Displacement and income effects of Central and Eastern European labour migrants in the Netherlands

Labour migration from the Central and Eastern European countries of Estonia, Latvia, Lithuania, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Bulgaria and Romania, together referred to as the CEE+ countries in this report, has a modest impact on the Dutch economy. Despite the substantial growth since 2000 in the number of Polish labour migrants in particular, displacement of Dutch workers hardly takes place on average, a lowering effect on wages is barely noticeable and the average level of welfare is maintained. For the public sector the net contribution of this generation of labour migrants is even slightly positive because, relatively speaking, this group pays more taxes and premiums than it makes use of public services.

Between 1999 and 2005 the number of labour migrants from the CEE+ countries who were employed in the Netherlands during a certain year grew from over 23,000 to more than 96,000. Since then, this number has only increased. Although exact figures are not yet known, we estimate the number for 2008 to be 158,000 employees. These are labour migrants who at one point during 2008 were employed in the Netherlands for a shorter or longer period of time. The estimate is based, amongst others, on the number of workers with a CEE+ nationality for whom by 30 June 2008 employees’ insurance premiums were paid to the social insurance agency UWV. According to UWV, 94,047 employees from the CEE+ countries were working in the Netherlands at that date.

However, during the year the number of labour migrants from the CEE+ countries fluctuates strongly, partly due to seasonal labour migration. An increasing number of labour migrants come to the Netherlands for a few months only. In our study we therefore make a breakdown between long-term labour migrants who are registered with the Dutch municipal personal records database (Gemeentelijke Basisadministratie, GBA), because they intend to stay in the Netherlands for more than 4 months, and temporary labour migrants who are not registered with the GBA, because they do not intend to stay in the Netherlands for more than 4 months.

The number of temporary labour migrants in particular has risen considerably during the last few years, from 9,000 in 1999 to an estimated 107,000 in 2008. The vast majority of them come from Poland. On the other hand, Polish citizens make up ‘only’ about half of the group of long-term labour migrants, which has increased from more than 14,000 in 1999 to an estimated 51,000 in 2008. Apart from Polish employees, the long-term labour migrants consist of people from Hungary, Slovakia and the Czech Republic, and since 2007 from Bulgaria and Romania as well.

A remarkably large part of long-term labour migrants are female (64 percent), whereas the majority of temporary migrants are male (62 percent). With regard to age the rule is that the younger the workers are, the more temporary the nature of their stay. The dominant group of long-term labour migrants is between 25 and 35 years old. When it comes to temporary labour migrants, it is mostly workers between 19 and 25 years old who come to the Netherlands. If we look at the regional distribution of labour migrants from the CEE+ countries, we notice that they are primarily overrepresented in North Brabant and Limburg and underrepresented in the northern and eastern provinces of the Netherlands.

Temporary labour migrants from the CEE+ countries primarily find temp work (48 percent) or through direct employment with an employee in agriculture (23 percent) or business services (18 percent, mostly outsourcing). Long-term labour migrants from the CEE+ countries are much more similar to Dutch workers when it comes to the employers they work for. Although they too work slightly more often in agriculture, hotels and catering, for business services (primarily outsourcing) and in temp work, the differences are much smaller. By and large, temporary labour migrants have very short-lasting jobs, with an average length of slightly more than 3 months. The average salary they earn is in most cases close to the minimum wage or slightly above. Amongst long-term labour migrants the wages vary much stronger, but still hardly ever exceed the average salary level of a Dutch employee.

The share of self-employed people amongst the total number of labour migrants from the CEE+ countries, who are registered as such with the Chamber of Commerce, is limited to approximately 1 in 25. Most of them work in business services, the construction industry (self-employed people without personnel in particular) and trade. It is unknown, however, how many people are active in the Netherlands who are registered with the Chamber of Commerce in their country of origin.

For the period 1999-2005 we do not find displacement of Dutch employees as a result of the influx of long-term labour migrants from the CEE+ countries. Displacement of Dutch employees is considered to have taken place when a decrease in the number of jobs for Dutch workers is the direct consequence of the supply of labour migrants. This is not the same as labour migrants taking up or over jobs of Dutch employees. In the case of displacement, however, it does take Dutch workers who lose their job more time to find another job, because there are more candidates for the available jobs due to labour migration. With regard to temporary labour migration from the CEE+ countries, displacement of Dutch employees is observed. We only find displacement effects of labour migration in growth sectors, i.e. in situations where there is an increase in jobs and an explicit need for new workers arises. Native candidates less often fill new job vacancies due to the – possibly cheaper – supply of foreign workers. When the share of temporary labour migrants from the CEE+ countries is doubled, displacement concerns approximately 1 in 1200 jobs of Dutch employees. Thus, it only is a modest effect that takes place primarily within growth sectors where the share of temporary labour migrants increases strongly.

Between 1999 and 2005 the effects of labour migration from the CEE+ countries on the average wage level in the Netherlands have been very different for different wage groups. The effects are greatest in the lowest wage group and nonexistent in the highest wage group. For the lowest wage group, the salary is negatively influenced by the share of long-term labour migrants who work within the same sector and region. Because of the negative effects on the lowest wage group and the absence of an effect for the highest wage group, there is a slight overall increase in the wage gap due to labour migration from the CEE+ countries. The extent of the effects, however, is negligible: when the share of long-term labour migrants from the CEE+ countries is doubled, the average salary in the lowest wage group decreases by 0.3 percent.

Between 1999 and 2005 the share of labour migrants from the CEE+ countries has had no significant effect on the average added value per employee. If this added value per employee is related to the national income per capita, this means that labour migration from the CEE+ countries has not resulted in a change in welfare for Dutch citizens. At the same time, the added value per employee also represents the average labour productivity. The absence of a relation between the share of labour migrants from the CEE+ countries and the average labour productivity within the Netherlands means that these labour migrants have a relatively high labour productivity in comparison to the wages they earn.