EU’s Blue Card Directive: Can India make the most of the opportunity?

After lengthy deliberations, the Council of the European Union (EU) adopted a Directive in May 2009, designed to implement a common immigration policy. The participating member states required to implement it by 2011. This is a welcome development, particularly from the Indian perspective.

The Council adopted the Blue Card Directive, which establishes more attractive conditions for professionals from outside the EU to access its labour markets. The directive has created a fast-track procedure for issuing a special residence and work permits, called the “EU Blue Card.”

Its objectives are analogous to the Green Card system of the US, particularly in attracting highly-skilled professional and technical manpower. The EU hopes to reverse the current mix of migration flows, according to which it attracts 85% of global unskilled migrant labour, while only 5% is absorbed by the US.

The highly-qualified foreign workers make up only 1.7% of the employed population within the EU, but the equivalent figure for Australia is nearly 10%, over 7% in Canada and 3.2% in the US. Given the high fiscal and economic costs of Europe’s redistributive welfare systems, the policymakers hope that the Directive will attract immigrants who are net financial and economic contributors to their welfare systems, and the economy.

The Directive envisages levying of penalties against the EU employers who use illegal migrant labour. It is variously estimated that between 4.5 million and 8 million people work illegally in the EU’s construction, hotel, and agriculture industries. Companies involved in employing illegal labour could be banned from public tenders for five years, forced to give back public aid, face closure, fined, or even required to serve prison sentences in extreme cases. Thus, both incentives and disincentive structures for attracting the right mix of migrants is incorporated in the directive.

The Blue Card will facilitate access to the labour market to their holders (the validity will be between 1 and 4 years, with the possibility of renewal); and will entitle them to a series of socio-economic rights (including recognition of qualifications and social security provision), and favourable conditions for family reunification and movement across the EU.

The Blue Card provisions however are less generous than the Green Card, particularly with respect to permanent residency, and citizenship.

The transaction costs associated with obtaining the Blue Card, and the integrity or the spirit with which the provisions are implemented, will be important determinants of the success of the Directive. There are likely to be intra-EU variations in this regard.

Through the Blue Card initiative, the EU hopes sustain its international competitiveness, and ensure that it continues to remain a major global economic, technological, and strategic power in the twenty-first century. There is widespread concern that unless remedial measures such as the Blue Card initiative are taken, Europe’s current demographic trends and the migration mix may significantly erode its global position.

A 2008 report by Richard Jackson and Neil Howe of the Centre for Strategic and International Studies in Washington DC, titled “The Graying of the Great Powers,” projected that the share of Western Europe in the world’s GDP will decline from 16% in 2010 to 7% in 2050; while its per capita GDP as percentage of US per capita GDP will decline from 68% to 57% over the same period.

Europe has indeed been graying rapidly as a result of prolonged period of low total fertility rate (TFR), and increasing life expectancy. In statistical terms, assuming no net migration, each woman must produce 2.15 children over lifetime for the population to be stable. But Europe’s fertility rate has been below that level since 1975. Thus, according to the latest UN projections, between 2005 and 2010, the TFR was only 1.5, with large intra-Europe variations. Life expectancy at birth in Europe is projected to increase from 75.1 years in 2005-2010 to 81.5 in 2045-2050.

Between 2000 and 2010, several European countries, including Germany, Italy, Sweden, Austria, Spain, and Greece have been experiencing contraction of their working population as a result of a long period of decline in fertility and increased life expectancy. According to the US Census Bureau, by 2030, the EU can expect to have 14% fewer workers and 7% fewer consumers than it does today. The OECD has estimated that labour force declines will subtract 0.4% a year from potential economic growth in the EU between 2000 and 2025, and 0.9% a year thereafter.

The Blue Card Directive provides India and the EU to engage in mutually beneficial migration policies. EU is rapidly graying, and has a need for workers, particularly professional and technical manpower. India however is in a demographically favourable phase in which its working-age to total population share is increasing. International migration can assist India in meeting the challenge of providing livelihoods to the expanding workforce. 

India has been a significant contributor to the global stocks and flows of professional and technical manpower, including to the United States, and other industrial countries. The Blue Card initiative has the potential to expand migration opportunities for the Indian manpower, while meeting EU’s manpower needs.

Increased migration to EU will assist India to sustain the flow of inward remittances, which have been playing a crucial role in financing India’s trade deficits. According to the World Bank, India’s inward remittances were US$ 52 billion in 2009, equivalent to 3.3% of its GDP, and 15% of the global total. Greater access to EU’s labour market by the Indian manpower will help diversify the source of remittances, and expand the Diaspora network which can help deepen economic and strategic linkages between India and the EU. The role of Indian Diaspora in the US in deepening bilateral linkages is particularly instructive in this regard.

The Blue Card Directive thus represents an important opportunity. India’s competitors in supplying professional and technical manpower globally will however be keen to grab this opportunity, too. Indian policymakers, particularly the Ministry of External Affairs, Commerce, and Overseas Indian Affairs will need to urgently evolve a coordinated strategy and specific measures to ensure that the EU’s Blue Card Directive results in expanding opportunities for India’s manpower.

More broadly, there is a strong case for restructuring India’s international migration policies, with a view to expanding India’s economic space and strategic leverage in the world.

Mukul Asher (mukul.asher@gmail.com) is a professor of public policy and Amarendu Nandy (amarendun@gmail.com) a PhD candidate, LKY School of Public Policy, National University of Singapore. Views are personal.