Social benefits & mobility

“2013 –  the European Year of Citizenship: upcoming changes this year?”

“(..) in principle, most of us will, at one point or another in our lives, nd ourselves to be in a cross-border situation: the European Year concerns each and every one of us” (Viviane Reding, Vice-President of the European Commission). The 2013 is declared the “European Citizens’ Year”, does it point to substantial changes in the field of free movement of work in Europe?

Aside from technological revolution, migration is increasingly producing changes. The World Migration Report (2011) emphasizes that a likely increase in scale and complexity of international migration is taking place. One of the most important types of migration that affects public finances refers to those individuals who travel for work. If referring to the European citizens commuting to one or more Member States of the European Union, the migration among the EU citizens could rather be called “free movement”.

Policy makers affirm that the freedom of movement for work has an important role in the European Union’s agenda.  The last three years marked:

  • 25 years since the EU citizens travel without visa within Europe (freedom of movement across European borders, the Schengen Agreement, 1985)
  • Implementation of the first* law on coordination of social security institutions that promotes free movement in the EU (EC Regulation 883/2004 implemented in May, 2010)
  • The EU citizenship celebrates 20 years, since the Maastricht Treaty entered into force.

At the same time, the mobility for work is low within the European Union, compared to the United States or Canada (Bonin, 2008).   Despite stakeholders’ efforts to promote free movement for work at the EU level, the administrative complexities related to the interaction of two or more tax-benefit systems at the same time have not been fully harnessed. The difference in length, structure, eligibility conditions for short-term benefits varies widely across the European countries. Pension systems are differently organized, and long-term benefits still have different retirement requirements, benefits amounts and structures (Schokkaert & Van Parijs, 2003).

The national social security systems in place have a determining role and these vary a lot in aims and conditions. The existent legislative mechanism that promotes free movement for work does not aim to smooth these differences; instead it aims to create cooperation between social security institutions. One of the complexities that arise with free movement for work resides in the differential treatment of domestic workers versus frontier workers. Using the example of individuals who commute regularly to another EU country for work, while they and their families resides in another EU country, such as frontier workers, Burlacu I. and O’Donoghue C. (2013) reveal a series of disparities and complexities that arise due to mobility of labour. Examining the case of Luxembourg and Belgium, we have concluded that regardless if the country of employment and residence have closely similar social security structures or namely, belong to the same welfare regime the impact on the welfare of mobile earners (those who work in more than one country) varies significantly. Despite many commonalities in welfare state traditions (e.g. conservative-corporatist welfare regime) and long history of cross-border cooperation, the discrepancies in income taxation allowances and rates, the differences in benefits amounts and conditions, lead to large differences in earnings of domestic and frontier workers. The reason for such variations is explained by the variation in objectives that welfare states have across the EU.

Europe is inevitably affected by globalization. In few decades, more and more individuals will require their pensions and other entitlements from more than one country and policies to face this change need to be in place. The argument of Ferrera M. (2010) holds valid and calls for attention to the social security administrations. He argues that broad-based national insurance schemes remain the most efficient and equitable institutions at our disposal, but these schemes need to be updated and modernized and one could argue that labour migration and mobility of labour is a crucial component to consider in the modernization of the European social security schemes. In conclusion, despite the strong focus on the importance of free movement for work on the EU agenda, the modernization of national schemes and thus, of the overall EU social security umbrella will probably not take place within a year time.

* The European Community legislation is rich in directives and regulations on social security and it developed throughout time. The EC Regulation 883/2004 is the first one to joint the efforts of cooperation among the administrations of the EU Member States in the field of social security and called it the “coordination of social security systems”.

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