Labour Migration and Social Security Coordination

2011–2012

ERSTE Foundation Fellowship for Social Research Should we stay or should we go?

Migration and its effects on demographic and economic development in Central Eastern Europe

Labour Migration and Social Security Coordination: Effects on Welfare in Countries of Origin and Destination – the cases of Macedonia, Serbia and Kosovo Marija Stambolieva

Labor Migration and Social Security Coordination – Effects on Welfare in Countries of Origin and Destination The cases of Macedonia, Serbia and Kosovo1

Marija Stambolieva

Abstract This article discusses the mutual effects among labor migration, social security coordination arrangements and the welfare states. It analyses country cases, which are outside of the European Union’s coordination rules, but with a tradition of relatively functional social security coordination regimes. The assessment underlines the importance of social security coordination. Apart from the obvious advantages for the migrant workers, it shows clear advantages for both the countries of origin and destination. In that, the content of the social security agreements is equally important. It further engages in identifying key points which require improvement. Finally, the assessment shows that current and future reforms of the national social systems will have an effect on the future of the social security coordination arrangements. In the conclusion the article offers recommendations for policy makers in the region and the EU on how to improve governance of social security coordination.

Final Paper Submitted to ERSTE Stiftung in February 2012

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I would like to express my gratitude to the ERSTE Stiftung which supported the realization of this study.

I would also like to thank the interviewees from the selected countries who took the time and showed the interest to contribute to the research. Finally, I would like to thank Darko Docinski, Maja Bogicevic and Muhamet Brajshori, who helped me collect information and schedule the interviews and also Damjan Harish who helped me understand some documents written in Slovenian language.

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Contents Introduction .................................................................................................................................................3 Methodology ...............................................................................................................................................3 Migration Data ............................................................................................................................................4 Legal Framework .......................................................................................................................................6 Bilateral Instruments..............................................................................................................................6 Pensions .............................................................................................................................................8 Health-care .......................................................................................................................................14 Other Social Security Provisions ...................................................................................................19 Multilateral Instruments.......................................................................................................................20 Assessment of the Legal Framework and the Mutual Effects of Labor Migration, Social Security Coordination and Welfare.......................................................................................................................23 Conclusion ................................................................................................................................................28 References ...............................................................................................................................................30

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Introduction Most of the migration literature has focused on the exploration of the reasons for migration and the effects on the host country (for a summary see Massey et al., 1993). In that, the dominant perspective has been an economic one. Much less attention has been paid on the countries of origin and when that has been the case it has been again predominantly through an economic prism. When social costs of migration are on the agenda, the term social is used to describe the family structures and relationships. The term social is seldom used to correlate migration with social policies.

A pioneering study on the portability of pension and health-care benefits for international migrants has been done by Holzmann, Koettl & Chernetsky 2005.

Depending on the access of migrants to social protection in the host country and the possibility to transfer these entitlements back to the home country, Holzmann, Koettl & Chernetsky have developed a classification of four types of regimes: Regime I providing access to social security benefits and advanced portability regulated by bilateral agreements between the migrant-sending and receiving country (also multilateral); Regime II granting access to social security benefits in the absence of bilateral instruments; Regime III where there is no access to portable social security benefits; Regime IV marked by undocumented but also legal migrants who participate in the informal sector of the host country (p.5). In global terms only around 20-25 percent of international migrants move under the favorable Regime I (Holzmann, Koettl & Chernetsky 2005, Avato, Koettl & Sabates-Wheeler 2009).

The data provided by Avato, Koettl &

Sabates-Wheeler shows that the EU countries and the other European countries have 80% of their migrants covered under this regime, followed by North America with 68%. Migrants from poorer regions of the world are much worse off.

This article turns to social security and intends to investigate its correlation with migration. It discusses labor migration and social security coordination mechanisms in Macedonia, Serbia and Kosovo. The selected country cases are representative of a region which is outside of European Union’s coordination rules, but with a relatively developed network of bilateral social security coordination arrangements. I begin by portraying the existing legal framework in the selected cases and continue assessing the impacts it might have on migrant-sending and migrantreceiving countries. By linking the empirical findings to the existing theoretical considerations, I finally pinpoint key findings relevant for providing policy suggestions.

Methodology Several methodological approaches have been combined in this study examining the effects of the social security provisions and coordination mechanisms on labor migration: a) selection of the cases; b) mapping of the relevant legislation and gathering of data; c) semi-structured interviews with stakeholders in the selected case countries; and d) analysis of the collected documentation and comparing with existing theoretical considerations.

The selected country cases are the Republic of Macedonia, the Republic of Serbia and Kosovo2. This choice has been

2

UNSC Resolution 1244-administrated Kosovo (hereinafter referred to as Kosovo). In further

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made for two reasons: a) they are representative of a region in Europe where labor emigration is an important issue.

Considerable share of their populations lives abroad. During the transition the countries experienced increases of the expatriate communities abroad, Macedonia to a higher, Serbia to a lesser extent.

Stabilization of migration patterns can be observed and a shift from emigration to a region of both emigration and immigration, mostly owing to the return migration.

(Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009); and b) they are successors of the former Yugoslavia, which unlike the Eastern communist Bloc had already then concluded bilateral social security agreements with countries from the EU and wider. Macedonia and Serbia took over these agreements and over the course of time have been replacing them with new ones. Kosovo, considering its particular status, faces significant applicability issues and it has not yet concluded new agreements with states which have recognized it as an independent state.

The process of identifying the relevant legislation and the gathering of data has proven particularly challenging. The information about the applicable rules could not be obtained from one source and at times contradictory information was given by different sources. This was especially the case of Kosovo. The quantitative data referring to the financial implications of the different provisions as well as the number of beneficiaries was especially difficult to obtain. This was mostly the case because this data is either not collected systematically by these countries or not available. For the data which is not

text I will use the terms Macedonia and Serbia when referring to these states.

publically available requests have been sent to the competent public institutions which have responded positively to some degree and provided part of the data.

Migration Data The identification and provision of precise data on migration, in particular labor migration, from the selected countries is not the main intention of the article.

Nevertheless, it is worthwhile to have an idea what is the range of persons who could make potential use of the different social security (coordination) provisions. However, clear-cut information on the number of people living abroad or moving across borders is lacking, primarily due to varied sources of information, inconsistent collection of data and use of different methodologies. A study by Kupiszewski, Kicinger, Kupiszewska & Flinterman (2009) has in detail elaborated the problem of obtaining relevant data.

Data on labor migrants is particularly difficult to obtain. This could be because labor migrants are not registered as a special category in the statistics on migration in general. Another reason could be the different definitions used by the states to determine which person falls under the scope of labor migrants. Furthermore, persons who move abroad do not necessarily report the change in residence.

In that sense especially difficult to monitor are the temporary and circular migrants.

Having these impediments in mind, it is difficult to assess the number of migrant workers from Macedonia, “in the absence of data for the principal receiving countries, particularly Germany and Switzerland” (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.58). General data on stocks of migrants from Macedonia abroad 4

indicate an annual increase of around ten thousand migrants per year (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.57). Another report shows that “of the 1.282 emigrants in 2005, 518 have left for employment reasons, 420 for family related issues, and 85 for marriage, 41 for educational purposes, and 218 for other reasons” (IOM 2007, p.15). Based on this data appears that somewhat less than one half of the migrants have left the country in order to seek employment abroad. This data relies on one source and is limited only for one year; hence, it is impossible to detect trends in labor migration flows.

The general data shows drop in emigration from Serbia and Montenegro between 2000 and 2005. However, also immigration to Serbia and Montenegro has declined (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.58). Only the numbers of labor migrants show certain stabilization to “between 625.000 and 680.000” (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.59). Furthermore, there has been an increase of naturalizations in the host countries. Therefore, “it is expected that owing to permanent settlement, the associated family reunification and the resulting reduction in the share of working family members, will in future reduce the proportion of labor migrants in the total migrant population” (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.59).

