Towards a Transnational Labour Market? European Union Regulations regarding social security and migrant workers

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Towards a Transnational Labour Market?

European Union Regulations regarding social security and migrant workers

“Man is of all sorts of luggage the most difficult to be transported” Adam Smith

University of Groningen Faculty of Economics and Business Global Economics and Management

Supervisor: N. A. Lillie

UWV (Uitvoering Werknemersverzekeringen)

Supervisor: Geert Nijburg

Student: Wieteke van der Meer

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Preface

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Abstract

The focus of this research is on European Union Regulations regarding social security impacting migrant workers and how this promotes a transnational labour market. Based on evidence from the comparative case study analysis by means of interviewing migrant workers about their unemployment benefits and incapacity benefits, the solution to improve the free movement of workers can clearly not be found in EU social security Regulations. Migrant and frontier workers are not being stimulated by these social security Regulations since they have a short term perspective. That is, their main motivation is to work abroad and make money, they do not think about the possible negative consequences of becoming unemployed or disabled. They are not affected or stimulated by the EU social security Regulations which should make the free movement of workers easier. Thus, social policy does not support the labour market.

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Chapter 1: Introduction

Trade compensates for the lack of international mobility of the production factors according to the theory of Heckscher and Ohlin. A Common Market can alleviate this lack of international mobility (Straubhaar, 1988). According to Robson (1987) and the theory of Common Markets allocational gains arise for the integrated area through the free movement of labour. Workers will migrate from a low return member country to a member country with high return. EU social security legislation has a coordinative function between the EU member states in order to achieve the goal of increasing the freedom of movement of EU citizens. However, is this being achieved?

Not much has been written about EU social policy supporting the free movement of workers consequently creating a transnational labour market. According to Straubhaar (1988) the Common Labour Market has not significantly stimulated labour migration in the EU. Also, several authors have argued that an influx of migrant workers could lead to an erosion of the social welfare state (Forsander; 2004, Kvist; 2004, Sinn; 2002). So, the formation of a transnational labour market is being complicated by this factor.

In order to know whether or not EU social security policy is supporting or constraining the transnational labour market, the impact of EU Regulations regarding social security on migrant workers will be investigated. Recently, in May 2010, Regulation 883/2004 has been implemented by the European Union (EU) together with the Implementing Regulation 987/2009. The UWV, an autonomous administrative authority (ZBO), concerned with the implementation of the Dutch employee insurances, labour market and data services, is interested in knowing what the effect of European Union Regulations, and especially Regulation 883/2004, is on the freedom of movement of workers which could lead into a transnational labour market in the EU (UWV, 2010).

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With the term migrant worker the frontier worker is also meant. However there is a difference between the migrant and frontier worker. The definition of migrant worker and frontier worker used here is that the migrant worker leaves his country of origin completely to live and work in another country, and the frontier worker lives in one country and works in the other. Although under Community law the definition of frontier worker is „any worker who pursues his occupation in the territory of a Member State and reside in the territory of another Member State to which he returns as a rule daily or at least once a week‟ (European Parliament, 2011). Under Community law all interviewees are frontier workers, because they return home at least once a week. However, in order to show the difference of a „real‟ frontier workers living in the Netherlands and working in Germany or Belgium and migrant workers working abroad in another EU country a distinction has been made between those two based on the first two given definitions. Still, interviewed migrant workers do return home at least once a week.

A comparative case study analysis by means of interviewing migrant workers about their unemployment benefits and incapacity benefits which they are or have been receiving will be conducted. The comparative case study will reveal the actual impact on EU Regulations regarding social security on the free movement of workers; it will contribute to and gives new insights in the welfare migration debate from the perspective of the migrant workers.

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Chapter 2: Research design

2.1 Comparative case study

Two in depth case studies will be compared in order to know more about the impact of EU Regulations regarding social security on migrant workers and the free movement of workers. Comparing two case studies with one another will give replication logic to reveal support for theoretically similar results and contrasting results for predictable reasons (Yin, 1994). According to Eisenhardt (1989) “the case study is a research strategy which focuses on understanding the dynamics present within single settings.” A case study is an empirical inquiry in which the focus is on a contemporary phenomenon within its real-life context. Moreover, the boundaries between phenomenon and its context are not clearly evident (Yin, 1994). The two cases that are being compared and contrasted are: frontier workers applying for or receiving a disability benefit and migrant workers receiving unemployment benefit from the UWV. Both cases are being studied from the work environment of the UWV. Although the cases are about different legislation; disability benefit and unemployment benefit, both cases concern migrant workers. The disability benefit and the unemployment benefit legislation are affected by EU Regulation concerning social policy. That is, regulation 1408/71 and 883/2004. Moreover, frontier workers and international migrant workers are being studied in order to analyse the differences and similarities in behaviour concerning the free movement of workers.

2.2 Methodology

2.2.1 Literature review

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2.2.2 Interviews

The two case studies are based on elite interviews, subject interviews and official UWV sources. By means of „triangulation‟ of this multiple data collection, a better constructed and less biased case studies can be achieved (Eisenhardt, 1989). The interviews with UWV and EURES employees are being characterised as elite interviews. In elite interviewing the investigator is willing to let the interviewee teach him what the situation is to the extent where there exist a relationship with the interviewer‟s basic problems (Dexter, 2006). The unstructured interview method is used during the elite interviews in which the respondent starts with a narrative. This gives the interviewee the possibility to turn the interview into different directions and to come up with different topics which the investigator had not thought of (Blumberg et al., 2005). The subject interviews are migrant workers who are unemployed or disabled and receiving a benefit. During these interviews a semi-structured interview method was being used. That is, the interview starts with specific questions, but later on the interviewee has the possibility to follow his or her thoughts (Blumberg et al., 2005).

