The Future of the Fence Around the EU Labour Market

Abstract

The paper investigates the welfare aspects of the European Union's restrictions on labour immigration, especially the restrictions on the free movement of medium- and low-skilled labour from outside the EU. The welfare implications of restrictive labour immigration are found to be considerable, both within and outside the EU. The paper subsequently discusses the future pressure on the 'fence around the EU labour market', given inside factors (population aging, pressure from employers seeking cheap labour) and outside factors (decreasing fixed costs of illegal immigration, more economic and political refugees). Towards 2030, the forseeable pressures on the 'fence' could become too much, causing a chaotic collapse. The paper suggests ways for an orderly transition in which selective immigration licenses for low- and medium skilled labour could have an important role.