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In general, states try to restrict the movement of foreign labor because immigrants are seen as "taking jobs" from locals. However why cannot states with similar wage levels sign agreements to allow freedom of movement for their citizens? There is such an agreement within the EU, but remote developed countries such as Canada, Japan or Israel usually don't have any kind of similar agreements.

Why don't developed countries sign freedom of labor agreements with each other? Wouldn't it benefit everyone by allowing people to move unrestricted wherever their skills are needed?

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    There is such an agreement within the EU -> And the wage levels are definitely not similar within the EU, Bulgaria has wages ~10 times lower than Luxemburg. – Bregalad Apr 25 '17 at 12:19
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    @Bregalad yes and it is disliked by some countries for this reason, e.g. it was a major contributor towards Brexit. However I don't see why Canadians would dislike British people working there and vice versa. – JonathanReez Apr 25 '17 at 12:21
  • @Bregalad Bulgaria is not in the Shengen area (yet, I think it currently discussed), which is the free movement zone associated with the EU. Poland is, though, with a median salary way lower than the one in Luxembourg. So is Norway, which is not in the EU. – user5751924 Apr 25 '17 at 15:17
  • Working holiday visas are a limited form of this. – Andrew Grimm Apr 26 '17 at 12:55
  • @AndrewGrimm yes, it's certainly acknowledged through WH visas, but for some reason it never made it into full-scale legislation. – JonathanReez Apr 26 '17 at 13:16
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It depends on what do you believe states are. If you believe that states compete for taxpayers, the answer is that states would dislike the increased competition such an agreement would cause.

With freedom of Labour states which are considered attractive would have an inflow of citizens and therefore increasing tax revenues. While less attractive states would lose those. So the states would been under pressure to become more attractive. From a citizens-centric point of view this pressure is welcome, but maybe states doesn't act as citizens-centric as we would like.

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To Protect Domestic Job Markets

One reason that country's dislike free movement for workers is because there is a risk it will negatively impact their own domestic job markets. Immigrants may displace citizens, which is a problem for governments which both pay social benefits (like unemployment benefits) and require the support of citizens to stay in office.

Interviews with union leaders in 4 European countries identified several factors which can influence this choice (Krings, 2009):

  • Unemployment: Countries with high unemployment are less likely to support freedom of labor agreements. When unemployment is high, people may be more sensitive to job competition. However, these concerns don't appear to be validated. A study by the UK Department of Pensions found no connection between immigration and unemployment claims (Gilpen et al., 2006).

  • Wage and Standard of Living Differences: Large wage or standard of living differences may be associated with less support for free movement of labor. When these differences are large between countries, there are stronger incentives for people to immigrate. However, in these cases immigrants will generally take jobs that are unattractive to domestic workers (Werner, 1990).

When these factors aren't present (that is, when unemployment is low and there are no large wage or standard of living differences between countries) there is likely to be greater union support for free movement. Kring's (2009) analysis of UK and Irish union leaders found this to be the case.

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  • What about countries with low unemployment and similar wages? E.g. Canada and UK? Or Israel and Germany? – JonathanReez May 2 '17 at 6:27
  • @JonathanReez - Edited to address. It was already in one of the papers, I just didn't summarize that part here. – indigochild May 2 '17 at 13:13

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