An ethnographic approach is chosen in these interviews. That is, describing the nature of those who are being studied. Within the ethnographic field two approaches, who are opposed to one another, are being used. These are: the positive approach and the reflexive approach. The positivist approach is based on the 4Rs which reflexive science violates. These 4Rs are: reactivity, reliability, replicability and representativeness. From the positive science perspective: the researcher must avoid affecting the world he/she studies (reactivity), criteria is needed for selecting data (reliability), any other researcher studying the same phenomena could reproduce the same results based on unambiguous data selection (replicability), and the small part of the world we examine must be typical of the whole (representativeness) (Burawoy; 1998). “The premise that distinguishes positive from reflexive science is that there is an “external” world that can be construed as separate from and incommensurable with those who study it” (Burawoy; 1998). Since my study violates these 4Rs, my approach can be described as reflexive. Moreover, this research is based on a small sample of people and the research will be qualitative and exploratory. According to Burawoy (1998) “reflexive science elevates dialogue as its defining principle and intersubjectivity between participant and observer as its premise.”

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are impacting the migrant workers environment and in effect also the free movement of workers. With the use of the extended case method of Burawoy (1998) the interviews are being contextualised. The extended case method: “...deploys participant observation to locate everyday life in its extralocal and historical context. The extended case method emulates a reflexive model of science that takes as its premise the intersubjectivity of scientist and subject of study.” Thus, with the use of this method I try to also show the bigger context in which the migrant workers operate, and how this context, (the nation state, the EU and global structures) are influencing the migrant workers and therefore the free movement of workers.

Research from the work environment of the UWV

I started my research at the international department Bijzondere Zaken (BZ) (special cases) of the UWV where I was assigned to Project 883. The goal of Project 883 is to communicate electronically with the other social security institutions in the other EU member states. In order to know more about the new Regulation 883 and its legal differences with the old Regulation I had several conversations with Adri Zuidervaart, who is working as staff assistant international at Project 883. As staff assistant he could tell me more about Project 883, the old Regulation and the impacted legislation by EU social security Regulations: the WAO/WIA (Wet op de Arbeidsongeschiktheid en de Wet Inkomen en Arbeid) (Law on disability and the Income and labour law).

Since I wanted to talk to migrant workers who received or are receiving WW (Werkloosheidswet) (Unemployment law), WIA/WAO Adri sent an email to his colleagues of Bijzondere Zaken in Heerlen, Breda and Amsterdam. All these BZ offices are dealing with the WAO/WIA legislation. The BZ office in Amsterdam deals with the international migrants from other EU member states and from other countries in the world. No frontier workers are being dealt with at this office, these are being dealt with in Heerlen and Breda. The only difference between Heerlen and Breda is that Breda deals mostly with the Belgian Mutualiteiten and migrant workers from Belgium and The Netherlands. Heerlen deals with the German Krankenkassen and the migrant workers from Germany and The Netherlands. At the office in Breda I have interviewed Jef Oomen of BZ, and Jos Keizer a job specialist. At the office in Heerlen I have interviewed Frans Muyers of BZ, and the insurance doctor Rob de Jong.

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and Hinrich Kuper EURES advisor of the Eems Dollard region. EURES provides information, advice and recruitment/placement for people who want to make use of the free movement of persons. Moreover, in order to come in contact with migrant workers with a WW benefit I contacted Edwin Prijs at the WW office in Hengelo from which I received a database of WW migrant workers. With the help of Eric de Ree of Klant en Service (Client and Service) a letter was sent to those people with the request for an interview.

2.3 Overview of the migrant workers

In this section the general characteristics of the migrant workers will be discussed. I have interviewed 19 migrant workers, from which 10 migrant workers are disabled frontier workers and 9 are migrant workers are or have been unemployed. That is why I have separated these two groups into two different cases, because the conditions and characteristics of these two groups are different from one another. I have based my findings for most part on these interviewed migrant workers. However, I also used the information about migrant workers which I received from the job expert, the insurance physician and the EURES employees who are working closely together with the migrant workers and provided me with reliable expert knowledge about these migrants.

2.3.1 Case 1: Disabled frontier workers

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Figure 1 Figure 2

The age of the frontier workers is spread within the ranges from 26 till 60 (figure 3). If you look at the records of the ages of people in the Dutch WAO and WIA (disability insurance) in 2008, 2009 and 2010 from the age of 35 there is a bigger increase of people with a disability insurance (UWV Kwantitatieve informatie, 2010 and UWV Kwantitatieve informatie, 2009). I have not mentioned the type of sickness in this section since this is of no value to this research, but it can be read in the written interviews. There are different „types‟ of frontier workers due to the different nationalities and different insurance systems. As already mentioned before and can be seen in figure 4 there are three types of insurance systems which the frontier workers make use of. These are: the Dutch WAO/WIA, the German Krankenkasse, and the Belgian Mutualiteiten. This research is from the perspective of the Dutch UWV, so these are the social security agencies which the disabled frontier workers make use of.

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2.3.2 Case 2: Unemployed migrant workers

From the office of Hengelo I received a document of 454 WW clients who are under Regulation 883 due to their border crossing character. From this a selection was made to send a letter with the request for an interview to 131 people living in the north and middle of the Netherlands. Since I had already interviewed a lot of frontier workers in the south of the Netherlands also a representation was made of frontier workers living in the north and middle. The north of the Netherlands includes the three provinces: Friesland, Groningen and Drenthe. Whereas the middle the provinces: Flevoland, Overijssel and Gelderland were included. The background of the clients was not available because only the names addresses and BSN numbers were visible. That is why I randomly contacted the WW clients for an interview. There was a financial incentive of 40 Euros for the WW clients who agreed to an interview. This, in order to increase the response to my letter. I received 26 replies from which I interviewed 9 people. All interviews were face to face and were being recorded. Also, short notes were taken in case of problems with the recorder.

The people I have spoken, two (22.2%) are women and seven are men (77.77%). One frontier worker country of origin was Germany but for the rest they were all from The Netherlands (Figure 1). The educational level was fairly high, at least 44% with a HBO (bachelors degree) or Masters diploma (Figure 2). Only one was low educated with almost no education at all. The age was ranging from 37 till 63 with most people ranging in the higher age scale (Figure 3).

