The EU's Internal Market and the Free Movement of Labor: Economic Effects and Challenges

The EU's Internal Market and the Free Movement of Labor: Economic Effects and Challenges

Zeynep Kaplan (Yıldız Technical University, Turkey)
DOI: 10.4018/978-1-5225-2008-5.ch005
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Abstract

Free mobility of labor has been the core element of the European integration process. The aim of this chapter is to analyze the effects and challenges of the labor mobility within the EU. The analysis then focuses on the recent trends in labor mobility. Cross-border labor mobility remains low in the EU. The main reasons behind the low levels of labor mobility in the EU include linguistic and cultural reasons, as well as non-tariff barriers such as pension rules, recognition of professional qualification or social security differences. Removal of impediments to free mobility of labor and improvement of flexibility of the European labor markets will strengthen the EU's labor market integration.
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Background

International economic integration, often termed as regionalism, is defined as the institutional combination of sovereign economies into larger economic blocs (Robson, 1998, p. 1). Such initiatives between separate national economies have been claimed as one of the most prominent developments in international trade policy after the mid-twentieth century. Indeed, as indicated by Jovanovic (1998), international economic integration has touched most of the countries, and it became an unavoidable part in most international economic policy decisions.

As introduced by Balassa (1961), international economic integration may take several forms that represent varying stages of integration. These stages include free trade area, customs union, common market, economic union and complete economic integration. In a free trade area, all tariffs and quantitative restrictions subject to trade between member countries are eliminated, but each nation retains its national trade policy against the non-member states. A customs union, by contrast, involves the equalization of customs tariffs in trade towards non-members. A common market involves not only the integration of product markets through trade liberalization that results from customs union but also the free movement of factors of production within the bloc (Robson, 1998, p. 72). Member countries introduce common regulations on the movement of factors of production with third countries (Jovanovic, 1998, p. 10). A more advanced form of integration is economic union. An economic union requires the harmonization in many areas of economic policy such as monetary, fiscal, industrial, regional, transport, etc. Finally, a total economic union calls for the unification of economic policies and setting up of a supranational authority with great economic authority. The most prominent achievement in this sense is the establishment of organizations in the developed world such as the European Union (EU) which has evolved from a customs union to a monetary union and from six to twenty-eight member states. The main goal of the European integration initiative from the beginning has been the deepening of economic, political and social linkages between the nations and regions of Europe.

Key Terms in this Chapter

Single European Act: The Single European Act, signed in 1986, set a deadline of end 1992 for the establishment of the common market. Within the EU, the common market was launched on 1 January 1993.

Cecchini Report: A report prepared by a group of experts, chaired by Paolo Cecchini, examining the benefits and costs of establishing a common market in the EU.

Internal Market: An economic area without internal borders in which the free movement of goods, persons, services and capital is ensured.

Four Freedoms: Four freedoms denotes free mobility of goods, services, capital and persons in the EU's internal market.

Enlargement: The EU has gone through several phases of expansion since its establishment in the late 1950s. The biggest wave was in 2004 when 10 countries joined, eight of them being Central and Eastern European countries. Currently, the EU has 28 member states.

Labor Mobility: The easiness of which workers are able to move freely within an economy or between different economies.

Economic Integration: Economic integration is an economic arrangement between two or more nations, marked by the reduction or elimination of barriers to trade that prevent the flows of goods and services.

European Union: European Union is an economic and political body aiming at achieving closer economic and political union among its member states. As of 2016, the European Union has 28 member countries.

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