The selected country cases are representative of the South-eastern European region (SEE), which is outside of the EU, as they show two different types of countries: one which is characterized by higher rates of emigration, as the example of Macedonia shows and one which is characterized by moderate flows, such as the example of Serbia. Certain immigration

trends can also be observed in the region (Kupiszewski, Kicinger, Kupiszewska & Flinterman 2009, p.60). Considering the current sizes of the population of these countries as well as demographic trends3, it could not be expected that emigration would put pressures on the host countries.

Another question is the effect on the countries in the SEE. Short term, emigration could relax the labor markets and lessen the problem of unemployment. However, on the long run, emigration of primarily young population could pressure the social systems, i.e. the pension and health-care funds as well as the budget for social services. It therefore makes sense to bring the migration patterns in correlation with the existing social systems and their forthcoming reforms. This will be examined at the end of the paper.

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Macedonia has population of 2.057.284; Serbia has population of 7.276.195 (Sources: Statistical Office of the Republic of Macedonia; Statistical Office of the Republic of Serbia). The population percentage change from 2000 to 2100 is projected at -26 for Serbia and Montenegro and -6 for Macedonia (UN 2004, p.49). The projected decrease of the population of Macedonia for the period between 2009 and 2050 is -9,1 and of Serbia is -6,7 (UN 2009, p.51).

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Legal Framework Bilateral Instruments Inherent to one of the basic objectives of its establishment – the freedom of movement of workers – the European Union has developed a system of coordination of social security schemes. The main instruments of coordination have been the Regulations No 1408/71 and 859/2003, and more recently 883/2004 (replacing 1408/71) and 1230/2011 (replacing 859/2003). The rest of the countries in Europe, which are not member states to the EU, are outside of the EU social security coordination rules.

They rely on alternative provisions. Major instruments for social security coordination for these states are the bilateral agreements on social insurance.

Most of the concluded agreements refer to the two main types of social insurance: pension and disability insurance and health insurance, but there are quite a number of those which include insurance in case of unemployment. Such are the agreements with other European countries, while the agreements with countries such as the US, Canada, Australia regulate only the pension

and disability insurance. The agreements reflect the specificities of the period when they have been concluded and of the contracting parties. Nevertheless, some of the main principles upon which the agreements are based are: -

Equality of treatment between the nationals of both states regarding the conditions for acquisition and use of certain rights;

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Unity of the applicable legislation – application of the legislation of only one of the contracting parties, usually the one of employment (lex loci laboris), for the same person for the same period of time;

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Protection of rights in the course of acquisition, with aggregation of periods;

-

Protection of already acquired rights and exportability of benefits.

These principles are also common to the European social security coordination rules.

Table 1 shows the bilateral agreements in power on the selected cases.

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Table 1 Bilateral Agreements (in force)

With countries

MACEDONIA

SERBIA

KOSOVO

Australia, Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Czech Republic, Germany, Luxembourg, Montenegro, Netherlands, Poland, Romania, Slovenia, Switzerland, Turkey, FRYugoslavia (Serbia)

Austria, Bosnia and Herzegovina, Croatia, Czech Republic, Cyprus, Luxembourg, Macedonia, Montenegro, Slovenia

Croatia, Luxembourg, Macedonia***

Inherited from Yugoslavia: Denmark*, Egypt, France, Hungary, Italy, Libya, Norway, Slovakia (from Czechoslovakia), Sweden, United Kingdom

Inherited from Yugoslavia: Belgium, Bulgaria**, Denmark, Egypt, France, Germany, Hungary, Italy, Libya, Netherlands, Norway, Panama, Poland, Romania, Slovakia (from Czechoslovakia), Sweden, Switzerland, United Kingdom

Total number

28

27

In procedure of negotiations

Hungary, Italy

Austria, Belgium, Canada, France, Greece, Hungary, Romania, Russia, Slovakia, Switzerland, Turkey

Inherited from Yugoslavia: Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Sweden

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*New agreement signed and ratified in 2000, not yet in force **New agreement signed in September 2011. ***Based on the agreements between these countries and the Federal Republic of Yugoslavia. For other agreements, for example, between the FRY and the Czech Republic, there is no data regarding its applicability in Kosovo. Also there is lack of data connected to the relevance in Kosovo of some of the agreements concluded by the former Socialist Federal Republic of Yugoslavia.

Sources: Ministry of Labor and Social Policy of Macedonia; FIOOM 2009; Institute of Social Insurance of Serbia; Econom:east; Employment Agency of Serbia; Ministry of Foreign Affairs of Kosovo.

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Pensions Legal Provisions The legal basis for the coordination of the social security schemes is the national legislation. Republic of Macedonia guarantees payments of the pension benefits and the bodily injury benefits to foreign citizens if they have moved back to the country whose citizenship they have and if there is a bilateral agreement with this country which regulates this or based on reciprocity4. It further envisages payments of pensions and other monetary benefits to Macedonian citizens who have moved abroad if this has been guaranteed by a bilateral or other type of international agreement. In case such an obligation has not been stipulated then the Pension Fund may approve payment based on the person’s material circumstances and the justification of the movement abroad5.

The provisions in the national law are thus linked to notion of citizenship, even though the bilateral agreements refer to the notion of insured persons. Basically, it seems that the intention of the Pension and Disability Insurance Law of Macedonia has been to guarantee the pension and bodily injury benefits to all, both domestic and foreign citizens, however the provisions may prove to be discriminatory especially towards foreign citizens as their entitlement to the benefit is conditional upon the residence in a state whose citizenship they have.

The exportability of pension and bodily injury benefits from Serbia is conditional upon residence of the insured person in a

4

Article 149, Pension and Disability Insurance Law, Official Gazette of the Republic of Macedonia No. 80/93, 3/94, 14/95, 35/95, 40/96, 70/96, 71/96, 24/97, 25/97, 32/97 & 24/2000.

5 Article 150, ibid.

state which has concluded a bilateral agreement with Serbia (PDIFS 2011).

Otherwise, the Serbian Pension and Disability Law does not contain any specific provisions regarding the benefits obtained abroad, with the exception of the specific arrangements for rights obtained on the territory of other former Yugoslav republics6, which will be elaborated further in the text.

With regard to the social risk of old-age, the social security coordination enables realization of the right to pension benefit primarily through aggregation of insurance periods in different countries. In the cases of Macedonia and Serbia, which are in that sense representative of the whole Southeast European region outside of the EU, insurance periods abroad are taken into consideration only in case there are bilateral agreements in place. In principle, if a person has spent a certain time working abroad and been insured against the risk of old-age then the states involved will have to perform two calculations when determining the right to pension benefit. One calculation is according to the national legislation. If it is established that the person does not fulfill the prescribed conditions for obtaining a pension benefit in one state, then another calculation would follow which takes into account the insurance periods in other contracting states. The second calculation includes first determining a theoretical benefit amount by collecting all relevant insurance periods as if they had been completed in one state and then determining the proportional part of the benefit that that state would have to pay.

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Articles 110 & 259, Pension and Disability Insurance Law, Official Gazette of the Republic of Serbia No.34/2003, 64/2004, 84/2004, 85/2005, 101/2005, 63/2006, 5/2009, 107/2009 & 101/2010.

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The proportional part is set when the theoretical benefit amount is multiplied by the number of months of realized insurance in that state divided by the total number of months in both states. If there are more

than two states involved, then all insurance periods in all countries are taken into account in case there are agreements between them. This is the so called pro-rata pension (PDIFS 2011).

Formula for the calculation of proportional part of the pension benefit in one state Theoretical Benefit Amount x Insurance period Total Insurance Period

The old agreements between the former Yugoslavia and the countries of the Eastern Bloc obliged the signatory states to always take into consideration the insurance periods completed in the other states, also when this was not necessary for the determination of the pension benefit according to the national legislation. As a result the beneficiaries eventually had the right only to a proportional part of the pension, even in cases when the insurance period completed in one state was sufficient for the realization of a full national pension.