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worker leaves his country of origin completely to live and work in another country. Whereas the frontier worker lives in one country and works in the other. Although under Community law the definition of frontier worker is „any worker who pursues his occupation in the territory of a Member State and reside in the territory of another Member State to which he returns as a rule daily or at least once a week‟ (European Parliament, 2011). Under Community law all interviewees are frontier workers, but in order to show the difference of „real‟ frontier workers living in The Netherlands and working in Germany and migrant workers working abroad in another EU country a distinction has been made between those two based on the first two given definitions. In figure 4 there are five migrant worker (55.55%) and four frontier workers (44.44%). Although the migrant workers are workers who have worked and lived abroad they have considerable ties with their home country The Netherlands.

2.4 Ethical issues

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2.5 Limitations

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Chapter 3:

Literature review

3.1 The Common Market

Why start with the free movement of workers in the EU in the first place? Regarding the theory of Heckscher and Ohlin trade compensates for the lack of international mobility of the production factors. This is based on evidence where two countries share a common technology and are specialized in producing two commodities with internally but not internationally mobile labour and capital (Straubhaar, 1988). A Common Market can alleviate the lack of this factor mobility. A Common Market is a form of international economic integration, because it involves the trade liberalization of product markets, and the elimination of obstacles to the free movement of factors within that specific area. Part of the free movement of factors is the free movement of labour (Straubhaar, 1988). According to Robson (1987) and the theory of Common Markets allocational gains arise for the integrated area through the free movement of labour. That is, marginal productivity of labour is being equalized through the migration of a mobile labour force from a low to a high productivity country. Workers will migrate from a low return member country to a member country with high return.

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leads to no incentive to reallocate factors of labour migration (Straubhaar, 1988). So, there exists no perfect labour migration in the EU while the free movement of workers creates allocational gains for the member states. From the perspective of the creation of a transnational labour market the lack of labour migration in the EU indicates that there does not exist a transnational labour market in the EU due to the causes mentioned above. The literature does not mention the experiences and opinions of the migrant and frontier workers themselves about the how and why of crossing the border to work. Moreover, no connection in the above literature is being made whether or not EU social policy does influence in a positive manner the free movement of workers and consequently the transnational labour market. However, in order to know how the transnational labour market is affected by EU social policy we need to know how social policy at EU level is being formed.

3.2 Globalization pressures on EU social policy

Globalization affects EU social policy because the EU has to compete in a world where trade and capital movements are more and more integrated. Europe is affected by globalization which threatens the EU welfare states. Expansion of the welfare state in a member country could lead to a member state becoming less competitive in the world market. That is, an increase in the payroll taxes leads to higher wages, which in turn leads to an increase in goods and services which might harm the member state competitive position. Although the foreign exchange market can offset the deteriorating competitive position of a member state. A depreciation of the currency leads to a higher export ratio (Atkinson, 2002). This is almost made impossible due to the Economic Monetary Union.

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the EU. Directly, it impacts migrants within the EU through nation state and EU social policy regarding migration. Indirectly, these migrants are affected when social policy is formed by the member states and the EU. These institutions have to be aware of globalization pressures when forming this policy as the above literature indicates. The next section will discuss EU social policy and how this impacts the social policy in the EU member states. In the end the migrant and frontier workers are directly impacted by national social policy. However, in case of the migrant and frontier workers legislation, EU social security Regulation has, indirectly impacted member states social security legislation. This phenomenon is described as Europeanization of social policy.

3.3 Europeanization and social policy

Europeanization is the basis from which the EU affects member states with their EU rules. The definition of Europeanization Borzel and Risse (2009) use is as follows: “…the emergence and the development at the European level of distinct structures of governance, that is, of political, legal, and social institutions associated with political problem solving that formalizes interactions among the actors, and of policy networks specializing in the creation of authoritive European rules”. Europeanization is seen as a process of institution building at the European level, and how this process of Europeanization impacts the member states. A distinction is being made between policies, politics, and polity to identify the domestic impact of Europeanization. There is an emerging consensus that Europeanization affects member states (Borzel and Risse, 2009). From the perspective of the member states and the influence of the EU regarding social policy, Europeanization pressure is growing in social policy. There is an occurrence of horizontal processes of transnationalization where civil society organizations in one country are learning and being aided by groups in another country (Bruszt and Holzhacker, 2009). Member states are restricted in an increasing number of actions regarding social policy by the EU. These are: the progress of pooling sovereignty (decision-making) among nations, the adopting of common policies among member states, and the progress in creating single social areas of which the internal barriers are removed (Threlfall, 2007). Thus, from the theoretical perspective, Europeanization affects member states social policy through restrictions of sovereignty and common policy due to EU law on welfare states.

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According to Borzel and Risse (2009) measuring convergence or divergence is hard, because answers are different depending on what level one looks for convergence or divergence and the issue subject to the convergence or divergence. That is, what can be convergence at the macro-level can still be divergence at the micro-level. A number of articles on the subject of social convergence exist. One research question was: to what extent is there social convergence and does the EU need more social convergence? Goudswaard and Caminada (2003) state that there is convergence of social protection, which is not a result of EU policy coordination but can be seen as spontaneously. This research investigated the impact of the tax system on social protection statistics. Another study, researched social convergence of social protection systems in the EU and whether they have converged or diverged under the influence of the integration movement. Traditional opinion is that economic integration promotes progress in social protection across member states so that convergence of social protection systems should follow. However, it was too early to say that convergence of social benefits as a result of the European integration movement set in. For their findings they used empirical data on gross replacement rates of unemployment benefits of 14 countries from two decades, and data on the share of GDP spent on social benefits covering four decades (Cornelisse and Goudswaard, 2001).

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guidelines action programs. This can contribute to the sustainability of the social protection systems of member states. (Goudswaard and van Riel, 2004).

Social convergence of EU policy is in effect a good thing, because this leads to convergence of the welfare systems of the member states which could lead to a higher level of migrant and frontier workers crossing the border since they are then less affected by the differences in welfare legislation in the member state where they work and the member state where they live. Still, one does not know if migrant and frontier workers are constrained in crossing the border through the difference in legislation. Moreover, the level of social convergence is not entirely clear as stated above by the different outcomes of the EU social convergence literature. Also, the question remains unanswered if EU social convergence is necessary for EU and member states social policy. It also remains unclear what the impact is of the welfare state on EU social policy. This is useful to know since the legislation concerned with the free movement of workers is not only influenced by globalization and Europeanization pressures. The welfare state plays a big role in affecting legislation concerning the enablement of the free movement of workers. This will be discussed in the next section.

