“Romania And Bulgaria Are Scheduled To Join To The European Union On 1 January 2007. Using Market Analysis, Discuss Some Possible Implications For The Uk Labor Market.”

Bulgaria and Romania will become the 26th and the 27th members of the European Union (EU) in 2007. United Kingdom (UK) is one of the few countries in European Union to allow residents from Eastern Europe to be able to work in England after last enlargement in 2004. Zornitsa and Stoyanova-Yerburgh (2006) indicate, that: “An estimated 600,000 migrants have moved to the United Kingdom over the last two years.” Adding, that: “… 250,000 jobs a year are created by the UK economy and the economy continues to grow.” Moreover, Ullmann (2006) argued, that: “Free movement of labor within the UK has given our labor markets a timely boost.” Hence, the upcoming joining of Romania and Bulgaria to European Union would have significant effect on labor market.

Among the numerous economic aspects of future enlargement, wage rates and employment might be of the most concern. Based on the demand and supply analysis it could be possible to investigate major affects of the immigration on labor and salary in the UK. Figure 1 represents the market for labor, where wages, determined by demand and supply, are initially at level We1. An influx of migrants from Bulgaria and Romania could cause labor supply curve to shift from S1 to S2 and, other things remaining equal, wages rates will be decreased to We2. Hence, the increase in supply of labor could influence in the fall in wages and as a result lower the living standards of workers who already reside in the country.

Furthermore, wages and employment rates are also influenced by the elasticity of demand. Considering that the demand for labor is elastic, which is according to Sloman (2004: 54): “When quantity demanded changes by a larger percentage then price”, then labor supply would increase to LE2 and require the additional employees with insignificant decrease in wages to WE2, as shown on the Figure 2.

However, when the demand for labor is inelastic, as defined by Sloman (2004: 54): “When quantity demanded changes by a smaller percentage than price”, then labor supply would insignificantly increase to LE2 in proportion to a great decrease in wages at WE2, as illustrated on the Figure 3.

Moreover, the influx of workers from Romania and Bulgaria could increase migrants spending from the income they earn as well as creation of new jobs in the country following in raise of productivity levels. As a result, Figure 4 illustrates that, the demand curve would shift from D1 to D2 and, other things remaining equal, wages rates would be increased from We1 to We2, as well as labor employed would increase from Le1 to Le2.

Taken that the supply for labor would be elastic in UK economy, then labor supply would increase to LE2 and require the additional employees with insignificant increase in wages to WE2, as shown on the Figure 5.

However, when the demand for labor would be inelastic, then labor supply would insignificantly increase to LE2 in proportion to a great increase in wages at WE2, as illustrated on the Figure 3.

Hence, the enlargement of EU would increase labor supply, resulting in rise of the level of economic activity. Moreover, greater productivity level would influence the demand for labor to rise. Figure 7 illustrates the movement of equilibrium from E1 to E2, given that the demand and supply of labor increase. The outcome of the diagram indicates that generally, the arrival of Bulgarians and Romanians, everything else remaining equal, would case the employment levels to rise with slight increase in wage rates.

As mentioned earlier, the future expansion is not the first precedent in European Union, thus, some possible implications for the United Kingdom (UK) labor market could be drawn from the past. Hence, based on supply and demand analysis and on previous experience, the influx of Bulgarian and Romanian migrants to the Great Britain could result in the following positive outcomes in British economy:

• Firstly, during previous Euro Union enlargement in 2004, according to Work Permit (2006): “Immigration has boosted the UK economy by about Ð'Ј2.5billion a year… adding between 0.5 and 1 percentage points to growth.” Consequently, joining of Bulgaria and Romania could cause expansion in supply of labor with additional increase in employment and tax payers.

• Secondly, Ball (2006) suggests, that: “Influx of workers to meet skill gaps had helped keep a lid on wage growth that in turn had helped keep inflation low.” Therefore, Romania and Bulgaria immigration could be associated with low inflation leading to weaker interest rates and, as a result, ensuring economic stability.

• Thirdly, the Confederation of British Industry (2006), stated that: “Immigrants from Poland had benefited the economy by filling skills gaps in areas such as building and catering.” Hence, providing the entrance of skilled migrants from Bulgaria and Romania to UK could fill in skills shortages in workforce.

• Finally, Romanian and Bulgarian migrants could influence an increase in investment as Work Permit (2006) indicates, that: “Property market has been the demand for accommodation from East European workers.”

However, some negative implications could also occur in UK economy and labor market including:

• Firstly, the worrying result of the new arrivals has exposed some of the weaknesses of the British workforce. Significant number of jobs has been occupied by skilled Eastern European workers leaving untrained UK workers unemployed. According to Work Permit (2006)”It (immigration) raises issues about how well the education system is preparing UK students for the jobs that are available in the real world.” The problem of unskilled domestic labor could be temporarily solved with the arrival of a few thousands migrants from Bulgaria and Romania. However, the economy could result in reduction in competitiveness and increase of unemployment in the longer term