|Old Time Landlord
Joined: Dec 20, 2007
Good article from the front page of today's Wall Street Journal.
Shifting FortunesAs Irish Growth Fades, Its Immigrants DepartPolish Workers Follow the Boom Home
By JOELLEN PERRY
June 25, 2008; Page A1
DUBLIN -- In March 2005, Tomasz Tokarczyk left his job as a Krakow construction foreman and moved here, joining a wave of Eastern Europeans heading west for better work.
With the Irish economy surging, the 31-year-old civil engineer quickly quadrupled his former salary by building highways and hotels. But a few months ago, jobs got harder to find. Polish job sites, meanwhile, bombarded him with offers for well-paid work, and he decided to move back home.
Polish immigrants to Ireland, many of whom are considering returning home amid an economic boom in Eastern Europe.
"The biggest boom in Ireland is finished," Mr. Tokarczyk said through a translator at the Dublin airport, while sipping a latte and waiting for a flight to Krakow. "And the boom in Poland has started."
Since 2004, when the European Union added eight Eastern European countries, hundreds of thousands of Eastern Europeans have moved west -- mostly to Ireland and the United Kingdom, among the first EU countries to open their borders to workers from the new members. Now, with the Western economies flirting with recession and Eastern Europe flourishing, the wave of immigrants is slowing sharply. Many of the recent arrivals -- half of them, by some estimates -- are heading home.
The shift shows how rapidly some Eastern European economies are catching up to their Western counterparts, as their growth, wages and currencies surge. And it illustrates how a new, nimbler breed of immigrant, aided by discount airfares and technology, can hopscotch across countries to capitalize on economic cycles.
That stepped-up mobility is helping bolster the cohesiveness of the world's largest economic and political bloc, even in the wake of Ireland's rejection of a treaty designed to make the 27-nation EU a stronger global force in other ways.
"These immigrants are simply putting into life the very idea of European integration," says Pawel Kaczmarczyk, a researcher at the University of Warsaw's Center of Migration Research. The ability to move between countries as labor conditions change, he says, "is exactly what we wanted in introducing the whole idea of a common market."
Ireland, the U.K. and Sweden were the only three countries to open their labor markets fully to the new EU entrants in 2004, though many other EU countries have since followed suit. France will drop its restrictions next month. But amid persistent fears that easterners will undercut western wages, many of the countries are still keeping up their barriers to workers from the EU's newest and poorest entrants, Romania and Bulgaria.
Eastern European immigrants generally have been a boon to the Irish and the U.K. economies, greasing growth by propping up domestic demand and house prices -- while moderating wage inflation. Now, steady departures could be a help as those economies slow, but there are dangers. A more abrupt outflow could exacerbate economic slowdowns under way, reducing demand for houses and consumer goods and fueling inflation. In Eastern Europe, where governments are anxious to lure back citizens to fill shortages in skilled jobs, too big a surge of returning workers could nevertheless overwhelm labor markets.
Perhaps nowhere was an enormous Eastern European influx felt more dramatically than in Ireland. For much of its history, Ireland was a homogenous island that sent its own workers abroad. But in the 1990s, as deregulated markets and low corporate taxes helped launch the so-called "Celtic Tiger" boom, Ireland began luring its own citizens back and attracting workers from around the world. Over the past decade, with Ireland's economic growth averaging more than 5% a year, the share of immigrants in the population has doubled to 15%, according to the Organization for Economic Cooperation and Development, a proportion that approaches that of the U.S.
Since 2004, the vast majority of those immigrants have come from the new eastern EU members, with nearly a half-million receiving the Irish version of a Social Security number. With Ireland's population hovering around 4.2 million, the increase in immigrants' share of the labor force has been the fastest in Western Europe since the end of World War II, according to the Irish employment agency.