3.4 The welfare state and social policy

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influenced by the wishes of the member states who play a big role in EU public policy making. Thus welfare states play a big role in EU social policy, but are also influenced by the fears concerning the negative impact of migrant workers on the welfare state. This fear of welfare states can impact the free movement of workers due to the possible negative consequences of migrant workers on the welfare state and the welfare states influence in EU public policy making.

3.5 The welfare state and immigration

There are several studies about the positive or negative effect of immigration for member states. Devitt (2010) describes the concern about the immigration in Western Europe as the „migrant worker factor‟. This concept encompasses three concerns about economic immigration. These are: economic immigration is perceived as a threat to the employment or employment standards of the domestic workforce, the concern about the social and cultural integration of labour migrants, and the concern of the dependence of member states on labour migrants. Fear in European member states that labour immigration will lead to lower wages and higher unemployment for domestic workers is discussed in several studies. If wages in the destination country are inflexible, and there is a high substitutability of foreign for domestic workers then the increase in immigration would lower the domestic workers wages and would lead to higher unemployment rates in the destination country. However, this can be disputed by the argument that immigrants provide different goods in the service sector. Moreover, immigrants can help labour markets perform more efficiently through weakening of the power of unions. Also, immigrants are often complementary to native workers in production (Zimmerman, 1995). Whether the population of the receiving member state is worse or better off through immigration depends on: the size and the structure of the immigration flow, and the labour market institutions, especially wage flexibility of the concerning member state. So, economic theory cannot offer any definite outcome of the positive or negative effects of immigration on member states (Bauer and Zimmerman, 1999). Thus, from the perspective of nation states there can be positive or negative effects of migration. Still, nation states are losing more and more control over their social policy, including migration flows.

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welfare state redistribution (Mau and Burkhardt, 2009). Forsander (2004) argues that immigration challenges the European national states and the Nordic welfare states. She makes this argument with the use of the model of Esping-Andersen (1990) and his three characterizations of welfare states. First of all, the liberal welfare state, with relatively low levels of universal services and social security determine social policy. Second, the corporatist welfare state which wants to keep the influence of the state and the family in social policy. Third, the social democratic welfare states, which is mainly found in Nordic countries, constitutes of high levels of residence-based social services and social security. Nordic countries perform well regarding social capital, such as the level of trust and the density of membership in voluntary associations. The problem is that the strong social capital seems to be exclusionary, where immigrants immigration and labour market integration are concerned. Foreign labour is seen as a threat to the balanced order of labour market regulation, because the labour market cannot cover the living costs of the immigrant and his or her family members. She concludes that the social welfare system of the Nordic welfare states is inclusive because of its residence based equality. However, for the immigrants from the perspective of a society based on wage labour, immigrants fall out of the Nordic society (Forsander, 2004). Thus, immigration can undermine the basis of the welfare state which depends on what type of welfare state system the EU member state has. So, for rich member states the question arises with what motive these immigrants come to work in their country.

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over social raids depend on: the possibility of exporting certain benefits, attracting certain groups, and risking permanent support for new groups (Kvist, 2004).

In a systematic multi-country study which looked at the policy impact of enlargement in the older member states little empirical evidence was found to support the assumption that welfare states with generous benefits and accessible labour markets will attract more welfare migration. Although the study finds a trend that those countries with the least restrictions on labour market access are the ones who are the most active in adjusting their social policies. This could lead to a „race-to-the-bottom‟ (Kvist, 2004). That is, the weakening of the labour standards and the worker bargaining power. When the government are very generous with their welfare benefits in one nation, that nation will receive a large influx of immigrants who will depress the welfare benefits, or is an incentive for the outflow of capital to nations with lower labour costs. This in turn will depress compensation and raise unemployment (Krueger, 2000).

There are different opinions about how this „race to the bottom‟ can be avoided. Kvist (2004) states that this can be solved through coordination or harmonization. Coordination by means of a country who encounters extra costs due to migration receives a subsidy, either from the sending country or the EU. Harmonization of social policies across countries could be done through minimum directives by the EU (Kvist, 2004). However, Sinn (2002) argues that implementing harmonization standards there would be no more incentive to migrate from east to west Europe. Still, even trying to harmonise the level of eastern countries from one tenth to one fifth at the current western level would be impossible to finance by the east or the west. According to Sinn (2002) it is best to implement the home-country principle. The claims for social benefits can be send to the home country, or the benefits should only be paid to the amount they would be paid in their home country.

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and attracts the poor who come from abroad. As a consequence there is welfare state erosion (Sinn, 2002).

The study of Kvist (2002) indicates that it is not proven that welfare states with substantial welfare benefits attract more immigrants. Schram et al. (1998) states that welfare migration is an infrequent occurrence and consists only of a small portion of the welfare budget. Still, in the study of Sinn (2002) he assumes that welfare state migration can be expected through the existing wage difference between east and west member states. De Giorgi and Pellizzari (2008) used data of the European Community Household Panel which contains data on the households in the EU, and data on welfare generosity from the OECD database to give an answer to the above debate. The results indicated that the welfare state may attract migrants, but that the size of this attraction is very low if you compare this to the role of the labour market with its unemployment rate and level of wages and the differences of labour markets across the EU which could lead to distortions in the flows of migration per country.

Research has also been conducted on the relative importance of short-distance welfare-motivated migration. Testing welfare caseloads at state borders to state interiors, looking if border counties with low benefits of a state have lower welfare participation compared to the state‟s interior counties, so having lost welfare migrants. That means that they assume that there exists welfare migration. If migration costs are lower for border county residents, border county residents who live in a high welfare benefits county should have higher welfare participation compared to the states interior counties (McKinnish, 2005).

