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Solving the EU Migration Crisis

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On New Year's Day, European Union labor market restrictions on Romanians and Bulgarians lapsed, meaning citizens from those Balkan countries are now free to work throughout Europe. Over the past decade, immigration from the EU to its richest members has far exceeded forecasts. It now looks like many more economic migrants will be leaving the Balkans and heading west.

The most worrying of these forecasts actually may be insufficiently alarmist. Here at the Democracy Institute, our econometric model projects that the numbers of Balkan migrants crossing into Western Europe over the next five years could easily top half a million, with at least 385,000 heading for the UK.

The UK is neither economically nor politically prepared for this. A new EU study finds 600,000 unemployed EU immigrants already living in Britain, a 42 percent rise in only five years. The number of Romanians and Bulgarians working in Britain rose by more than a quarter last year.

A recent OECD study concludes that the economic impact of migration within the EU is broadly neutral, with the very notable exception of Germany (where immigration increased by 15 percent from 2011 to 2012), which is Europe's only fiscal loser from migration. Some researchers have found that immigrants may use social services more intensely than natives, compete for finite housing and educational resources and apply downward pressure on wages.

Individual governments, not individual immigrants, are responsible for these demographic and economic challenges. Immigrants sensibly act in their own self-interest, as they respond to the economic incentives provided by host countries and the economic disincentives provided by their countries of origin.

More prosperous nations, be they European or North American, are attractive to members of less prosperous nations, be they Romanian or Mexican. For example, Britain's employment marketplace is attractive to Balkan workers for exactly the same reasons that that the U.S. marketplace is attractive to Mexican workers -- because wages are far higher than at home.

Over decades, rising prosperity has encouraged comparatively wealthy nations to build ever-larger, more expensive welfare states. Consequently, these nations are economic magnets for immigrants. Whatever the pessimists say about the situation in the U.S., among wealthy nations it is the UK that is arguably the best example of this self-inflicted, economic immigrant "own goal."

Even in this new era of alleged austerity, the British welfare state continues to get larger. The British system makes it easy to claim benefits, based on means-testing, which allows EU immigrants to receive income support without ever having paid into the system.

Oxford University economist Paul Collier is undoubtedly correct when he says that there is an inherent tension between mass immigration and the welfare state. A rich country that invited all and sundry to live off the host state would not stay rich for long.

Those looking for lessons for the U.S. can take some solace from the fact that immigrants assimilate better in America than in most European countries in part because the welfare state is less generous. In the UK, it is possible for able-bodied newcomers to subsist on government handouts, which infuriates the native-born workers. In America, by and large, immigrants have to work, so they do. Through work, they swiftly integrate into society.

The solution is not to close borders or punish immigrants. Rather, the fiscal burden associated with current welfare statism must be reduced in destination countries in order that the menu of benefits and services on offer no longer incentivizes segments of external populations to migrate in order to exploit destination nations' largesse.

Equally important is the need for countries of origin to implement policies that make them more economically attractive to their own people. Romania, under Prime Minister Ponta has made an encouraging start on this, but is under pressure to ratchet down its free market policies. This would be a mistake and deny the country the chance of a sustainable economic future within the EU.

Romania, alongside countries like Bulgaria, must continue to implement economic policies that support economic growth and send a clear message that they are "open for business" for foreign investors. To do this they must commit to addressing contradictory laws, lack of transparency, and political corruption and they must resist pressure from the regional powerhouse, Russia, to turn away from the EU and embrace it as a primary trading partner.

EU citizens have real worries about immigration and their politicians have done little to address them. There is still time for European countries to get serious about taking control of their economic future. If they fail to do so, expect to see zombie towns littering the Balkans and westward migration on an unprecedented scale.

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Dr. Patrick Basham authored, "Home, Sweet Home? Balkan Migration, the EU & Liberal Solutions," published by the Democracy Institute (www.democracyinstitute.org)