Such solution is regularly more unfavorable for the beneficiary. The new bilateral agreements concluded by the successor states of Yugoslavia have therefore excluded it. It is only still applied where there are no new agreements, while the successor state of Yugoslavia has continued the application of an old agreement. Such are the agreements between Macedonia and Serbia with Slovakia and between Serbia and Hungary and Poland.

= Pro Rata Pension

hundred and twenty thousand beneficiaries in the case of Serbia. From the amounts presented under Table 2 and Table 3 it is obvious that the number of beneficiaries living in Serbia and Macedonia and making use of the bilateral social security agreements is much higher than the beneficiaries living outside of these states.

This ratio is somewhat 4:1. The highest amounts are being transferred from Germany, whilst for the case of Serbia considerable amounts come from Austria and Croatia as well. This is primarily as a result of the returning “gastarbeiters” from Germany and Austria, as well as the legacy of being part of the Yugoslav federation.

The number of persons making use of the possibility to export pension benefits across borders on an annual basis (2009) adds up to around twenty thousand beneficiaries in the case of Macedonia and to around 9

Table 2 Transfers of pensions FROM selected countries of destination TO Macedonia and Serbia (in Euros) Country

Macedonia 2007

Serbia 2009

Montenegro

134.087,06

Croatia

1.622.673,14

2.083.651,37

Slovenia*

2.148.205,5

2.424.310,39

2007

2009 4.004.986,38

Macedonia

65.951.236,90

2.558.097,54

3.419.835,61

Serbia

4.149.973

5.042.474,52

Austria

5.312.701,38

5.715.999,32

72.000.154,15

76.925.170

Germany

27.479.000

31.013.000

107.000.000

121.000.000**

*The given data is a sum of the transfers of pensions to Macedonia and payments made to non-resident bank accounts in Slovenia. **Data includes transfers to Kosovo.

Sources: Pension and Disability Insurance Fund of Macedonia; Institute for Social Insurance of Serbia.

Table 3 Transfers of pensions FROM Macedonia and Serbia TO selected countries of origin (in Euros) Country

Macedonia 2007

Serbia 2009

2007

2009

Montenegro

117.447,25

161.651,03

8.153.354,90

Croatia

377.676,29

553.245,42

10.324.521,03

Slovenia

197.200,83

241.643,15

Macedonia Serbia

2.558.097,56

3.419.835,61

Austria

32.298,63

54.453,01

Germany

77.092,46

4.149.973

5.042.474,52

577.339,92

936.181,73

4.428.276,98

5.586.693,26

Sources: Pension and Disability Insurance Fund of Macedonia; Institute for Social Insurance of Serbia.

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An unfavorable situation for the individuals is when the decision for granting the pension benefit is negative, which occurs in case the total number of insurance periods collected in the different states is lower than the nationally prescribed minimum. For both Serbia and Macedonia the necessary minimum for obtaining the right to pension benefit is 15 years. These stipulations particularly adversely affect the temporary migrants, who move across borders for a limited period of time, either on an one-off basis or periodically, like highly skilled professionals, trainees, students, projecttied contract or seasonal workers in the agricultural, construction and tourism sectors (Strban 2010, p.3-4). Although there are bilateral agreements in place, in principle these categories do not work and contribute sufficient number of months to be able to reach the necessary minimum for receiving a pension benefit at the end of their working age. The Serbian legislation seems to offer the possibility for selfemployed persons who perform seasonal work to remain insured outside of the season, as long as contributions continue to be paid7 (Strban 2010, p. 12). Moreover, the Serbian Pension and Disability Insurance Law had previously envisaged the possibility for foreign pension beneficiaries, who have also worked in Serbia, to make additional contribution payments for the period which is lacking for them to be able to receive a Serbian pension as well.

However, with the latest changes in the national legislation, this possibility is no longer there (Kosanović 2011, p.272).

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Strban (2010) further highlights a solution in the Croatian legislation, which allows seasonal workers or their employers to pay contributions after the ending of the contract, during unemployment, until the next season (p. 11-12).

In some cases the national legislations contain provisions with the intention to improve the position of migrant workers. If the total amount of the pension received based on the national law and the foreign pension is smaller than the minimum amount determined according to article 34 of the Pension and Disability Insurance Law of Macedonia (respective article 76 in the Serbian law), then an insured person who receives part of the pension based on an international agreement acquires a right to minimum pension. In Macedonia, the insurance period completed abroad is not taken into account when determining the percentage of the minimum pension.

The absence of a bilateral agreement could represent an obstacle to cross border mobility, as without any social security coordination migrant workers are generally worse off. The Macedonian and Serbian legislation guarantee special protection for certain categories based on citizenship when other instruments are missing.

According to article 11, points 5 and 6, of the Macedonian Pension and Disability Insurance Law, and article 11, point 7 of the Serbian law, the citizens who are employed abroad are considered insured persons according to the law, if during the employment they are not compulsory insured with a foreign insurance carrier or if they are under compulsory insurance but unable to realize or use the rights to pension and disability insurance outside of that country. Additionally, some security is offered also to foreign citizens and persons without citizenship employed on the territory of Republic of Macedonia (Article 13) and on the territory of Republic of Serbia (Article 11, point 8) through their inclusion in the national insurance scheme, if an international agreement does not stipulate otherwise.

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The Case of Kosovo Particularly problematic are the cases when individual claims for pension benefits are based on previous insurance periods spent in Kosovo. The problems are connected to the verification of the insurance period realized in Kosovo as well as the determination of the competent state. The first problem is related to the lack of data which would confirm the fact that a certain person has spent a certain amount of their working life in Kosovo. This impedes the implementation of the bilateral agreement between Macedonia and Serbia with reference to Kosovo. Despite the fact that Macedonia has recognized Kosovo as an independent state, it is reluctant to conclude a new agreement with it, because not only is there lack of data, but also the necessary legislation in Kosovo is not yet in place (PDIFM 2011). There is however readiness on the Macedonian side for regulation of mutual recognition of certain periods of insurance for its citizens. Although there are no precise figures for the number of potential beneficiaries, there are quite a number of people who remain excluded from social security system. Currently, around one thousand applications for pension benefit are pending and there is no saying how much their number would increase after the conclusion of an agreement (MLSPM 2011).

As for the relations between Serbia and Kosovo, they are of particular nature related to the status of Kosovo. For the part of Serbia, the main obstacle is the problem of determining the competent side which would decide upon and payout pension benefits (ISIS 2011). For the part of Kosovo, the currently valid pension system consists of basic pensions and individual savings

pensions8. The basic pensions are awarded to all persons habitually residing in Kosovo and who have reached a certain pension age. Therefore, in the last decade, Kosovo has been building a system where the contribution track record is relevant only for the individual savings accounts. The basic pensions are non-contributory in their nature, linked to the residence criterion and intended to provide a certain minimum financial security for old age. In that sense, the basic pensions are another form of social assistance, which like other noncontributory benefits are non-exportable even between countries with concluded agreements.

Some countries have continued to apply the bilateral agreements with the former Yugoslavia based on which they make payments of benefits to Kosovo (MLSWK 2011). These countries are presented in Table 1. The information on their implementation is inconclusive, as it is unclear how precise the list of countries which still adhere to the agreements is, as well as how the recognition of insurance periods from Kosovo is done.

The Yugoslav Legacy The relations between the former Yugoslav republics are of specific nature. After the break-up of Yugoslavia all the successor states have taken the responsibility for the insured persons on their territory. In practice this meant continued application of the Yugoslav Federal Law, which stipulated that the insured persons who had completed insurance periods in more than one republic, realized the right to pension through the Pension fund (then called “community”) of the republic in which they

8

UNMIK Regulation No. 2001/35.

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were insured immediately before retirement.

After the adoption of the national laws on pension and disability insurance in the newly independent states, the Yugoslav Federal Law was formally out of force, but was partly silently being followed on the basis of reciprocity. Thus, when determining the right to a pension benefit, the states were taking into consideration also the periods of insurance acquired on the territory of another former Yugoslav state.

