Blog | September 2016

“I want my entry tickets back!”

by Stefan Schlegel


Free movement of persons within the EU/EFTA-Area is under the heaviest pressure since its establishment. Several member-states want to limit it at least partly and two voted in a popular referendum to pull out of it altogether: Switzerland (in 2014) and the U.K. (in 2016). Switzerland is not a member of the EU but a member of the area of free movement of persons. It wants to renegotiate the most substantial package of treaties that links it to the EU with the goal to regain the capacity to cap immigration from EU/EFTA-countries. The U.K. is supposed to leave the Union. Although their legal relationship to the EU is different, the situations are very comparable in what the two countries aim to achieve: They both want to be able to cap immigration from EU/EFTA-Countries but to keep access (partial access in the case of Switzerland) to the Common Market. In both countries, there seems to be a broad consensus that access to the Common Market is essential for the economy.

Never mind the “core principles”

Typically, EU-officials, members of the EU-Parliament and EU-friendly observers reject this request with the argument, that the free movement of Persons is a “core principle” of the EU and that the free movement of goods, capital and services require the free movement of persons. The first of these two arguments is not very convincing to people who do no longer want to be part of the Union and of its core principles. A special deal, in violation of common principles, is precisely what they are asking for. The second argument has now been put into question by a Think Tank with considerable influence in Brussels. The back-to-immigration-caps-camp in the U.K. and in Switzerland both reacted enthusiastically on this paper.

Whether the idea is convincing or not, that a common market for goods, capital and services can work without a common labor market, the argument misses a deeper point that is rarely mentioned explicitly but might well be decisive in the negotiations of both countries with the EU. It is the value of the entry ticket to labor markets.

My research may be helpful to clarify this point. I analyze the right to decide whether the migration of a given individual to a given place can happen or not, as a valuable right, the right to dispose over a valuable good: access to a market for labor and services. Legal ways to migrate, in this view, are not just (fundamental) rights or (core) principles. They are goods with a significant value. I call the control over this good the property right on migration.

International negotiations about migration deal with the exchange of large amounts of these property rights. Think of it this way: By entering the EU (in the case of the U.K.) or by ratifying the bilateral treaties (in the case of Switzerland), the two countries issued labor-market-entry tickets to all European citizens (and received entry tickets to the huge European labor market for their citizens in turn). Owning your individual entry ticket means to have the property right on your migration to this country. The property right was transferred from states to prospective migrants. To individual citizens, these entry tickets have considerable non-monetary value: they mean more options in life and more independence from circumstances back home. This value is hard to measure. However, we can just restrict ourselves to the monetary value these tickets have for individuals, in order to get a first impression of the proportions.

It adds up to a staggering sum

The monetary value is the difference in salary back home and the salary in the destination country multiplied by the probability that a given individual actually opts for migration to the U.K. or to Switzerland and actually finds a job there (higher living costs have to be taken in account as well). For many European Citizens, this probability is much smaller than 1 which decreases the individual value of the entry ticket. But if the probability is just 10 percent (0.1), this means that the value of the entry ticket to a labor market is a tenth of the difference in salary between the two countries, added up for the remaining years as an active labor-market-participant. Even if individual values of the ticket are negligible in most cases, modest in other cases and substantial in the relatively few cases of citizens who seriously aspire to migrate to one of these countries, added up for all European citizens, it makes for a staggering sum. Switzerland and the U.K. want their entry tickets back; they want a staggering sum of potential European incomes back. Both countries have nothing to offer in exchange and yet they still want to keep what they got for the price of issuing out these tickets in the first place: access to the Common Market.

Putting it this way helps to show two things:

First, it is very unlikely that any of the two countries has anything to offer (like traffic-easements, financial contributions or – in the case of the U.K. – even a defense-coalition with the EU ) that is remotely as valuable as access to their labor markets. This is so, because both labor markets are attractive (which is why they attracted substantial European immigration) and because the gains from liberalizing labor markets are vastly more substantial than the possible gains from the full liberalization of markets of goods, capital and services. The individual who is able to migrate can improve its economic situation far more through migration than it is improved by the free circulation of goods, services and capital. Even if the two countries would be willing to offer something in exchange for taking back the entry tickets once issued, it is unlikely that they have something quite as valuable to offer.

A question of leverage

The second point is much more general: blocking migration – thereby blocking access to labor markets – is to actively diminish the expected live-time income of would-be migrants. If taking back an entry ticket from EU/EFTA-citizens harms them, the decision never to issue such a ticket to citizen of third states in the first place, means to harm them just as well. The reason, why it is easier to cause the damage and get away with it in the case of third states-citizens, is that these states do not have a comparable leverage to internalize the damage, as the EU has with its Common Market. But the insight remains: If countries would have to compensate the locked-out for the damage caused to their expected live-time-income, they could not afford it. If the country of origin is powerful enough to enforce a partial internalization of that damage, it quickly becomes too costly to continue to cause the damage.

This is why it is a safe bet that neither Switzerland nor the U.K. will eventually be able to pull out of the free movement of persons within Europe. And this is why countries with attractive labor markets will have to open it ever more to third countries if they want something from them in exchange – access to their growing markets of goods and services for instance.

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