It appears that there are different types of welfare migration. However, some assume that there exists welfare migration while others indicate that welfare migration is very low. Still, even with low welfare migration there can be a „race-to-the-bottom‟ of social benefits. Fear of this welfare migration by welfare states can impact EU social policy negatively which in turn could impact the free movement of workers negatively. However, no hard evidence is given to support this argumentation.

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Chapter 4: The Dutch social security context

The literature review indicates that the creation of a Common market in which the free movement of workers is made possible is affected by globalization, Europeanization and immigration pressures. However, from the perspective of Europeanization, in order to know how EU Regulations regarding social security impact migrant workers in the Netherlands the Dutch social welfare state is being investigated and connected to the European Social Model (ESM). In this section the social security context in which the migrant workers operate will be revealed, not only on national level but also on European level.

4.1 The Dutch welfare state according to Esping Andersen’s typology

The welfare state has different characteristics according to Esping-Anderson, so one should not speak of the welfare state. Esping-Andersen divides the welfare state into three different welfare state regimes. “Regimes refers to the ways in which welfare production is allocated between states, market, and households.” (Esping-Andersen, 2000, p. 73). The typology should be seen as an ideal type, and can be used as a device to classify the differences in welfare states between countries. (Esping-Andersen 2000) In this case the comparison can be made between the ESM and the Dutch welfare state. First of all, the social-democratic welfare state regime which can be classified as welfare services dominated by the state. There are universal welfare services of a high level, and a large proportion of the population has access to these welfare services. Due to the re-distributive effect of the welfare state income differences are very low. Sweden is a classical example of a social-democratic welfare state. Second, the corporatist welfare state regime where the state is fairly active in giving welfare services. Still, this does not lead to income distribution since welfare policies at state level is all about the preservation of the existing hierarchy in society. So, different groups are entitled to different welfare services, in which the traditional family is being favoured. Corporatist countries are: Austria, Germany, Italy and Belgium. Third, the liberal welfare state regime has little state interference and a strong market focus. Responsible for the majority of the welfare services are private companies. Only a limited group with really low incomes is help being provided by the state. Thus, society is characterised by dualism. There is differentiation in income in society, and there is equality under the people who receive state welfare. Typical welfare state regimes: United States and Australia (Hoekstra, 2003).

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(Esping-Andersen, 2000). However, he places the Netherlands within the corporatist welfare state system, which is according to Goodin and Smitsman (2000) wrong. This can be seen in table 2 below. This table reproduces component indicators that go into making a cumulative index scores about the countries depicted below. Sweden, the US and Germany are ideal types of their respective welfare state regimes (Goodin and Smitsman, 2000). Although the data is from the 1980s the regime type of these countries has not changed since then.

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payment. Dutch social spending is very high in general, but the Dutch spend more money on means tested benefits than a social-democratic welfare state regime does. That does not mean than the Netherlands does not have a high non-means tested spending, which is 26.4 compared to Sweden‟s 25.7 percent. Item 2 the „average benefit equality‟ is very low based on Esping-Andersens‟s measure. The „average benefit equality‟ is calculated as the ratio of the „basic benefit‟ to the „maximum possible benefit‟ under the three programs: pensions, sickness and unemployment benefits. Sickness and unemployment benefits are in the Netherlands earning related, the old-age pension is flat rate. So, Dutch pensions show huge benefit equality (1.0), and sickness and unemployment benefits would have scored relatively low. However, when averaging between these three components than the important aspect of pensions is being concealed (Goodin and Smitsman, 2000). Therefore, the social security system in the Netherlands according to Esping-Andersen‟s model can be seen as a social-democratic welfare state regime.

4.2 The European Social Model

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their normative meanings about how a social security system should look like (Scharpf, 2002).

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Chapter 5: Case 1: Disability benefits and disabled frontier workers

In order to investigate the impact of EU social security legislation on the free movement of workers frontier workers are being interviewed about their experiences with EU social security legislation. In this case EU Regulation 883/2004 will be used since Regulation 883 is the newest legislation regarding social security and has been implemented in May 2010. The frontier workers interviewed are receiving or in the process of receiving a disability benefit from the Dutch UWV, German Krankenkasse or Belgian Mutualiteiten.

5.1 The disabled frontier worker

The UWV offices of Heerlen and Breda are dealing with the disabled frontier workers from Belgium, Germany and The Netherlands. There are four types of frontier workers who show up at the offices in Breda and Heerlen. First of all, the last Dutch insured (Laatst Nederland Verzekerde, LNV) living in The Netherlands or abroad. Persons living abroad, mostly in Belgium (checked at Breda) and Germany (checked at Heerlen). This is a person who is at the moment of becoming disabled insured in The Netherlands but has a job history abroad. Logically, this job history is most times in Belgium and Germany. So:

LNV + NL (Last Dutch insured, living in The Netherlands)

LNV + BTL (Last Dutch insured living abroad, Belgium or Germany)

Second, the last foreign insured frontier worker (Laatst Buitenland Verzekerde, LBV) living in The Netherlands or abroad. These are persons who are at the moment of becoming disabled insured abroad, Belgium or Germany, but also have a Dutch job history. Thus:

LBV + NL (Last foreign insured living in the Netherlands)

LBV + BTL (Last foreign insured living abroad, Belgium and Germany) (Interview: Jef Oomen 08.06.2011)

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5.2 Different disability systems