Certain exception from this practice was introduced in Slovenia after 1996, where the condition of citizenship was introduced.

According to this provision, the regulations valid before the adoption of the national law on pension and disability insurance, i.e. the Yugoslav Federal Law, could be applied only to insured persons with Slovenian citizenship or to persons without Slovenian citizenship, but for the periods of insurance completed on Slovenian territory. This was justified with the introduction of similar practice in some other republics (PDIFSlo 2011), although according to representatives from other states’ institutions this information was confirmed only for the Slovenian case. The situation changed after the conclusion of bilateral agreements among the different states. The states have agreed on recalculation of the pensions realized after the proclamation of independence of each republic, based on which, each state has resumed the responsibility for the insurance period which occurred on its territory through the application of the “pro rata temporis” principle. In the meantime, the persons have not lost their acquired rights and could keep them until the recalculation has taken effect.

The recalculations have resulted in a serious increase of the workload of the pension funds. For example, in Serbia the

recalculations with Macedonia have been completed, but not with Croatia and Bosnia and Herzegovina, although the bilateral agreements have been in power since 2003 and 2004 respectively. Administrative capacities have proven insufficient in sense of insufficient human resources as well as inadequate software solutions9. A multilateral agreement among all the former states of Yugoslavia at the beginning of the break-up could have contributed to avoiding the excessive overburdening of the administration; however this was not possible then due to political reasons.

Unlike the Czech Republic and Slovakia, that had regulated the division of competences regarding the pension and disability insurance already under the laws of Czechoslovakia, in Yugoslavia this was not possible related to the nature of its break-up (ISIS 2011). According to the interviewee in the Ministry of Labor and Social Policy of Serbia a multilateral agreement at this point is no longer necessary, as all these countries have concluded bilateral agreements among each other and in due time this process will be completed.

9

According to the Vice-president of the Government of Serbia, Božidar Djelić, “the Government has been trying to introduce a single information system in the Pension and Disability Insurance Fund for four years, however, has been continuously met with resistance”, B92. (03.11.2011). Djelić: PIO neće informacioni sistem. http://www.b92.net/biz/vesti/srbija.php?yyyy=201 1&mm=11&dd=03&nav_id=554712 (accessed on 10.11.2011).

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Health-care Legal Provisions Most of the agreements ensure that healthcare is provided for persons insured under the laws of the contracting parties. The only difference is regarding the determination of the competent state for the coverage of health-care costs. In case the agreements are concluded based on the so called “principle of insurance”, which is the case in most agreements, health-care costs are borne by the insurance carrier. In case the agreements are concluded based on the “principle of reciprocity”, health-care costs are borne by the state on whose territory the insured person resides. A specific group of agreements are the agreements of Macedonia and Serbia with Switzerland, Sweden, Norway and Denmark, which do not envisage health-care coordination. The insured persons from these countries may ask their insurance carriers for reimbursement of the costs which incurred during their temporary stay in Macedonia or Serbia.

The national legal provisions and the agreements generally distinguish the regulation of access to healthcare protection in the different contracting states depending on the type of insured person and their residence status. One universal rule is the application of the “lex loci laboris” principle.

In that sense migrant workers are insured according to the legislation of the state of employment. Insured persons of one contracting party, who have permanent place of residence outside of that state and in the other contracting party, enjoy equal treatment with the insured persons of the latter contracting state. This category includes the pensioners who have realized their right to pension in the other contracting state, the members of their family as well as

the members of the family of persons who work in the other state and are insured based on that there. According to this, they will have the right to health care according to the legislation of the state of residence and at the expense of the state of employment/insurance (HIFM 2011; Kosanović 2011, pp. 261-262).

The cases of temporary residence are regulated differently from the ones of permanent residence10 (also Kosanović 2011, pp.258-260). The insured persons of one contracting state, when they temporarily reside in the other contracting state, have the right only to urgent and necessary health protection in the latter state. The realization of this right is done by attainment of an appropriate bilingual form from the competent insurance carrier. The bilingual form is a general instrument for the realization of right to health-care services in the other country regardless of the type of insured person or their residence status. Its attainment is furthermore conditioned upon previous examination of a person’s medical condition and a physician’s statement. In case the person has not secured the form before traveling to the other state, it can be obtained subsequently if the person has not travelled to the other state for the purpose of medical treatment. The cases of temporary residence are usually cases of travel for the purpose of study, professional specialization, work-related travel, tourism and other.

Specific cases of temporary residence abroad are posted workers who for a limited period of time work on the territory of the other contracting state and which are an exception to the general “lex loci laboris”

10

Article 30, paragraph 5, Law on Health Insurance, Official Gazette of the Republic of Macedonia No. 19/2011.

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principle. During this time they normally remain covered by the insurance of the state where the employer has a seat. The agreements regulate also other such cases, where the insured person falls under the legislation of the sending state, for example self-employed persons which perform part of their activities on the territory of the other state, diplomatic and consular personnel, personnel in state administration representative offices, travelling personnel in air, rail, sea traffic and others.

Recently in Macedonia there has been a tendency for a more rigorous issuing of the bilingual forms, which is why they are being issued for shorter periods of time (HIFM 2011). This is contrary to more developed states as other contracting parties, which issue the forms for longer periods, as it is in their interest to cover lower costs for healthcare services in Macedonia (HIFM 2011), and comparatively Serbia. Similar to Macedonia, in Serbia, the maximum duration of the validity of a bilingual form is twelve months or ninety days when the purpose of travel is tourism11.

Related to this tendency to reduce costs could be the conclusion of agreements between Macedonia and different countries of the European Union (EU) for direct applicability of the European Health Insurance Card (EHIC). The EHIC has been foreseen as a replacement of the forms necessary for the application of the Council Regulations No. 1408/71 and No. 574/72 as regards access to health-care during a temporary stay in a Member State other than the competent State or the State of

residence12. Macedonia has concluded agreements with Bulgaria, Slovenia, the Czech Republic, Luxembourg, the Netherlands, Germany and Belgium (not yet in force), which allow the insured persons of these countries to directly use health-care services in the health facilities without prior attainment of the bilingual forms. However, health facilities in Macedonia have not yet been equipped with card readers, which could raise concerns about the possibility for abuse of the EHIC, either to the detriment of the state which has issued it or of the state on whose territory it has been used. In the first case this could happen as a result of overuse and in the latter case if the insurance card has expired or is otherwise invalid. Additionally, the level of information of all the health facilities throughout the country about their obligation for provision of health care services based only on the EHIC could raise concerns about its applicability (ISIS 2011). Serbia has not yet started making such agreements in addition to the existing bilateral agreements, which could be explained through the different levels of approximation to the EU between the two countries.

Considering the insufficient administrative preparedness for the implementation of these agreements in Macedonia, the motivation for their conclusion remains unclear. One plausible explanation could be the facilitation of movement across Europe for the citizens of the EU member states.

This explanation seems plausible, first, because the EHIC refers only to stays

12

11

Article 66, Law on Health Insurance, Official Gazette of Republic of Serbia No. 107/2005, 109/2005 & 57/2011.

2003/752/EC: Decision No 190 of 18 June 2003 concerning the technical specifications of the European health insurance card (Text with relevance for the EEA and for the EU/Switzerland Agreement.) Official Journal L 276 , 27/10/2003 P. 0004 – 0018.

15

abroad of temporary nature and second, because the current EU system regulating cross border health-care is itself a result of long-lasting discussions and compromises for finding a balance between patients’ benefits from the freedom of movement inherent to the European integration and the need of each state to create and sustain a financially viable national health-care system. The EHIC facilitates easier access to health services in Macedonia; however it is less likely that the motivation behind it has been the rationalization of costs for the foreign insurance carrier, as access to the relatively cheaper health services in Macedonia has already been in place via the bilingual forms. In any case, the question about the health-care costs is an important question because the issues of cost-containment and cost-effectiveness have been occupying national agendas in both developed and less developed states to a greater extent in recent years. It is what makes weaker social states generally more reluctant to enter multilateral instruments, as will be shown further in text, and what enables stronger social state remove administrative barriers for cross-border usage, like in the case of the EHIC for example.

