Saturday, October 28, 2006

ECB Report Encourages Open Borders

Source: Labour mobility would help eurozone, says ECB - FT.com

Many EU countries, fearing an exodus of workers from newly admitted EU states to more developed member states, have adopted or are considering laws restricting employee mobility from Central European states. However, a new European Central Bank (ECB) criticizes this approach.

The ECB report argues that employee mobility would help the EU cope with local fluctuations and shocks in the economy. Allowing worker mobility would also help EU nations cope with an aging workforce, and would help the EU become more competitive in international markets.

The report concedes that the exodus can negatively impact the √©migr√©s’ native countries, particularly in light of current labor shortages in many Central European countries. The report also found some evidence that the arrival of workers from Central Europe tends to depress wages in the receiving country. Ultimately, however, the report concludes that the EU nations that are first to open their borders to the foreign workers generally recognize positive impacts to their domestic labor markets.

Questions:

1. Assuming the ECB report is correct when it states that open borders provide an adjustment mechanism in times of fluctuation and shock, why do European counties continue to consider and adopt restrictions on the flow of workers? Do individual nations benefit by such restrictions? In what way?

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