Incentives for Romanian and Bulgarian Migration to the UK

European Union 4.20

Summary

1. Even at the minimum wage in Britain there are very strong financial incentives for Romanians and Bulgarians to migrate to the UK, especially as wages here are topped up by substantial in-work benefits. Take home pay (including benefits) for a single worker is four or five times higher and for families eight or nine times higher than at home, after taking account of differences in the costs of living. This incentive is roughly double that available to Polish workers in 2012. There are also, of course, opportunities for considerable financial savings – a key driver of Eastern European migration. Such savings go much further in their home countries than they would, for example, in Poland. These incentives would be far higher for the Roma, many of whom receive no benefits in Romania, if they were to migrate to the UK.[1] With the success of the Polish workers well known to them, it is hard to imagine that the UK would not prove an attractive prospect, especially given current economic conditions in Spain and Italy. The potential for work in Germany and the Netherlands will only partially offset these very strong pull factors.

Introduction

2. This paper examines the economic incentives for Romanian and Bulgarian workers to come to the UK for work on the minimum wage. Efforts to lift low paid British workers out of poverty have resulted in substantial “top ups” to the minimum wage. The same uplifts are available to EU citizens and greatly enhance the incentives to migrate. The calculations in this paper are adjusted for the differences in costs of living.

Romanian and Bulgarian Nationals in the UK since Accession in 2007

3. In 2007, when Romania and Bulgaria joined the European Union, transitional controls limited access to the labour market. Workers were only allowed to come to the UK under certain employment schemes such as the Seasonal Agricultural Workers Scheme (SAWS) which allocated around 20,000 permits per year for agricultural workers. Students, the self-employed and the self-sufficient had an immediate Treaty right to come to the UK to study, work and live.

4. At present there are an estimated 94,000 Romanians and 47,000 Bulgarians living in the UK.[2]

5. From 1st January 2014 transitional controls will end and Romanian and Bulgarian citizens will have full access to the labour market.

6. The government has been reluctant to publish an estimate of the number of people who will come to the UK once transitional controls end in 2014. We have estimated that a total of 50,000 Romanians and Bulgarians will come to the UK each year for the next five years.[3]

Financial Incentives of Migration to the UK for Romanians

(a) Standard of living

7. Nationals of the two accession countries are able to enjoy a standard of living in the UK far higher than in their native countries. Purchasing Power Parity (PPP) data can be used to compare wages across countries by taking into account the differing costs of living.[4]

8. A single person in Romania on the minimum wage would have a weekly income of 164 Romanian New Lei. (Table 2) Once the costs of living have been accounted for, this is the equivalent of £55. A single person in the UK on the minimum wage would have a salary of £254 (Annex A) which is four and a half times more than can be earned at home. (Table 1)

9. In Romania a family of four (an individual with a dependant spouse and two children) on the minimum wage would have a weekly income of 208 Romanian New Lei. (See Table 2) Once the cost of living has been accounted for, this equates to £70. (See Table 3) In the UK the same family would have an income of £543 (See Annex A), which is almost eight times what they could earn at home.

10. A family on the average wage would have a weekly take home pay of 420 Romanian Lei. (Table 2) Once the costs of living have been accounted for this is the equivalent of £141, so the family on the minimum wage in the UK would earn almost four times the average wage at home. (Table 3)

Table 1. Comparison of Household Incomes of Single Workers in Romania and the UK

 Working in RomaniaWorking in the UK
 Romanian New LeiConverted to US$ using PPPConverted to £ using PPP£s
 Average WageMinimum WageAverage WageMinimum WageAverage WageMinimum WageMinimum Wage
Annual 1991585059858.91142106696286013218
Weekly3831641908112955254

Table 2. Household Incomes of Single Person on Minimum Wage, Family of Four on a Minimum Wage and on an Average Wage in Romania in Romanian New Lei and converted to £s

 Single Adult on Minimum Wage in Romania after Tax and including BenefitsIndividual with Dependant Spouse and Two Children on Minimum Wage after Tax and including BenefitsIndividual with Dependant Spouse and Two Children on Average Wage after Tax and including Benefits
 Romanian New Lei
 AnnualWeeklyAnnualWeeklyAnnualWeekly
Gross Income114421144228147
Minus Income Tax10494733415
Minus Social Contributions188818884644
Plus Family Benefit017281728
Household Net Income85051641080920821816420
 £s
Household Net Income £s168132213641431183