Practical Challenges The legal provisions alone offer insufficient evidence for evaluating their actual implementation in reality. Considering the established practice for social security coordination, already inherited from the former Yugoslavia, it would appear that the prescribed stipulations to a large extent are being followed. Nevertheless, given the numerous bilateral agreements, the specifics of different solutions within them complicate getting the entire perspective on the issue. Additional problem is the question about the level of inclusiveness or

exclusiveness of these provisions. For example, medical benefits in case of professional illness or injury at work or on the way to work are granted to migrant workers. However, sometimes the national legislation which will be applicable according to the bilateral agreement presupposes the existence of prior periods of insurance13. Such a provision may exclude certain categories from this right and that is usually the case for temporary migrant workers.

Another example is related to the issuing of a bilingual form. The Health Insurance Fund does not discriminate based on the insurance basis (HIFM 2011). However, in practice, if the basis for health insurance is unemployment status, other national legal provisions may collide with the agreements.

The practice of issuance of bilingual forms for shorter periods on one hand, and the obligation for regular registering every one to two months in front of the Employment Agency on the other, may cause one person who leaves to another contracting state for the purpose of study or professional specialization to lose his/her insurance in the first state to begin with. Moreover, in 2011 a revision of the health insurance for the unemployed in Macedonia came into force. In that sense the reduction of rights and benefits would have an effect on the application of the agreements, as they rely on the existing legislation in the contracting parties. At this point, this is less the case for Serbia, as its social security system has not been a subject of any major alteration.

Nevertheless, also minor amendments in the national legislation have an impact over the application of the agreements and the social security of migrants in general. For

13

Articles 75 & 32, Law on Health Insurance, Official Gazette of Republic of Serbia No. 107/2005, 109/2005 & 57/2011.

16

instance, the Serbian Law on Health Insurance states that only the absence of “acute or chronic disease in an acute phase”14 in the medical condition of an insured person intending to travel abroad would give this person right to health protection abroad at the expense of the domestic insurance carrier. The formulation “chronic disease in an acute phase” has been developed in order to extend the coverage, since “there are rarely people, especially at a certain age, that do not suffer from a certain chronic disease and since before this amendment very few people were able to use this right” (ITUCS 2011).

Before applying for a bilingual form, the insured person’s medical condition has to be determined by a physician and in practice it would be very difficult to implement this provision (ITUCS 2011).

Similar amendment has been adopted in Macedonia as well15, which is expected to produce similar problems in implementation.

Macedonia and expenditures by insurance carriers of all the other contracting states for the period from 2007 to 2010.

Overall, it is difficult to assess the application of the legal provisions in practice and the level of use of the health insurance services abroad. The national insurance carriers in both countries do not report the number of persons who benefit from the agreements nor the category they belong to and based on which they have the right to covered heath care services abroad. Some estimates could be made based on the amount of expenses made between countries. Table 4 shows the expenditures made by the Health Insurance Fund of

14

Article 65, ibid.

Compare article 28, Regulation on the Application of Health-care Services Abroad, Official Gazette of the Republic of Macedonia No. 105/2011 and article 24, Regulation on the Application of Health-care Services Abroad, Official Gazette of the Republic of Macedonia No. 111/2000, 31/2003, 113/2005, 41/2007, 89/2007, 700/2008, 101/2009 & 75/2010.

15

17

Table 4 Requested and realized payments by the HIFM (Amounts in Denars) 2007

2008

2009

2010

Requested payments

51.284.235

40.374.221

35.425.018

25.316.868

Payments made by the HIFM

9.291.311

9.538.417

17.038.051

18.732.235

Difference

41.992.925

30.835.804

18.386.967

6.584.633

Source: Health Insurance Fund of Macedonia (HIFM), Annual Report 2010, p.69 The table clearly shows that the payments made by the insurance carriers of the other contracting states are much higher than the ones made by the Macedonian insurance carrier. This means that smaller number of persons insured under Macedonian law have made use of the bilateral agreements for health care services abroad than the number of persons insured under the law of the other contracting state which have used services in Macedonia. Countries with which there has been a negative difference between the requested and realized payments by the Republic of Macedonia in 2010 have been Bulgaria, France, the Netherlands, the Czech Republic, Croatia, Slovenia, Serbia and Montenegro. The highest positive difference has been with Italy and Germany. The amounts presented in Table 4 are given in real amounts, which is different from lump-sum payments.

Usually lump-sum payments pro month are determined by the contracting states on an annual basis for insured persons with permanent residence on the territory of the other state, unless the agreements stipulate that all expenses are covered in real values.

Thus, the expenses depicted above reflect primarily the funds spent for shorter stays

abroad. There is no information provided as to the categories of insured persons who have made use of the bilateral coordination.

The data also shows a clear drop of the total health-care expenditures over the last few years. It is however unclear if the drop is a result of the decreased number of persons who have made use of the bilateral agreements or if they have used services which cost less.

Table 5 shows the expenditures made by the Health Insurance Fund of Serbia and expenditures by insurance carriers of all the other contracting states for the period from 2007 to 2010. Like in the previous case the payments made by the insurance carriers of the other contracting states are much higher than the ones made by the Serbian insurance carrier. However, unlike the Macedonian case, the data shows clear rise of the total health-care expenditures over the last few years. It is unclear what this owes to, especially when it is considered that some contracting states are included in the financial calculations of one year but omitted in another one. In addition, the provided information did not specify which types of payments are accounted for.

18 Â Â

Table 5 Requested and realized payments by the HIFS (Amounts in Dinars) 2007

2008

2009

2010

Requested payments

186.942.181,73

269.310.012,46

702.399.229,3

1.017.753.965,73

Payments made by the HIFS

167.982.530,46

149.085.997,68

312.425.797,5

369.529.904,14

Difference

18.959.651,27

120.224.014,78

389.973.431,8

980.801.061,59

Source: Health Insurance Fund of Serbia (HIFM)

Other Social Security Provisions Generally the agreements guarantee acquisition, protection and exportability of the social rights and benefits; however some rights and benefits are not subject to exportability. Pensions and health-care, as shown above are exportable, while other benefits, such as unemployment benefits, invalidity benefits, care benefits, death grants and generally all non-contributory benefits are not. Even when by definition benefits are of contributory nature, the countries still may choose to exclude them from the portability, which has been a trend in recent agreements. In case of nonexportable benefits the agreements usually only envisage recognition of previous periods of insurance in the other contracting party when determining the right to a certain benefit in the other. This generally attests to the states’ dominant perception of social benefits as matters of the national welfare system rather than as individual rights. For instance, despite the single system of social security coordination in the European Union, which relies on relatively comprehensive legislation, various initiatives have been emerging in front of the European Court of Justice. The Court’s opinion has often been sought for in the

cases of national states’ reluctance towards the exportability of certain social entitlements and the diverging views on that between the national and the supranational level (see Martinsen 2007, Verschueren 2011). When social entitlements are subject of bilateral regulation, their attribution and portability depends solely on the contracting state which implements the undertaken obligations. Notwithstanding the general tendency for exemption of various social benefits from social security coordination and especially portability, certain examples still show that the developed welfare states have greater possibility of guaranteeing social security including to migrant workers, but also the financial and administrative advantage to assume initiatives for the improvement of their position.

