" Countries: With Particular
Reference to Hungary

In relation to migration within and from Central and
Eastern Europe, four countries - the Czech and Slovak
Republics, Hungary, and Poland - stand in an especially
sensitive position. This is due primarily (although not
exclusively) to their geographical location. If the
forecasts and fears of potential West-bound mass migration
were to come true, these countries would appear to be
destined to become the "buffer zone" between the likely
major source areas (the former USSR, Romania, etc.) and the
probable major destinations for migrations (primarily,
within the European Community). At the same time, depending
upon their own economic development, as well as other
factors, they themselves may also develop into sources of
West-bound migration.

The national labour markets of the Central and Eastern
European countries were closed for several decades,
although they did make use of "guest workers" in limited
numbers, during the 1970s and 1980s, to work on joint
projects or to ease labour shortages. In the mid-1970s, the
number of "guest workers" in the whole region was estimated
at 170,000, of whom 50,000 worked in the Soviet Union.(1)
Although the employment of "guest workers" has continued
until recently, there appears to be a decline in their
numbers.

International migration - being practically non-existent -
did not give rise to any problems, for several decades. In
Hungary, during the period 1980-1990, about 50,000
long-term (i.e. for longer than one year) residence permits
were issued, of which 24,000 were to re-settled immigrants
and 25,000 were to refugees (most of whom arrived in the
period 1988-1990). Work permits granted to foreign labour
amounted to about 30,000 in 1991. In all of these groups,
the majority were Romanian citizens (mostly of Hungarian
ethnic origin); some 77% of the long-term residence permits
and 78% of all work permits being granted to them. As
regards refugees, these were almost exclusively people from
Romania. The number of those illegally arriving in Hungary
(most of whom are also illegally employed) is probably
twice this level.(2) Another wave of refugees has been
under way, as a result of the on-going civil war in the
former territory of Yugoslavia.

Hungary's major recent dilemma has been how to cope with a
dual problem: namely, (1) to exercise control over the
inflow and employment of foreign labour, in order to
protect its own labour market in the current conditions of
rapidly growing unemployment, and (2) to take care of the
refugees (most of whom are of Hungarian ethnic origin).
Foreign labour in Hungary appears on the labour market in
various legal guises - as refugees, immigrants, residents,
(short- or long-term) "guest workers", or simply as
tourists or illegal immigrants. Accordingly, their
employment relationships are partially lawful and partly
illegal. In order to control the inflow andemployment of
foreign labour, the Hungarian authorities apply a
combination of indirect and direct measures. Indirect
measures are,in general, concentrated on the inflow of
potential foreign job-seekers, by controlling the inflow of
tourists and immigrants. Direct measures (special visas,
work permits) are aimed at the regulations of the
establishment of employment relationships by foreigners
already in the country.(3) 

There are considerable doubts, however, as to the
effectiveness of the above measures. Indeed, it is
generally anticipated that illegal employment, will
continue to flourish as:

- employers have a strong interest in evading the heavy
taxes on wages (comprising some 44% combined social
security contribution and other taxes);

- those who are illegally employed similarly have a strong
interest in evading work permits (especially if there is
little hope of obtaining one anyway), as well as taxation;

- illegal employment is primarily associated with the vast
"informal economy", which - by its nature - is outside the
control of the legislation and the government;

- illegal employment (mostly involving foreigners of
Hungarian ethnic origin) is closely associated with
informal (sometimeseven family) links and contacts;

- the labour offices, which are poorly manned and
over-burdened, are not in a position to exercise effective
control;

- the risks of disclosure are minimal - only happening, for
example, in the event of serious accidents at work.

Furthermore, it must be remembered that Hungary is a
"transit" country - indeed, in 1990, some 37.6 million
foreigners entered the country - where even the control of
such acute and dangerous problems as drug traffic,
international terrorism, and the like, poses increasing
difficulties. With the war in Yugoslavia transit traffic
has further increased.

The spread of illegal employment of foreigners necessarily
involves the likelihood that international (notably ILO)
standards4 aimed at the provision of equal treatment for
foreign labour will repeatedly be violated.

IV. The Closed Gates of the "Stronghold" of Europe

The legal possibilities for a West-bound migration of
labour from Hungary and the other Central European
countries are limited. In particular, the gates of the
European Community "stronghold" would appear to be mostly
closed to the immigration of foreign labour from the
region. As for the liberalisation of policies on migrant
labour, which has repeatedly been urged by the Central
European governments, no significant progress has yet been
achieved. On the contrary: national legislation on
migration (e.g. in Austria, France and Germany) has become
stricter.

The Single European Act opens up the frontiers in 1993 for
the free movement of goods, persons, services and capital
within the European Community. However, it leaves the
control of immigration from "third countries" to the Member
States.(5) This principle was adhered to during the
negotiations about associate membership for Czechoslovakia,
Hungary and Poland. Thus, for example, the Association
Agreement with Hungary leaves the question to bilateral
talks and considerations, although it does say that
the existing access to employment for Hungarian workers
accorded by Member States under bilateral agreements "ought
to be preserved and if possible improved" , and that other
Member tates "shall consider favourably the possibility of
concluding similar agreements".