Frontier workers go and work or live across the border, but what most do not realize is that there are big differences between disability systems and benefits of the concerning countries. Between Germany and The Netherlands the built-up system is in place which has not been changed with the new Regulation 883. That is, when a frontier worker gets disabled and has worked 10 years in The Netherlands and 10 years in Germany the payment of the benefit will be pro rata (based on time) (50% for The Netherlands and 50% for Germany) between the two countries. So, when frontier workers, especially Dutch frontier workers who work or worked in Germany, are ill they have to make use of the German Krankenkasse. The duration of receiving the sickness benefit is different. In The Netherlands this time is two years, from which the first year is 100% and the second year is 70%. In Germany is the sickness benefit 1,5 years from which 6 weeks 100% and after that your income drops to approximately 60-70%. “When frontier workers realize that there are big differences between the systems they are very surprised of the totally different legislation of the surrounding countries” (Interview: Rob de Jong 08.06.2011). The younger Dutch frontier workers incentive to stay and work in Germany is low, especially the ones who work for German call centers. The treatment of employees at these call centers is bad. Employees get fired very easily. After that experience those young Dutch frontier workers are looking for work in The Netherlands. However, for the older Dutch frontier workers it is more complicated since they have built up certain rights in Germany and will not quit their jobs easily. However, a good or bad system does not exist. An employee is better off at the Dutch disability system, whereas an employer is better off at the German disability system. For the Dutch employee the disability benefit is better arranged, but the Dutch employer has to pay the first two years of the disability benefit. In comparison to the German employee who is worse off, because the German employer has to pay only 2-6 weeks sickness benefit. Moreover, differences between the systems of Germany and The Netherlands influence the duration of employees absenteeism. The absenteeism rate of Dutch frontier workers working in Germany is lower compared to the Dutch employees and higher compared to the German employees. This has to do with the fact that the incentive to go to work is higher in the German disability system than the Dutch disability system. (Interview: Rob de Jong 08.06.2011 and Rob de Jong, 2006).

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with the new Regulation 883 this changed. Both countries are behaving as a built-up system now, just like Germany. Since the disability benefit is higher in The Netherlands it depends on the situation of the frontier worker whether he or she is better off. When a frontier worker gets ill there are some major differences between the medical checking system of Belgium and The Netherlands. This is also the case between Germany and The Netherlands. As an example Belgium and The Netherlands will be compared, as can be seen in figure 1 below. The Dutch system is based on what you are able to do when being ill. This stems from the different types of categories of the Dutch system: Category 1 is for people who are less than 35% ill. These persons won‟t receive the WIA. In category 2 you are between the 35% and 80% percent disabled. That means that you will receive a WIA benefit called the WGA benefit (Werkhervattingsregeling Gedeeltelijk Arbeidsgeschikten, Return to work scheme for partially able workers). In category 3 you are more than 80% disabled, than you will receive the WIA benefit called the IVA (Inkomensvoorziening Volledig Arbeidsongeschikten, Income provision fully disabled persons). Belgium has a totally different system. When being medically checked you have to be more than 66% disabled. Otherwise you will not receive the disability benefit. You cannot compare this type of medically checking with The Netherlands. First of all the gradation in the level of being disabled is different, but also the medical check of the doctor is not the same. Moreover, it could be that you would be disabled in Belgium for 68% and would receive the Belgium benefit, but you would only be 47% disabled in The Netherlands. (Interview: Adri Zuidervaart 31.05.2011) Thus, when a frontier worker gets ill there are different legislation which he or she need to take into account.

Different medical checking systems

1. Difference in the gradation of the level of being disabled:

The Netherlands Belgium

Category 1 <35% NO WIA Category 1 <66% NO insurance Category 2 35-80% WGA Category 2 >66% insurance

Category 3 >80% IVA - -

2. Difference in the medical check of the insurance doctor

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5.3 Border crossing motives

Crossing the border due to the open borders has become easier. The motives to work in another country for frontier workers, as the name suggest, is not only work. When looking at the motivation of persons with the Belgian nationality who is working in The Netherlands their motivation is mainly work. However, if you look at the motivation of Dutch persons who are working or working and living in Belgium other motives come to play. These persons are moving because of their Belgian partner or because of a job offer (Interviews migrant workers 14.06.2011). Although the evidence is based on an expert interview and a small sample of frontier workers it indicates the difference between the Dutch and Belgian frontier workers.

When looking at the motivation of Dutch persons to go and live in Belgium and work in The Netherlands the motive is mainly the cheaper costs of housing in Belgium compared to The Netherlands. Buying a piece of property or land is much cheaper in Belgium. Moreover, a couple of years ago it paid off for independent workers to live in Belgium and keep working in the Netherlands, because of the fact that the Dutch tax agency could not collect certain fees due to the „border‟. The following example also indicates this „border issue‟. Dutch persons with high debts who are on the run are not traceable in Belgium because the Dutch social security number (BSN) does not exist in Belgium. Moreover, Belgian rules and regulations tend to be less strict, if you look at renovating your house, but also for asylum seekers. A not so straightforward motive to go and live in Belgium is because of the so called „Belgium route‟. Dutch nationals who have a non-European partner moved to Belgium (and kept working in The Netherlands), because their partner, who was denied asylum in the Netherlands, could get asylum more easier in Belgium. When granted asylum the whole EU is accessible.

The Dutch frontier workers motives of working in Germany and living in The Netherlands is also work. Although behind that motive are a number of reasons why go and work in Germany. Some reasons are depicted below:

“My father was working at the same company for over 25 years. I always went with my father to his work.” (Frontier worker, average education)

“I went to school in Germany and I followed an education at a company in Germany.” (Frontier worker, average education)

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There is a certain closeness with Germany, because they live near the border they can speak the Aken dialect, they watched a lot of German television, some even went to German schools. So the German culture is not strange to them which makes it more easier to go and work in Germany.

Most of these frontier workers are receiving money from the UWV, the German Krankenkasse or the Belgian Mutualiteiten because of their disability. There is no link between abuse of the social security system and frontier workers motives to go and work in another country. Frontier workers need to go through a lot of trouble when finally receiving their benefit. In the past, abuse of the social security benefit in The Netherlands was easier due to the old legislation, the WAO. The judgment of being sick is more strict now. Moreover, when asking disabled frontier workers if they are able to work again, what they would like to do or if they are able to work, but it would be less than 100% (Dutch system) and the work would be different are they willing to do that? The indirect responses I received were that they were eager to work again, and that they did not want to be labeled as lazy. “Applying for a disability benefit makes me feel uncomfortable, I feel guilty…” (Frontier worker, low education)

“Sitting at home for six weeks drives me crazy. The last three weeks I didn’t do anything at all, it drives me crazy.” (Frontier worker, average education)