The Slovenian government has recently initiated revision of the bilateral agreements with Bosnia and Herzegovina and Macedonia with regard to the part regulating the right to compensation in case of unemployment (AFTUS 2011). In the bilateral agreements between Slovenia and Bosnia and Herzegovina and Slovenia and Macedonia, the access to certain benefits in one contracting state is conditioned by having a permanent residence status in that 19

state16. As such the current agreements are in contradiction with the national legislation in Slovenia, which recognizes the right to unemployment benefits to persons with temporary residence in Slovenia. This leaves quite a number of migrant workers outside of the social system. In case of compliance between the Slovenian law and the agreements, the financial obligations of the Slovenian Employment Agency would on a yearly basis increase for 4.357.843 Euros and 1.039.000 Euros due payments to the migrant workers from Bosnia and Herzegovina and Macedonia respectively (Lukić 2011). Additionally, also neither the Macedonian legislation nor the legislation of Bosnia and Herzegovina pose the residence as an obstacle to the right to unemployment benefit17.

With Bosnia and Herzegovina an Amendment to the Agreement on Social Security Coordination between Slovenia and Bosnia and Herzegovina has been signed on 17.12.2010. The Amendment to the Agreement has to date not been ratified

by Bosnia and Herzegovina. According to the Minister of Civil Affairs of Bosnia and Herzegovina, “it has taken so long to ratify the agreement in Bosnia and Herzegovina because of the delay in forming the parliament”18. On 21.04.2011 the

16

See Article 5 of the Social Security Agreements between Bosnia and Herzegovina and Slovenia and between Macedonia and Slovenia.

17 Articles 65-67, Law on Employment and Insurance in Case of Unemployment, Official Gazette of the Republic of Macedonia No.144/2008; and Law on Employment Mediation and Social Security of the Unemployed Persons, Official Gazette of the Federation of Bosnia and Herzegovina, No. 55/00, 41/01, 22/05 & 9/08.

18 Ministry of Labour, Family and Social Affairs of the Republic of Slovenia. (14.07.2011). The position of migrant workers in Slovenia: Slovenia

government of Slovenia initiated amending the agreement with Macedonia, to which a reaction is pending. Possible explanation could also be the early elections in Macedonia which took place on 05.06.2011.

The agreements with Serbia and Montenegro, which entered in force in 2010 and 2011 respectively, do not contain the same problematic aspects. Exportability of unemployment benefits, invalidity benefits, care benefits, death grants and other is excluded; however, the right to these benefits for migrant workers in one state is not conditioned upon the type of residence status there.

Multilateral Instruments For the countries outside of the EU the main instruments for coordination of social security of migrant workers are the bilateral agreements between states. Prior to the establishment of the European Economic Community, this has been the case also for its members. Social security coordination among the Member States is now subject to European law, whilst relations with nonMember States are still subject to bilateral agreements. In addition, there are also multilateral instruments which provide space for the coordination of social security schemes. Under the auspices of the International Labor Organization (ILO) there have been several such conventions: Convention No. 19 concerning Equality of Treatment (Accident Compensation), from 1925; Convention No. 48 on Maintenance of Migrants’ Pension Rights, from 1935; Convention No. 118 concerning Equality of Treatment (Social Security), from 1962 and

is awaiting ratification of the bilateral agreement in Bosnia and Herzegovina. http://www.mddsz.gov.si/en/newsroom/news/arti cle/1939/6720/938a8c1561/ (accessed on 10.11.2011).

20

Convention No. 157 on Maintenance of Social Security Rights, from 1982. Out of these, Convention No.19 has had the highest number of ratifications: 121 countries, whilst Convention No. 157 the lowest: 4 countries. The Convention No. 48 on Maintenance of Migrants’ Pension Rights has been ratified by only 12 countries, however out of these it has been ratified by all the former Yugoslav republics.

In Europe the Council of Europe has been particularly active in the creation of instruments which concern the social security coordination. Conventions relevant in this sense are: from 1953 the European Interim Agreement on Social Security Schemes relating to Old Age, Invalidity and Survivors; the European Interim Agreement on Social Security other than Schemes for Old Age, Invalidity and Survivors; the European Convention on Social and Medical Assistance; and their related Protocols; then from 1972 the European Convention on Social Security and its Supplementary Agreement. Out of 47 member states, the latter has been ratified by only 8 countries. Most of the signatory states of the Council of Europe conventions are the members of the European Union.

Macedonia and Serbia have not signed any of them, and neither have the rest of the former Yugoslav states.

The Council of Europe has developed other instruments related to social protection, whose main purpose is not coordination of social security among the signatory states, but rather setting minimum social security standards. Such is for example the European Social Charter (ESC) from 1961 and the Revised European Social Charter from 1996. In 2005 Macedonia ratified the European Social Charter and Serbia ratified the revised one in 2009. Coordination of

social security is not the main objective of the Charter (Končar 2011). Nevertheless, there are certain provisions which bind the states to “take steps, by the conclusion of appropriate bilateral and multilateral agreements, or by other means (…), in order to ensure: a. equal treatment with their own nationals of the nationals of other Contracting Parties in respect of social security rights, including the retention of benefits (…) b. the granting, maintenance and resumption of social security rights by such means as the accumulation of insurance or employment periods (…)”19.

Furthermore, article 13 of the Charter, which envisages “ensuring the effective exercise of the right to social and medical assistance”, extends the application of the provisions to “nationals of other Contracting Parties lawfully within their territories, in accordance with their obligations under the European Convention on Social and Medical Assistance”. Obviously this provision would thus bind the signatory state of the Charter only if it has signed the Convention on Social and Medical Assistance as well. As for the provision stipulated under article 12, the intention of the Charter to promote social security coordination through other bilateral or multilateral instruments is clear. Generally, the ESC endorses certain socio-economic rights, but leaves it up to the states to undertake actions for their realization in practice. Consequently, albeit this international treaty produces obligations for the states, their fulfillment depends on the national states alone. To begin with, the undertaken obligations are limited in scope: for example, Macedonia has accepted 41 of the 72 paragraphs, it has signed but not

19

Article 12, paragraph 4, the European Social Charter and the Revised European Social Charter.

21

ratified the Additional Protocol to the Charter and it has neither signed nor ratified the Additional Protocol providing for a system of collective complaints. Secondly, despite the commitment, there are various cases of non-conformity or cases where compliance with the Charter is difficult to assess20. As for the Serbian case, given that Serbia has ratified the Charter’s revised version in 2009, the first national report on its implementation has not yet been published. It is therefore logical to ask: what is the justification of the creation and acceptance of such instruments; and if their effects in reality are incompatible to the proclaimed objectives is their existence mere wishful thinking?

The results from the interviews verify a view that multilateral agreements are beneficial coordination instruments. First, they contribute to the higher degree of transparency in the application of the relevant legal provisions. Migration is a complex phenomenon and there are an increasing number of cases which involve more than two states. In that sense, secondly, multilateral instruments contribute to the alleviation of complexity, through entanglement of the applicable legal provisions and subsequently simplification of the administrative procedures. This is in the interest of both individuals as well as institutions. Despite these advantages, national states are not always eager to join international treaties. The rationale behind this is the fact that the treaties may produce duties beyond the ones accepted in a bilateral agreement, which are more easily controlled. Especially reluctant are

economically less developed states, with weaker social systems, which prefer to regulate matters unilaterally or bilaterally, because this enables them containment of commitments. Without external pressure coming from more developed states or international organizations an incentive would be lacking. The cases presented here demonstrate that once the established practice functions well it is hard to change it.

This particularly applies to weaker states, due to many reasons, such as lack of knowledge and information, lack of statistical data and research, inflexible administration. Additional challenge is posed by the ongoing reforms of the social security systems, which will have its own implication over the future of the social security coordination. In the last section below I will evaluate the existing legal and actual practice in the cases presented here and fit it in the existing research on the correlation between migration and the social systems in order to pinpoint what works, what doesn’t work and what the future challenges are.

20

See “the Former Yugoslav Republic of Macedonia” and the European Social Charter, Factsheet, available under: http://www.coe.int/t/dghl/monitoring/socialcharter /CountryFactsheets/FYROM_en.pdf

22

Assessment of the Legal Framework and the Mutual Effects of Labor Migration, Social Security Coordination and Welfare Social security coordination agreements are initiated and concluded primarily with the purpose of protection of individual rights despite the movement across borders. In some cases they are concluded for the sake of promotion of cross-border migration.

