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April 2008, Volume 15, Number 2

Eastern Europe, Sweden, Russia

An estimated five million workers have left the Eastern European countries from the Baltics to Bulgaria for western Europe between 2004 and 2007 (the population of these new EU member countries is 104 million). Many returned, but the mass emigration put upward pressure on wages and downward pressure on unemployment rates. For example, nominal wages rose more than 20 percent in the Baltics and Romania, and unemployment in Poland fell from over 20 percent in 2003 to less than 10 percent in 2007.

Despite the sharp increase in wages, labor costs are still far less in eastern than western Europe, spurring investment in manufacturing that creates more jobs. Nokia announced that it would close a German plant and expand a Romanian plant in January 2008, citing German labor costs of E28 ($41) an hour compared to E8 in Poland and E4 in Romania. German labor productivity is higher, but with modern machinery and young workers, the productivity gap is closing.

The question is whether the Eastern European enlargement boom will continue. Rapidly rising wages and a declining population could begin to slow economic and wage growth. Some think that rising labor force participation rates can offset shrinking labor forces. For example, 77 percent of persons 16 and older are in the labor force in Denmark, but only 54 percent of Poles, largely because many Polish workers then in their 40s and 50s were given early retirement or disability benefits during restructuring in the 1990s.

Sweden. The Financial Times on January 19-20, 2008 reported on 278,000-resident Malmo, Sweden, where 37 percent of residents were born abroad or had parents who were born abroad. There has also been an influx of Danes seeking lower-cost housing; the Oresund bridge opened in 2001, easing the commute.

Malmo is one of the most segregated cities in Europe, with most migrants in the suburb of Rosengard, where satellite dishes bring TV programs from Turkey, the Balkans and Iraq. A quarter of Rosengard residents are Muslim, and there are fears that they could become an ethnic underclass. The article concluded that Sweden, like the EU, is hoping that by opening legal channels for blue card foreign professionals, local residents will begin to see immigrants as economic benefits rather than economic burdens.

Sweden has granted asylum to about 100,000 Iraqis, 40,000 of them since 2003. The government is tightening its rules-85 percent of asylum applicants were granted refugee status in January 2007, but a year later, the rate declined to less than 30 percent, when the government decided that Iraqi applicants had to show they faced specific threats rather than a general threat of violence.

A third of the residents of Estonian are not citizens, prompting the interior minister to assert that a "massive influx of cheap labor [is] posing a threat to both our economy and our security, and can definitely not be permitted. Our choice is qualified labor. But, regarding foreign labor, the state cannot dictate to the private sector what they must do." The government is requiring employers to pay foreigners at least a minimum wage to upgrade the quality of foreigners employed in the country.

The Institute for Social Research reported contradictory attitudes toward foreign workers in Lithuania. Some 56 percent of those polled agreed that foreign workers support the economy, 47 percent say no more should be admitted, and 62 percent say more migrants would mean social unrest.

Russia. Moscow will have 300,000 legal migrant workers in 2008, down from 750,000 in 2007; the city's mayor wanted to reduce the number of migrants even further. The migrant workers include 195,000 from countries whose nationals do not require visas to enter Russia and 105,000 from countries whose nationals need visas.

The Federal Migration Service in January 2008 reported that 160,000 employers were fined 4.5 billion rubles ($185 million) for employing illegal migrant workers in 2007, when the fine was raised from 8,000 ($325) to 90,000 ($3,700) rubles per illegal hire. Most of the fines were levied in Moscow and St. Petersburg.

Radical nationalists are blamed for the deaths of 50 foreigners in the first three months of 2008, including 30 in the Moscow area. Government officials say that some of these deaths involve drugs and are not hate crimes. Most of those killed are migrants from Tajikistan, Kyrgyzstan or Uzbekistan, and most of the killings are not solved. There are an estimated 850,000 nationals of these three countries in greater Moscow, which has 10 million residents.

Russia's Far East lost 20 percent of its population between 1990 and 2007. Chinese workers are 1.3 percent of residents, and their number is growing-some 25,000 foreign workers were registered in 2007, up from 10,000 in 2003. Some Chinese lease land to cultivate cucumbers, watermelons and vegetables.

Louise Nordstrom, "Sweden cools its welcome for Iraqi asylum seekers," Scotsman, April 1, 2008. Stanislaw Waszak, "Schengen passport-free travel arrives at newcomers' airports," Agence France Presse, March 30, 2008. Monika Hanley, "Immigration dilatation," Baltic Times, March 31, 2008. Ursula Hyzy, "Needed but shunned: Chinese toil in Russia's Far East," Agence France Presse, February 20, 2008. Bernard Osser, "Chechen refugees chase 'French dream' following Schengen expansion," Agence France Presse, January 25, 2008.