“I don’t have hobbies and can you picture me running around with a vacuum cleaner? Playing games behind the computer everyday is starting to get boring.” (Frontier worker, average education)

5.4 Knowledge of the social security system

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“No definitely not I am not a person who gets sick very easily. The first treatment with hepatitis C was no problem and the second treatment went well until week 40 and then it went very bad. My immune system collapsed. Afterwards I could have checked the internet, you can find a lot there.”(Frontier worker, average education)

Frontier workers don‟t read anything when moving or working across the border. In this case, even with a serious illness and working no information was being read about the disability benefit. Most information is online available, but some just don‟t understand the information or are only interested in what their net income will be. “The simplicity of the letters of the UWV are not that simple as we think they are. It also depends on the educational level of the clients…Most people are interested in what their net benefit is…” (Interview: Frans Muyers 14.06.2011) The main interest of clients when receiving the disability benefit. From the above stems the short term optimistic vision of these frontier workers. When moving or working in another country no information is being gathered about the social security system.

So, knowledge about national social security systems is lacking, but when asking about European legislation the understanding is almost zero. Asking a frontier worker if he or she had ever heard about the free movement of persons, which personally affects the frontier worker, nine out of ten reactions were: “no” or “I don’t understand” (Frontier worker, low education. This also has to do with the fact that most frontier workers don‟t sense a border. Especially for frontier workers, some have to cross the street and they are Germany. The physical barriers have been removed. “Most people think that the EU EG is all the same, one Europe. If I work in The Netherlands or Belgium the border doesn’t matter anymore. Except there are the taxes and sickness fees. They have no idea that when people get ill how big the differences are between social security systems…” (Interview: Rob de Jong 14.06.2011). Thus, they don‟t sense a border, but when they become ill not only do they perceive the difference between disability benefits between countries, but also the difference in other legislations.

5.5 Other legislation

“Why don’t we have one tax system in Europe?” (Frontier worker, average education)

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When you are not paying taxes in The Netherlands there are also no Dutch tax benefits. “We have no possibility to buy a house because we don’t receive the benefit of subtracting the mortgage of our taxes because we don’t pay taxes in The Netherlands.” (Frontier worker, average education) Moreover, most find it very annoying to fill in the tax papers of The Netherlands while they are not working there. Also, troubles with the health insurance exist. There are confusions about the right coverage. Health insurance is in Belgium a lot cheaper compared to The Netherlands, but what most people don‟t realize is that when they become ill their own health risk in paying for their health is higher than in The Netherlands.

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don‟t want the hassle and the anxiety of being medically checked again. However, this is not the main reason. Two main reasons why people are not making use of the opportunity is that they might lose other beneficial regulations in Belgium and the complexity of recalculating their net income. In the end people are interested what they receive net. When they risk losing beneficial Belgian regulations the difference would be small in net income. For example, making use of the Dutch disability insurance you also have to be insured for the more expensive Dutch health insurance. Thus, other legislation and regulations have a big impact on the life of frontier workers.

5.6 The process

As a frontier worker, is it easy to apply for disability insurance? For most frontier workers the process is not entirely clear, but they found the Dutch application process for a disability benefit very natural. “…you go from two years being sick in the WIA it doesn’t matter what kind of name tag it is…” (Frontier worker, low education) Application for the Belgian Mutualiteiten gave some problems for a Dutch person. This has to do with the fact that Dutch persons working in Belgium do not know how to apply for disability insurance. Compared to the Belgian workers they don‟t know how the social security system works in Belgium. It takes longer for Dutch frontier workers to figure out the system.

“The Mutualiteiten in Belgium were not really clear and did not know exactly what should happen. And I also did not know what I should be doing in the Netherlands. So, it took me a while before I found out where I had to call in sick. I work in Belgium and I am insured in Belgium so I thought that if I have a doctor’s note then I go with that to the Belgium sickness fund so that everything was arranged over there. That was not the case.’' (Frontier worker, average education)

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Chapter 6: Case 2: Unemployment benefits and migrant/frontier workers

In case 2 EU Regulation 883/2004 will also be used, but the focus will be on the section of the unemployment legislation presented in Regulation 883/2004. In case 2 are next to frontier workers also migrant workers interviewed.

6.1 The unemployed migrant/frontier worker

When starting as a migrant or frontier worker most migrants did not foresee that they were going to be unemployed. For some the job did end rather unfavourable. Getting fired due to unresolved issues between the boss and the employee was a common reason. Also, in cases when business failed contracts were not extended. In one case the boss asked the migrant worker to work for less money, because Polish migrants were cheaper than what he was offering. The migrants interviewed applied for their unemployment benefit when living in The Netherlands, so the rule is, according to EU Regulation 883, that a frontier worker (under EU law) can only apply for an unemployment benefit in his/her place of residence, in this case The Netherlands.

6.2 Regulation 883

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the Landkreis to: Bitte verlassen Sie innerhalb von vier Wochen das Land (Please leave the country within four weeks). This had to do with the fact that when they went to Germany to live there they had to comply with two conditions. These are: they had to have enough resources to make ends meet and they needed to have a health insurance. With the ending of the WW insurance there was also no health insurance so they needed to have a private insurance which costs in Germany a lot of money. Most people also bought a big house which they could no longer afford so in the end for those people it wasn‟t a good solution. The reason why they could make use of this exception was that, in the past, it was not possible to sign oneself in for the Dutch job market. Now it is possible to, even if you live in Germany or Belgium, to sign yourself in for the Dutch job market, so the reason of the existence of the Case Miethe was no longer there and that is why it is with the new Regulation no longer applicable. According to EURES advisor Hinrich Kuper these problems could be resolved by focusing more on harmonisation of social security systems in Europe instead of only coordination. These people wouldn‟t have a chance to only make use of the best rules and they would not fall between the cracks of two totally different systems. (Interview: Hinrich Kuper 29.06.11).