Thus in order to make the freedom of movement of workers a reality, the signatories of the Treaty establishing the European Community have foreseen the competence of adopting measures in the field of social security21. In the case of Macedonia and Serbia there is the dilemma if there has been any particular reasoning behind the existing bilateral agreements, since most of them have already been inherited from the former Yugoslavia. New ones have been concluded based on the already existing ones, taking into consideration some developments and needs of the current time. It is often unclear upon whose initiative the revision of the bilateral agreements takes place. The interviewees have provided contradictory information. On one hand, it is in the interest of the countries of origin to protect their own citizens by guaranteeing access to social security also in the cases of cross-border mobility. On the other hand, it is in the interest of the host countries to have the area of social security of migrants regulated in order to mitigate adverse effects.

I will start the assessment first by looking into the effects from labor migration and the social security coordination arrangements on the social systems of the destination

21

Article 42, Treaty establishing the European Community, consolidated version.

states. Research has shown that migrants are drawn by the availability of jobs and the possibility of higher income. Welfare policies are also expected to have a similar effect (for a summary see Greve 2011, p.88). The welfare systems of different countries are very diverse, albeit there have been many attempts to group them in meaningful classifications for the purpose of systematic understanding (Titmuss 1972 cited in Schubert, Hegelich & Bazant 2009, EspingAndersen 1990, Bonoli 1997). Without intending to construct a new typology, Papadopoulos argues that “together, the interaction of welfare regime, informal and formal labor markets (and their relationship), and immigration and citizenship regimes combine to form distinct national migrant integration regimes” (Papadopoulos 2011, p.42). There are thus five types of national migrant integration regimes: Nordic, conservative (continental), liberal, familistic (southern) and Central and Eastern European. The Nordic regime has the most generous welfare system; however with comparatively low labor market participation of migrants. The conservative regime includes countries which range from highly integrative to highly exclusionary. The liberal welfare regime is characterized by accessible and flexible labor markets and modest welfare policies. The southern welfare regime is most insecure, as it primarily engages migrants in low-skill sectors and offers least social protection.

And finally, the Central and Eastern European regime is new to migration and therefore exclusive.

In which sense is the distinction among the different regimes relevant for this paper? To begin with, considering that the labor market and the income enhancement are important pull factors for migrants, it could be expected that once out of the labor market 23

migrants have a higher chance of either leaving a country with exclusionary regime or eventually falling under its welfare system. The generosity of the welfare system would play a role only to the extent of the safety net it provides. Thus, if for example a migrant becomes unemployed in an exclusionary regime, where the labor market is migrant unfriendly, he/she will become a burden to the welfare system of the host country. For the countries with integrative regimes or with less developed welfare systems this would be less of an issue, either because migrants will be more easily integrated back into the labor market and society or even when that is not the case the social system of the state would be less affected.

Studies have shown that migration has very small negative effects on wages and the welfare state, however “possible negative impact of migration on the labor market cannot be, in the long run excluded a priori (…)” and “can include additional future burdens on the welfare state, especially with regard to income maintenance, healthcare and pension benefits” (Greve 2011, p.91).

Additionally, migrants tend to return to their home country, which is related to what is known as the “home-bias” (Venturini 2008).

Personal and cultural reasons play a part, but also the level of skills, as highly skilled migrants have higher return propensity (Greve 2011, p.95) or tend to move overseas (Venturini 2011). Having considered this, the low-skilled migrants who would then stay in the host countries, would strain their social systems. Here is where the social security coordination through bilateral agreements or other instruments could play a significant role.

The possibility to sustain and export the acquired rights could provide a solution to the trade-off between staying under the

protection of a developed welfare system or leaving for insecure prospects. When faced with an eventual loss of months and years of contributions to the social security abroad, the migrant worker faces to “lose a substantial amount of the income earned while working (…) (which) might prevent the migrant from returning” (Holzmann, Koettl & Chernetsky 2005, p.2). The social security coordination thus complements the migrants’ motivation to return. Moreover, it decreases the likelihood of them becoming a new burden to the social systems of the home states. This argumentation has relevance mainly for the host states with developed social systems, regardless of the level of migrant integration into their labor markets, and not so much for the weaker social states, where social security is less available to everyone, not only migrants.

Going back to the migration data presented in this paper, and the small size of emigrants from the SEE region into EU, it could not be expected that emigration would put pressures on the host countries’ labor markets or welfare systems. Nevertheless, based on the examples of Macedonia and Serbia, which demonstrated the functional and the problematic areas, conjectures could be made about the advantages of having social security coordination and the directions for its upgrade or application in other cases.

Social security coordination is beneficial for the countries of origin in more than one ways. Labor migrants who return with their social security entitlements loosen the pressure on the home country’s social system. Especially the pension benefits simulate kind of remittances. Health-care benefits for different categories, such as pensioners as former labor migrants, current labor migrants and their families, expand the coverage at home at the 24

expense of the foreign insurance carrier.

Guaranteeing access to other social security benefits, which are generally nonexportable, for example unemployment benefits in the host country, lifts up the burden from the domestic labor market.

Independent of the social security coordination, one adverse affect on the home countries’ social systems could come from emigration of primarily young population and remaining aging population, which is by and large a fact in the countries of the SEE. These countries have already undertaken steps in direction of changing their national social systems. Their reform could in turn have an effect on the social security coordination arrangements.

The elaborated cases have shown that the current pension benefits coordination arrangements are operational to a great extent, owing to the long tradition of inherited practice. The provisions regulated in the bilateral agreements enable labor migrants to make use of their earned income in the form of pension contributions during old-age. As the available data has shown, there are quite a number of persons who return to Macedonia and Serbia and make use of their pension entitlements there. The coordination in the field of the pension benefits, the aggregation of periods and portability, guarantees access to security against the risk of old-age to people who move across borders, which might not otherwise be available in one state because they have not contributed long enough to fulfill the nationally prescribed criteria. In Macedonia and Serbia, remaining challenge is the completion of the processes related to the secession of the former Yugoslav republics. Particularly challenging are the case of Kosovo and the recognition of insurance periods realized there, which currently leaves a number of people at the

margins of the social system. The solution could be located in the inclusion of these issues in the Belgrade-Prishtina negotiations, which has not been the case up to date.

Reforms of the pension systems taking place throughout Europe, including both EU member states and the countries of the SEE region outside of the EU, could have an influence on the coordination of the pension benefits for migrant workers. A recent study

by Natali & Guardiancich looks into the role that the changing pension system designs in the countries of the EU will have on the application of EU legislation for the pension rights of migrant workers. They argue that “the growing importance of supplementary schemes (paralleled by the ‘retreat’ of the public protection) means that a growing part of pension rights is not covered by regulations on the portability of social security rights. As a consequence, an increased number of workers are at risk of losing part of their pension rights when moving from one EU member to another.”

(Natali & Guardiancich 2011, p.20).

Following this line of argumentation, it is expected that the current and future developments in the pension systems will have repercussions over the application also of the bilateral agreements. The trend towards declining importance of the public in favor of private provisions is discernable also vice versa, most notably Macedonia.

The regulation of the cross-border healthcare provides a much more complicated picture than in the case of the pension benefits. The provisions in the agreements display much more particularities and create complex situations in reality. The detailed stipulations regulating various aspects of the cross-border health care may create confusion so that the individuals get lost in 25

the pursuit of their rights, while the administrations get lost in securing them.

Even in the EU, the single community law does not vouch for sufficient clarity in application (Bertinato, et al. 2005).

Additionally, the financial implications of cross-border mobility and transfer of healthcare benefits need to be followed and evaluated more precisely (Bertinato, et al.

2005). There exists certain animosity in the perception of health-care benefits as either expenditure or as earned individual rights.

