National institutions vs EU policies? Why and how differences in welfare states and other national institutions can contribute to political conflicts about the rules for the free movement of workers in the European Union

Migration is today one of the most divisive issues in the European Union (EU). In the wake of the drastic rise in the number of refugees and other migrants arriving in Europe over the past few years, EU countries continue to disagree sharply about how to reform common EU policies for asylum and immigration from outside the European Union. At the same time, the free movement of workers within the EU has generated considerable political turmoil, contributing to “Brexit” and ongoing debates about whether and how the regulations of intra-EU mobility and EU workers’ access to welfare need to be reformed.

Under the current rules for free movement, EU citizens can move and take up employment in any other EU country and – as long as they are ’workers’ – enjoy full and equal access to the host country’s welfare state. The political leadership in a number of Member States – most notably in the UK but also in Denmark, Netherlands and Austria – has in recent years called for more restricted access for EU workers to welfare benefits. Unwilling to wait for EU-wide reform, the Austrian Government has recently announced that it would reduce child benefits for EU workers whose children live abroad in lower-income countries of the EU. Many other EU countries have been opposed to fundamental and permanent reform of the current rules for free movement, insisting that the current policy of unrestricted access to labour markets and full and equal access to welfare states for EU workers must continue.

What explains EU Member States’ different policy positions on these issues? Most explanations of the causes of these disagreements highlight cross-country differences in the characteristics, roles and powers of a range of national “actors”, especially populist political parties and “the media”. While these national actors are clearly important, it is equally important to study the role and potential impacts of cross-country differences in national institutions such as welfare states and labour market regulations. National institutions are an important part of the context that conditions the behaviour and policy positions of national actors, and they also influence the attitudes and sentiments of citizens.

Focusing on the recent debates about the need to reform “free movement” of EU workers, our new working paper shows why and how differences in national institutions, especially in national welfare policies, can contribute to divergent national policy responses to free movement. Our focus in this paper, which is part of a larger 3-year project, is on providing a theoretical analysis of these issues, to help provide the basis for future empirical work.
We suggest that there are three different but inter-related ways in which variations in the design of national welfare policies can influence whether or not there is domestic pressure in a particular country to restrict the access of EU workers to (specific) welfare benefits. First, the design of national welfare policies (e.g. the level of benefits offered as well as the extent to which access to particular benefits requires a prior contribution through employment) is one of the determinants of the fiscal effects of immigration on the host country. If national policy positions are guided by a ‘rationalist calculus’ of the costs and benefits of the inward mobility of EU workers, the specific institutional design of the welfare state can influence this assessment, and thus also affect the national policy preference for/against restricting EU workers’ access to particular benefits.

Arguably, this particular impact of institutional differences, via a cost-benefit calculus, is unlikely to play a major role in explaining cross-country differences in national policy positions on the need to reform the current rules for “free movement”. Although the net fiscal effects of inward mobility of EU workers vary considerably across countries – as our colleagues Pär Nyman Rafael Ahlskog have recently shown – they are positive in most (but not all) EU member states and, in any case, they are very difficult to assess accurately in practice. Consequently, it is likely to be hard for national politicians and other actors to argue “rationally” that full access to welfare for EU workers creates large net-fiscal losses for the host country because of the specific design of the national welfare system.

We suggest that a more important mechanism through which welfare states and other national institutions can affect national policy responses to free movement relates to the prevailing ideas and norms about fairness and the deservingness of welfare recipients. Our core argument is as follows: Different national welfare models and policies can be expected to be associated with different underlying principles of redistribution and associated normative attitudes about who, among the resident population, should get access to welfare benefits and under what conditions (e.g. based on “need”, “prior contribution”, “universal access” etc.). At the same time, there is a widespread and common view among the populations of EU member states that “reciprocity” should be a guiding principle in the provision of welfare benefits for immigrants (for an overview of the relevant attitudes data, see this recent paper by Moa Martensson and Katrin Uba). This means that different welfare systems and polices can be expected to be characterized by different degrees of (in)consistency with the shared reciprocity norm. We argue that demands for restricting specific rights for EU workers are likely to be greater in countries – and for specific welfare policies – whose underlying principles and associated normative attitudes clash with the reciprocity norm. Such policies can include, for example, social insurance policies that grant EU workers access to benefits primarily based on the principles of “need” or “universality” rather than “prior contribution”.

The third way in which institutional variations across countries can contribute to divergent policy responses to free movement also relates to the perceived mismatch between national institutions and common EU regulations, but the mechanism is slightly different and broader than a simple conflict with the reciprocity norm. It can be argued that welfare state institutions constitute a nation state project per se, and that any EU regulations in this area can generate conflicts about the perceived “appropriateness” of the level of decision-making (national or EU level). The current EU regulations of free movement and social rights for mobile EU workers are modelled on the continental European welfare state regime that, by and large, was applied among the six founding EU Member States in 1957. This system was typically characterised by: contributory and earnings-related social insurance systems with relatively strong links between contributions and benefits; family policies that were based on a “male-breadwinner” model where family/child benefits were a “derived right” justified by the employment (“contribution”) of the (typically male) worker rather than by an individual right granted by the “dual -earner model” of family policy now prevalent in many Scandinavian countries; and a largely insurance-based health care system funded significantly by contributions rather than general taxes. We can expect demands for restrictions of the social rights of EU workers to be greatest in countries whose national welfare policies and principles diverge most from those of the Continental European welfare state model.

These expectations are all part of a theoretical analysis that provides the basis for our ongoing empirical investigations of the actual determinants of different EU member states’ policy positions on free movement and EU workers’ access to welfare benefits. We believe that this question – whether and how cross-country differences in national institutions contribute to political conflicts between EU countries about common policies on mobility and migration – is an important new area for theoretical and empirical research as well as for EU policy debates. If national institutions do play a considerable role in these political conflicts – a question that we hope to help answer in the larger research project – the future sustainability of common EU policies on mobility and migration will critically depend on the extent to which they recognize and take account of the major institutional differences across EU countries.

The REMINDER working paper can be downloaded here. A revised version is forthcoming in the Journal of European Public Policy (paper available on request).

This blog article by Martin Ruhs and Joakim Palme has been originally published on the Reminder Project website

The EUI, RSCAS and MPC are not responsible for the opinion expressed by the author(s). Furthermore, the views expressed in this publication cannot in any circumstances be regarded as the official position of the European Union.