Problems also arise because employers are not aware of the new Regulation 883. When working abroad paperwork needs to be done by the migrant, but also by the employer. Some migrants did not have any trouble at all with the paperwork and their employer. When starting working they only needed to put their signature on the paperwork and everything was set. Others weren‟t so lucky. In one case the German company refused to pay for the Dutch WW which left the frontier worker with no choice to contact his lawyers or else the frontier worker could not receive the WW benefit. He stated that his employer mainly listened to the finance office in Hamburg and they were not familiar with the EU Regulations. There were not many migrant workers at the finance office in Hamburg, they were more located in Nordhrein Westfalen. So, starting to work in good faith at a company did not turn out well for every migrant worker.

6.3 Border crossing motives

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product. Another one wanted to personally develop himself even more by learning and working in another culture and by mastering the German language even more. He signed up at a headhunters company in Zwolle and found a job in Germany. Others just lost their job and were asked by a company or by a friend to go and work abroad. Or in some cases they ended up accidentally working for a foreign employer abroad when applying for a job in The Netherlands.

It is also possible for people in the WW to export the WW abroad, only once. Under Regulation 883 it is possible to export the WW to another country from three up to six months. Yearly there are approximately 500 people who make use of this possibility. From those people half goes to neighboring countries: Belgium, Germany and England. One third goes to countries in the Mediterranean. Very surprising in the UWV report was that most people (40%) were highly educated, based on a response of 62 people. In total 194 people, between April and July 2009, were sent a question list about the export of their WW abroad by the UWV office in Hengelo. When looking at their motive to go and look for work abroad is that far the biggest group are looking for work and hoping to find it abroad. Other reasons are: going abroad because of their family living there, their partner is going to work abroad, and returning to their home country. (Werk zoeken over de grens vanuit de WW, 2010) This rule does make it easier for migrants to migrate to another country, although one can ask oneself if they would not have gone abroad when not receiving their minimum of three months WW.

Some frontier workers do not even sense that they are working abroad. They have integrated very well, in this case, in the German culture. Although the physical borders have been removed between Germany and the Netherlands most frontier workers sense a legal and cultural border which is very big. Some quotes from frontier workers:

“Germany and the Netherlands does not look like each other. We are one EU but the culture and the rules are so different…” “I was a Dutchman in Germany. It has to do with the culture in the country itself. That is a pretty big difference to me as a person.” (Frontier workers, high education)

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legal differences were experienced by some frontier workers as a big border to cross, and made that some did not want to go and work in Germany anymore.

6.4 Knowledge of the social security system

A big number of the interviewees are high educated, so it is not very surprising that the knowledge about the social security system is rather high, as it appears from the interviews. This can also be seen in the following quotes in this section.

Asking the interviewees if they ever heard of the free movement of persons in the EU half had never heard of it and the other half heard of it, although one interviewee replied: “Ehm yes that is a term which I heard of but especially when things already went wrong” (Frontier worker, high education). So, after the facts he found out more about EU legislation. The interviewees who knew about the free movement of persons in the EU were almost all highly educated as opposed to the interviewees who did not know anything about the free movement of people, they had an average or low education level.

“Before I was thinking about going and work in Germany I first went to the EURES office just over the border, you can find a lot of information there. If you know nothing about border crossing work it is almost not doable to know to which office to go to because there are many. My complete history as an employee will be gone in The Netherlands so there needs to be some things arranged in advance; taxes, sickness fund etc.” (Frontier worker, average education)

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workers learned more about the German social security system because they had a negative encounter with the German social security system.

Knowledge amongst the border workers about their own Dutch social security system and especially the unemployed insurance and disability insurance varies. On the one hand, some border workers knew exactly where to go and what to do:

“I know that I fall under Dutch law because I am living in The Netherlands so it was pretty certain for me that I was eligible for a WW benefit or else I would never had agreed to quit my job in mutual consent with my employer.” (Frontier worker, average education)

On the other hand:

“No actually I didn’t know. Before I was working in Germany I had my own company so I was not entitled to WW, and I needed to arrange things fast with my German employer because they needed me on a short notice. They promised me to look after the legal side of working in Germany, but they did not kept their promise.” (Frontier worker, high education) Knowledge about their own Dutch social security system did not always have to do with how more educated people were the more knowledge they had about their social security system. Also, the people who did know about the Dutch social security system had educated themselves when they were on the brink of losing their jobs.

6.5 Other legislation

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“As an EURES advisor I built up a network of people working for the different governmental offices in Germany and the Netherlands, so I can help the frontier workers with specific problems. Because it is not only the taxes, but also unemployment, child funds, sickness funds etcetera…” (Interview Hinrich Kuper 29.06.11)

Half of the frontier workers did not have any problems at all but the other half did experience some problems with different kinds of legislation:

“The legislation is not clear, I had a German Steuerberater (financial advisor) who was active in the Netherlands and in Germany and he knew nothing of the new legislation in May 2010.” “For me the German legislation did not turned out very well. One of the problems was that I was working two days at home in The Netherlands. When working two days at home the situation becomes more complicated. When that is more than 10% than special rules are applicable. First of all, your social security in The Netherlands and your wage levies are spread over both countries to prevent double taxes, but there are some problems with it.” (Frontier workers, high education)

Problems also arise because information at the Dutch tax agency is interpreted wrongly. For one frontier worker it all looked very clear in the beginning when filling in the tax papers but afterwards there are some unexpected downturns. Looking at the examples on the website of the Dutch tax agency they are correct with the explanation but not with the actual outcome of the tax declaration. He expected to receive a tax discount of 80 percent but it turned out that the discount was only from the small part above his income of 45000. For him that was misleading. Moreover, one frontier worker before agreeing to go to work in Germany needed to negotiate with her German employer to increase her wage, because they owned a house and the house was on her name so the tax advantage would disappear when working in Germany. She also noticed that the wage groups were totally different. Because she already had worked that year in The Netherlands she was not entitled to certain declarations and therefore she was placed in Steuerklasse one (highest tax group) for the rest of that year. Another one had the problem that he was classified by his financial advisor as a „director‟ which means that he did not pay social funds in Germany, which needed to change because he was an employee of the company. However not all was trouble with paying taxes for frontier workers:

Towards a Transnational Labour Market? European Union Regulations regarding social security and migrant workers