Poles have made up almost two-thirds of the influx, followed by Lithuanians and Slovakians. On Dublin's Talbot Street, a prime shopping area, Polish shops peddling sauerkraut and kielbasa recently have joined the wood-paneled pubs where traditional fiddle music wafts around Guinness-drinking patrons.
Eastern European immigrants helped fill shortages for skilled labor and prop up house prices. The hourly wages of Eastern European immigrants are 45% less than their Irish counterparts with similar education and experience, according to the Economic and Social Research Institute in Dublin.
"I couldn't afford to be in business without them," says Irish restaurateur Vincent Mullen, a lanky 39-year-old who is about to open a new cafe. A third of his staff will be from the newer EU members. Without them, he says, he'd "have to pay huge wages for inexperienced domestic staff."
Now, however, the Irish boom is fading. Ireland's economy grew just 1.2% at an annual rate in the fourth quarter of last year, and the unemployment rate is the highest in almost a decade.
ON THE MOVE
• Economic Balance: Many Eastern European nations that joined the EU a few years ago have seen a boom in their economies while Western Europe faces a slowdown.
• The Shakeout: Immigrants who came to work in Ireland and the U.K. increasingly are returning to their home countries, where job opportunities have improved.
• Where It Is Felt: Net migration to Ireland, the Celtic Tiger of the 1990s, is expected to drop by half this year, as fewer immigrants arrive and more head home.
In a bid to help unemployed construction workers, Ireland's employment agency recently held a job fair where officials from Eastern Europe and elsewhere touted job opportunities in their countries. "It's the reverse of what we've been doing for the last 10 years," says Kevin Quinn, the department's international employment manager. "We've been going to [Eastern Europe] looking for construction workers, and now they're short of workers at a time when we seem to have a surplus."
Ireland's employment agency predicts net migration will fall by half this year, as fewer immigrants arrive and more head home.
Krzysztof Najda, a 41-year-old father of three who has been living in Dublin, plans to go home to Gdansk in August. Sipping coffee after Sunday Mass at the stately St. Audoen's Church, where Polish-language services attract overflow crowds, he said the construction industry's downturn makes it hard to get steady work. "I came here to earn and save," he said. "There's no point being here if there's no work."
Citigroup economist Piotr Kalisz in Warsaw estimates that up to half of Polish émigrés to Western Europe since 2004 will return home in the next two years. In the U.K., half of an estimated one million Eastern European arrivals since 2004 have already left, says the London-based Institute for Public Policy Research in an April report.
Aiding the reversal: currency dynamics that have narrowed the East-West wage gap. Poland's currency, the zloty, has benefited from the stability of EU membership, the growing economy, a steady flow of remittances from Polish emigrants and, more recently, Poland's central bank raising its interest rates.
Andrej Golczewski, who arrived in Ireland in 2005 expecting to stay five years, at first earned a monthly salary for laying sheet metal that was equivalent to four times what he could earn at home in zloty, a boon in saving for his daughter's university fees. But the euro has dropped 30% since May 2004, and with Polish construction wages rising, Mr. Golczewski left Ireland for home last month.
Similar dynamics are at work in the U.K., where a housing bust is threatening to tip the economy into recession and the pound is down 40% against the zloty since May 2004.
Irish policy makers are watching the immigration shifts closely. Relations between immigrant and native populations have been unusually good, partly because robust economic growth meant immigrants didn't undercut prospects for Irish-born workers. Conor Lenihan, Ireland's Minister for Integration, believes Ireland's history of emigration has helped it cope with the influx of foreigners. "Half a million of our own people came home as part of the early years of the boom," he said in an interview. "These people act as a tolerance valve in Irish public opinion."
Many in Poland were emigrating because of frustration with the low wages and high unemployment in Poland at the time.
But tensions could rise if immigration doesn't slow as the Irish economy cools. "The current downturn could lead to Irish and immigrants competing for a smaller" pool of jobs, says Brian McCormick, an economist with Ireland's employment agency.