Table 3. Comparison of Household Incomes of Families in Romania and the UK

 Working in RomaniaWorking in the UK
 Romanian New LeiConverted to US$ using PPPConverted to £ using PPP£s
 Average WageMinimum WageAverage WageMinimum WageAverage WageMinimum WageMinimum Wage
Annual 21816108091080053517336363428241
Weekly42020820810314170543

(b) Opportunities for saving

12. The opportunity to save money is a major driver of immigration. A 20% saving of a single worker’s weekly wage would save £50. On the current exchange rate £50 is worth the equivalent of 250 Romanian New Lei,[5] equivalent of one and a half times the weekly minimum wage (164 Lei) at home.[6]

13. An individual in the UK with a dependant spouse and two children earning the minimum wage will take home £543 per week after tax and including benefits or £28,241 per year. (See Annex A) If the family made a 20% saving of their weekly income they would save £109 per week or 552 Lei; this is over two and a half times their weekly take home income (208 Lei) in Romania.

Financial Incentives of Migration to the UK for Bulgarians

(a) Standard of living

14. A single adult Bulgarian on the minimum wage in the UK would take home £254 or five times his wage at home which is worth £49 once the cost of living is accounted for.(Table 4)

15. In Bulgaria a family on the minimum wage would have a weekly income of 74 Bulgarian Lev. (Table 5) Once the cost of living has been accounted for, this is equal to £62. (Table 6) In the UK the same family would have an income of £543, which is almost nine times what they could earn at home.

16. A family on the average wage would have a weekly take home pay of 156 Bulgarian Lev. (Table 6) Once the costs of living have been accounted for this is the equivalent of £131, so a family on the UK minimum wage would earn four times the average wage in Bulgaria. (Table 4)

Table 4. Comparison of Household Incomes of Single Workers in Bulgaria and the UK

 Working in BulgariaWorking in the UK
 Bulgarian LevConverted to US$ using PPPConverted to £ using PPP£s
 Average WageMinimum WageAverage WageMinimum WageAverage WageMinimum WageMinimum Wage
Annual 727030048975.30937096096251913218
Weekly140581737211749254

Table 5. Household Incomes of Single Person on Minimum Wage, Family of Four on a Minimum Wage and on an Average Wage in Bulgaria in Bulgarian Lev and converted to £s

 Single Adult on Minimum Wage in Bulgaria after Tax and including BenefitsIndividual with Dependant Spouse and Two Children on Minimum Wage after Tax and including BenefitsIndividual with Dependant Spouse and Two Children on Average Wage after Tax and including Benefits
 Bulgarian Lev
 AnnualWeeklyAnnualWeeklyAnnualWeekly
Gross Income379837989190
Minus Income Tax334334808
Minus Social Contributions4594591112
Plus Family Benefit0840840
Household Net Income3004583844748110156
 £s
Household Net Income £s132926170133358869

Table 6. Comparison of Household Incomes of Families in Bulgaria and the UK

 Working in BulgariaWorking in the UK
 Bulgarian LevConverted to US$ using PPPConverted to £ using PPP£s
 Average WageMinimum WageAverage WageMinimum WageAverage WageMinimum WageMinimum Wage
Annual 811038441001247466801322328241
Weekly156741939113162543

(b) Opportunities to save

17. A 20% saving of a single worker’s weekly wage would save £50. On the current exchange rate £50 is worth the equivalent of 113 Bulgarian Lev.[ Exchange Rate as at 07/02/2013 – 1GBP = 2.26 BGN] This is twice the minimum wage (58 Lev) in Bulgaria. [8]

18. Similarly, a family of four which saved 20% of their weekly income in the UK (£108), would be saving over three times what they would earn in one week at home (£33). (Table 5)

Comparison of the cost of living in Poland and the UK

19. The economic benefit for Romanian and Bulgarian families migrating to the UK is roughly double that for a Polish family. A similar study of Polish incentives to migrate in 2012[9] found that a Polish family on the minimum wage were able to enjoy a standard of living four times higher than a family on the minimum wage in Poland. Moreover, savings of 20% of a UK minimum wage were roughly the same as a week’s minimum wage at home. Single workers in the UK are able to enjoy a standard of living two and a half times higher than in Poland.[10] This may explain why immigration from Eastern Europe remains high – in the year ending March 2012, 70,000 citizens of the A8 moved to the UK, 36,000 left, giving a net migration figure of 35,000.[11]

