Although overall impact of immigration on native labour market outcomes, inflation and growth is not clear, labour migration can lower regional disparities in Europe. Immigration lowers wage demands as workers become aware of substituting them with foreign labour force become easier every year. Labour supply increase in flexible market lowers inflation pressure as the fear of unemployment tends to have downward impact on wages. Interestingly, the fear of unemployment in Ireland and UK has risen as the number of East Europeans has increased since 2002, even though there has been no change in unemployment. Consistent with the rise in fear, average earnings growth has fallen since 2003. Sweden has been concerned about skill shortage. So after opening borders, although the scale of the flows has been relatively small, actual unemployment and fear of unemployment declined as migrants solved some of the bottlenecks in economy. Additionally foreign workers are mostly from countries, which suffer high unemployment rate.
Immigrant workers in an economy would raise the supply potential of the economy. Surveys suggest that workers from East-Europe are highly productive. Highly productive workers could temporarily raise the domestic rate of productivity growth and lower natural rate of unemployment by filling skill gaps and tempering wage demands. As immigrants spend lower fraction of their income than natives, because migrants send remittances back home and spend less money on durable goods, so migration could lower inflation pressure by rising potential supply more than demand. This argument is based on three assumptions. Firstly, consumption behaviour is affected by fear of unemployment resulting from a more flexible labour market. Secondly, as firms are able to substitute capital and labour, they can offset some of investments. Thirdly, migration remittances lower purchasing power in host country, but increase it in country, which is receiving remittances. (Blanchflower, Shadford, 2007)