The reluctance of state authorities to enter or deepen cross-border health-care regulation, as the qualitative information provided in this study confirms, should therefore come as no surprise. The data presented in this paper which refers to the aggregate amount of expenses made between countries, based on the bilateral agreements, says very little. The fact that it does not show the different categories of users (migrant workers, family members) or the types of all cases (permanent residence, temporary stay) hampers the drawing of conclusions about the scope and level of implementation of the agreements. Precise information in financial terms could contribute to better understanding, planning and ultimate improvement of the health-care systems and their coordination. It would support policy makers in future policy creation.

Faced with fiscal pressures and budgetary constraints, the less developed states of the SEE region have chosen to reform their health-care systems in the direction of costcontainment and cost-effectiveness (Stambolieva & Dehnert 2011). As a result, individual rights are being restricted. In the case when they are taken abroad, their restrictive use is ensured through the state’s control over the issuing of the bilingual form.

The evidence from Macedonia and Serbia

has also shown that at this point, it is mostly the foreign insured persons which benefit most from the social security coordination mechanisms. This situation could potentially change with the accession to the EU and the adoption of the community law in this area, contained in the regulations, the jurisprudence and the Directive 2011/24/EU. According to Dewallens, “this could potentially undermine the social security systems in the South Eastern Europe region. Patients will want to travel to the European Union to get better or faster treatment and patients, who would reside in the European Union for whatever reason, would be entitled to more than just urgent medical care. They would receive all the care necessary to treat their condition without having to be repatriated. All of this could potentially drain the financial resources for healthcare in the South Eastern Europe..” (Dewallens 2009, p.17).

However, this is not necessarily connected to labor migration and in that sense not related to the topic of this study.

Considering the fact that both Macedonia and Serbia and the other countries from the SEE are primarily emigration countries the social security coordination in the case of health-care will continue to pertain to transfers from foreign insurance carriers.

When immigration occurs, it is mostly among the countries of the region themselves, which are at similar levels of development of their welfare systems.

In case of non-exportable benefits (unemployment benefits, invalidity benefits, care benefits, death grants, and generally all non-contributory benefits) the agreements usually only envisage recognition of previous periods of insurance in the other contracting party when determining the right to a certain benefit in the other. Thus they facilitate inclusion of 26

the migrant worker into the social security systems, by means of which the migrant worker does not lose income in the form of already paid contributions against these risks. Not only do such arrangements facilitate inclusion of the migrant worker into the official provision of welfare, but they also provide incentives for labor migrants once they enter the labor market of a host country to participate in its formal sector and not to avoid paying social security contributions.

This article presented the case where a host country, Slovenia, undertook an initiative to change bilateral agreements which were unfavorable for migrant workers, as they disabled them to access unemployment benefits. This example shows an interesting case how social security coordination could, contrary to the general rule, be more unfavorable for migrant workers. It further shows that the quality of the social security provisions is as equally important as simply having ones. Finally, it demonstrates the advantage that a developed host country has to instruct the development of the social security instruments. With this initiative, Slovenia commits to spending more public funds than it would in the absence of it.

Then again, this step could be interpreted otherwise - in the direction of preventing loss of public funds, which could occur if the unemployed enter the informal economy22.

22

Undeclared work is difficult to measure. In 2007 the European Commission commissioned a special Eurobarometer to measure undeclared work across the European Union. The report found that the unemployed, together with the self-employed, have an above average involvement in undeclared work. It also found that the relation between non-nationals and nationals in undeclared jobs was about the same, with the reservation of the underrepresentation of non-nationals in the sample (EC 2007, p.24).

Furthermore, the informal jobs are usually occupied by irregular migrants, although there are also legal migrants who work in the informal economies (see Maroukis, Iglicka & Gmaj 2011). The member states of the EU separately and in the framework of EU policies commit to fighting irregular migration, and invest resources in this direction. The policies addressing irregular migration are mainly control-oriented, but in practice show limited impacts and only worsen the position of migrants (Chappell, Glennie, Latorre & Mulley 2011, Merlino & Parkin 2011). Europe spends a lot of funds for fighting irregular migration. In a paper by Venturini it is found that “In Europe it is very difficult to know how much is spent. But, to give an example, in Italy, in 2004, 115 million euros were spent fighting irregular migration, something like 380.000 euros per day and the year before the expenditure was 165 million. In 2004 13 million was spent on expulsion and 40 million for the Temporary Residence Centres where illegal migrants are hosted” (Venturini 2009, p.4).

Although Italy belongs to the group of southern welfare states, which are generally more tolerant towards irregular work and irregular migration, the spending should be interpreted within the broader EU context and EU policies against irregular migration.

The so called Employer Sanctions Directive 2009/52/EC, providing for minimum standards on sanctions and measures against employers of illegally staying thirdcountry nationals is expected to have significant financial implications, while its intended effects have been questioned already during the adoption phase (Vogel & Cyrus 2008). The incompatibility of the effectiveness of the measures deployed so far with the amounts spent on them calls for their reexamination. Thus, examples which put an emphasis on the revenue, rather than only the expenditure side connected to 27

the employment of migrant workers and are complementary with the provision of social security could serve as policy-making reference points.

Finally, there are situations which could noticeably be adverse for both the countries of destination and the countries of origin, as well as the migrant workers, even with mutual agreements in place. As this paper has shown, this particularly refers to temporary migrants, who due to shorter periods of stay, contribute not sufficiently long enough according to the national legislations in order to have access to and possibility for transfer of social security benefits. Recognizing the potential advantages that temporary migration could have over permanent migration (Fargues 2005), the European Union has considered granting temporary or circular migration special treatment23. However, it might occur that the current national legislations, in particular referring to the social security provisions, are in opposition of these goals.

The mutual incompatibility of the migration, employment and social policies might contribute either to informal labor practices or to decreased temporary migration. The solutions suggested by Strban (2010) involve granting right to proportionally shorter unemployment benefits, possibility to claim sickness cash benefit or a pension after shorter insurance period and access to medical benefits without the requirement of prior insurance for this category of migrant workers. Venturini (2009) proposes capitalization of contributions in the form of establishing a personal pension account, which would collect all the contributions from the different countries where the migrant has worked.

Conclusion This paper has illustrated the current legal framework in social security coordination and its implementation between two nonEuropean Union members and the countries in the EU. Embedding the evidence into the broader theoretical considerations, it has further assessed the mutual effects among labor migration, social security coordination and the welfare states. Despite the abundance of the presented material and complexity of the issue, this study offers structured and analytical observations, which will be of benefit for policy making, as well as provide a basis for continued research. I below summarize some of the key points.

Apart from the obvious advantages for the migrant workers, the assessment has shown clear advantages for both the countries of origin and destination. In that, the content of the social security agreements has proven equally important.

The current and future reforms of the pension and health-care systems will have an effect on the social security coordination arrangements. The direction that the reforms will take will determine the future social security arrangements for migrant workers. It is therefore important that policy makers undertake reforms sensitive to the impact on social security coordination. At this point this does not seem to be the case.

The examples have shown that the countries in Europe have a well established tradition of social security coordination which has so far proven its functionality even between systems at different levels of development. Nevertheless, there seems to be much space for future improvement.

23

Green Paper on an EU approach to managing economic migration, /*COM/2004/0811final*/.

Policy makers in the selected countries should therefore address these issues in the 28

interest of their citizens and for the sake of better governance. They should: • finish unresolved issues - in particular social security coordination of pensions should be included in the negotiations between Belgrade and Prishtina; • address the identified weak points cutting public expenditure on healthcare or unemployment benefits for migrants may not be the best strategy neither for the individuals nor the public finances. Smart investments may improve efficiency of the social systems on the long run; • integrate temporary migrants in the system.

The EU member states or the EU itself should: •

provide the necessary guidance and support to non EU members – there is space for improvement of social security arrangements for migrants and their coordination even before joining EU;

•

relate the migration debate in the EU to social security – it should address the weak points of EU migration policies by considering the different migrant integration regimes of different EU countries. Such strategy may prove more successful in fighting irregular migration, undeclared work and promoting integration of migrants.

29

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