Conclusion

20. The financial incentives to migrate to the UK from both Bulgaria and Romania are very strong, much more so than in the case of Poland. Even allowing for the different costs of living, a single Romanian or Bulgarian worker on the minimum wage in the UK would earn four or five times what he or she would earn at home. A family on the minimum wage would be almost nine times better off in the UK than in Bulgaria once the cost of living is taken into account and eight times better off than in Romania. Even a family earning an average wage in Bulgaria and Romania could be three or four times better off if working in the UK at the minimum wage. There would also be considerable opportunities for financial savings – a key driver of migration from Eastern Europe.

12 February, 2013

Notes

  1. Many Roma in Romania and Bulgaria are unable to access social welfare because they do not have a national insurance number. National Insurance numbers can only be allocated to people who have a fixed abode.
  2. Annual Population Survey, http://www.ons.gov.uk/ons/.../august-2012/population-by-country-of-birth-and-nationality-datasets.xls
  3. Migration Watch UK, Immigration from Romania and Bulgaria, Briefing Paper No 4.17, 16th January 2013, URL: http://www.migrationwatchuk.com/briefingPaper/document/287
  4. Purchasing Power Parity (PPP) data adjusts for the differing costs of living in two countries which simple exchange rate mechanisms cannot account for. PPP therefore compares household incomes in different countries after taking account of differing costs of living. Based on PPP for 2010 – UK – 0.679219, Romania – 2.02, Bulgaria – 0.81.
  5. Exchange Rate as at 07/02/2013 – 1GBP = 5.06 RON
  6. In Romania the minimum wage is 8,509 RON per annum (£1,690). The calculations in Table 2 are based on earnings of 11,442 RON (£2,261) per year, which is 2933RON (£580) more than the minimum wage. This figure has been used due to restrictions with the OECD Tax Benefit Calculator.
  7. Exchange Rate as at 07/02/2013 – 1GBP = 2.26 BGN
  8. In Bulgaria the minimum wage is 3,247 BGN per year (£1,441). The calculations in Table 5 are based on earnings of 3,798 BGN (£1,681) per year, which is 551 BGN (£244) more than the minimum wage. This figure has been used due to restrictions with the OECD Tax Benefit Calculator.
  9. Migration Watch UK, Incentives for Polish Migration, Briefing Paper 4.15, 3 April 2012, URL: http://www.migrationwatchuk.com/briefingPaper/document/257
  10. A single worker on a salary just above the minimum wage in Poland would have a weekly income of 257 Zloty. Once the costs of living have been accounted for this is the equivalent of £98 (PPP – Poland, 1.781125 and UK, 0.679219). This is two and a half times less than the weekly income of £254 on the minimum wage.
  11. ONS, Migration Statistics Quarterly Report, November 2012, See here: Excel

Annex A

GBPTotal household income at min. wage
SingleCouple
 Person Child
Gross earnings213213
Income Tax1818
National Insurance1111
Net weekly income184184
 
Working Tax Credit1753
Child Tax credit099
Child Benefit034
Total direct benefits17186
 
Housing Benefit53161
Council Tax Benefit012
Total housing benefits53174
 
Total Income per week254543
Total Annual Income1321828241
 
Savings of 20%51109
Bulgarian Lev115 BGN246 BGN 
Romanian New Lei258 RON552 RON 

Annex B

Child benefit:

Child benefit for 2 children in the UK is worth £33.70 per week (£20.30 per week for the first child and £13.40 a week for the second). 

This is the equivalent of 171 Romanian Lei. In Romania a single person on the minimum wage will have a take home income of 164 Lei after tax. So child benefit for 2 children is the equivalent of a week’s wages on the minimum wage. 

This is the equivalent of 76 Bulgarian Lev. In Bulgaria a single person on the minimum wage will have a take home income of 58 Lev after tax. So child benefit for two children is much more than a week’s wages on the minimum wage. 

Unemployment benefit:

Unemployment benefit in the UK for an individual over 25 is worth £71 per week. 

This is the equivalent of 361 Romanian Lei which is 2.2 times the take home income of a single person on the minimum wage who would bring home 164 Lei per week. 

This is the equivalent of 161 Bulgarian Lev. This is 2.7 times the take home income of a single person on the minimum wage who would bring home 58 Lev per week. 

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