In this respect, Germany was already playing a pioneer role
in the 1980s, and continues to do so even following German
reunification (notwithstanding the grave employment
situation in the former GDR). Thus, for project-related
work in 1991 (referred to in German as "Werkvertrag"), up
to 30,000 East European were able to find employment in
Germany. The quota for Hungary was fixed at 2,500 in
January 1989, was raised to 10,000 at the end of 1990, and
went up to 14,000 at the end of 1991. Hungary has a
similar agreement, containing a more modest quota, with
Belgium, and also has a symbolic quota with Ireland.
Efforts to achieve similar agreements with other countries
(e.g. with Italy) have so far failed.

The present migration policies of the European Community in
relation to Central and East European labour will, so far
as one can judge, have to change in the future, not least
because: (1) strict obstacles to labour migration tend to
impede business cooperation; (2) a particular kind and
volume of labour migration is necessitated by the
requirement that Central European workers acquire necessary
skills; (3) business activities in Central and Eastern
Europe may be associated with the inflow of Western
European labour (apart from managerial staff) and this
requires reciprocity; (4) there often seem to exist strong
regional and local interests in receiving foreign labour
from Central and Eastern Europe (e.g. in Italy); (5) if
legal possibilities for migration and employment are closed
down, illegal - and, by their very nature, uncontrollable -
processes may gain in importance.

V. The Imperative of Joint Efforts

Possible mass migration involves, however, dangers for the
whole of Europe.(6) Amongst these dangers are: (1) the
prospect that the European Community (and Western Europe in
general) may be faced with an "invasion" which is not
capable of being controlled through the traditional
administrative means; (2) the possibilities that Central
and Eastern Europe, in consequence of an effective "brain
drain", may lose the best part of its labour force which
badly needed for the reconstruction of the national
economies, while, in some countries, the emigration of
young workers may add to the problems of dealing with an
ageing population; and (3) the likelihood that the "buffer
zone" countries may be faced with the prospect of being
"squeezed" as both target and transit countries between
the inflow of labour from other Eastern European countries
and the administrative defensive walls erected by Western
Europe.

There is a common conviction that the problem can only be
solved through joint efforts. Bilateral and multilateral
cooperation is needed between the Western and Eastern and
amongst the "buffer zone" countries. However, taking a
broader perspective, it should be noted that possible new
policies and cooperation over the control of labour
migration do not, in themselves, offer solutions to these
profound economic and political problems - of which the
foremost are economic crisis and decline, and ethnic
tensions and conflicts - which seem to contribute so
fundamentally to the whole process.

Notes

* The present paper draws upon an earlier publication by
the author in the International Journal of Comparative
Labour Law and Industrial Relations. Volume 8, Issue 2.
Summer 1992.

(1) A. Samorodov: "Labour mobility in Europe as a result of
changes in Central and Eastern Europe". Paper delivered to
the 3rd European Regional Congress of the International
Relations Association, Bari-Naples, 23rd-26th September
1991.

(2) J. Tuth: A politikai migrcciutul a migrccius
politikcig.(From Political Migration to Migration Policy).
Mozgu Vilcg, Budapest, 1991. No. 11.

(3) A. belfgyminiszter 13/1991. (X.17.) BM rendelete,
illetve a munkaŸgyi miniszter 7/1991 (X.17.) MfM rendelete.
(Decree No 13/1991 (17th October) of the Minister of the
Interior, and Decree No 7/1991 (17th October) of the
Minister of Labour. Magyar Kozlony. Budapest, No 115. 1991.

(4) Conventions No 197 (1949), No 143 (1975), No 118 (1962)
and No 157 (1982).

(5) For European Community policies, see W.R. Bohning and
J. Werquin, "International Migration for Employment. World
Employment Programme Research", MIG WP. 46E. ILO, Geneva,
April 1990.

(6) Uj Exodus. A nemzetkozi munkaerocramlcs uj ircnyai.
(New directions in the international migration of labour).
Eds. P. Tamcs and A. Inotai. HAS. Budapest 1993.

-----------------------------------------------------------
Copyright 1993 NATO

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system or transmitted in
any form or by any means: electronic, electrostatic,
magnetic tape, mechanical, photocopying, recording or
otherwise, without permission in writing from the
copyright holders.

Authorization may be requested for redistribution of the
text on a non commercial base by research and educational
services. Requests should be addressed to the Economics
Directorate, NATO, via e-mail 'scheurweghs@hq.nato.int'.

First edition 1993
ISBN 92-845-0079-6

This is the latest in a series bringing together papers
presented at the NATO colloquia organised by the NATO
Economics Directorate and Office of Information and Press
on economic issues in the former USSR and Central and
East European countries. For further information please
write to the Director, Office of Information and Press,
1110 Brussels, Belgium.

The articles contained in this volume represent the views
of the authors and do not necessarily reflect the
official opinion or policy of member governments or NATO.