Of the net increase in jobs in the first quarter of 2008 compared with 2007, more than half went to Eastern European immigrants, and just 10% to Irish nationals, according to Irish government figures. The number of Eastern Europeans collecting unemployment insurance has more than quadrupled since the end of 2006, surpassing 13,000, according to the employment agency.
The ease with which Polish workers were able to move to Ireland may now accelerate their return home. Andrew Galazka, a Polish mechanic who moved to Dublin with his wife in 2004, says the initial decision to come wasn't difficult: "It only cost me the ticket." With flights between Dublin and Warsaw recently costing as little as $150 round trip, Mr. Galazka has been able to go home every two to four months.
"I really feel more like a commuter than a migrant," he said, as he chatted with other Poles at a weekly gathering of the Irish Polish society in a stately Georgian row house adorned with a portrait of Pope John Paul II, who was born near Krakow. With work steady, Mr. Galazka said he and his wife are sticking around. "But if there's an economic crisis, we'll go."
Workers who do return to Poland are discovering a drastically different country than the one they left -- one with surging economic growth and an unemployment rate that has plunged to 10% from 19.9% four years ago. EU entry has helped stoke Poland's growth, both through foreign investment and aid from Brussels to assist the country's catch-up process. Average monthly wages have risen 30% while construction wages have jumped 50%, far outstripping inflation of 4.4% or less since December 2004.
Shortage of Workers
Such wage inflation is being stoked by a shortage of skilled workers, which has prompted a full-bore government campaign to bring Polish workers home. Prime Minister Donald Tusk, who made luring emigrants back a major plank in his 2007 campaign platform, recently proposed eliminating the taxes that returnees had to pay on their earnings abroad.
In Krakow, a medieval city in southeast Poland that has emerged as an information technology and outsourcing hub, a steady stream of returning workers is helping companies cope with surging growth. German commercial truck maker MAN, which opened a gleaming, 93,600-square-yard plant in a suburb in October 2007, just finished a five-month effort to recruit 250 mechanics for a second shift. Some 40% of the applications came from workers returning from Ireland or the U.K.
"More candidates means we have more choice," says Karoline Zygmunt, a MAN human-resources developer.
There are other benefits to Poland of its workers' returning home. When Irish workers headed home in the mid-1990s, they shared skills and attitudes learned abroad. "That was one of the factors that powered the Celtic Tiger," says Alan Barrett, an economist with Dublin's Economic and Social Research Institute.
There are signs that Poland is seeing a similar gain. Aleksandra Lichon, human-resources manager for an 1,100-person International Business Machines Corp. finance-outsourcing center in Krakow, has recruited more than 20 Polish employees directly from the U.K. and Ireland over the past year. Even those who worked in unrelated fields like waiting tables had acquired valuable skills -- including fluent English, customer-service skills and increased initiative, she says. "These people have a different attitude toward work," says Ms. Lichon. "I'd recommend every graduate going away."
Eastern European workers who want to work abroad gradually will get a wider array of choices. In France, opponents of open borders in 2004 used the specter of a mythical Polish plumber to personify the threat of cheap foreign laborers, but now it is opening its borders. The remaining four countries that haven't, including Germany and Austria, must do so by 2011.
Back home in Poland, Mr. Tokarczyk, the former Dublin construction worker, is mulling a few job offers from construction firms. Sitting atop a 4,300-feet high bluff, surrounded by not-yet ripe blueberry patches, he said he's glad he went to Ireland, citing his increased self-confidence and a bank account now fat enough to allow him to consider building a house in his village of Ochotnica Górna, some 65 miles from Krakow.
Mr. Tokarczyk said he'd go abroad again if he had to, but adds that the virtue of leaving is to earn enough "to build something that belongs to you" back home. That way, he said, tugging a blade of grass and squinting at the snowcapped peaks in the distance, "you don't have to go away again."
--Alistair MacDonald in London contributed to this article.
Write to Joellen Perry at email@example.com