Swedish Labor Market and Migration

Introduction

Sweden is one of the most attractive countries for immigration and asylum seeking. Due to the generous benefits are provided for its immigrants as well as citizens in line with the social democratic welfare state scheme, Sweden becomes a focal point of interstate labor movements. However, Sweden had affected global macroeconomic instabilities in the last decade; general unemployment rate has increased and it converged to the overall European statistics. My main ambition is to discuss the theoretical fact about the replacement effect of the immigrants by showing how immigrant workers in Sweden encounter with the threat of unemployment and to a what degree their unemployment rate is different with the natives. Also segregation is another aspect which I will cover, due to the its function as a accelarator of the risk of being unemployed.

Unemployment of the immigrant workers may show differences with regarding age groups. As a general trend in Nordic affluent societies, population has a majority of older citizens. It creates a fiscal problems such as higher pension payments and increasing government expenses. So that, it is important to analyze the youth unemployment rates and elderly pension funds. If youth unemployment rates of immigrants is increasing while elderly pension funds or retirement age are changed by the government then we can mention about those changes might be the results of macroeconomic dire straits . Recent performance of the Swedish Economy resembles a restoration period after 2008 global crisis and poor performance in the first half of the 2013(Konjunktur Institutet). Recovery period is forecasted by Swedish government until the end of 2017. So under this fragile environment, wage squeezes and expense cuts may hit the lowest socio-economic parts of the society . Therefore, we can claim that immigrant workers may face with these precautions harshly in the given context.I will examine the Swedish Labor Market on the issue of immigrant employment. Do immigrant were replace the natives or seggragated in a certain jobs. Also, I will investigate the migration effect on the age groups with a specific interest on youth unemployment. In this paper, I will use the first generation immigrants. Due to the considerable cultural difference with natives in overall, I expect larger effect of seggregation and unemployment.

Substitution Effect: Explanation

Substitution effect approach might be one of the most concrete analysis methods for immigration figure in the labor market. Elasticity of substitution notion is important because it may give clues about the changes in labor demand for native workers even under the rigid pressures from immigrant workers. That is to say, elasticity of substitution will provide us a mechanism to understand real affect of immigrant based reduced labor cost in the specific sector. Increase in the labor supply, might create a well known substitution effect between natives and the immigrants(Ozden and Wagner 2014). However, this substitution can only happen if the immigrant workers have the same skills and compatible know how with the native. Also, cultural and lingual factors might be added in this frame. Increase in the cultural and lingual distance may give poor results of substitution.

Unemployment and Immigration in Sweden: Why there is no clear substitution effect in Swedish Labor Market

Labor Market Structure and Macroeconomic Problems

In the last decade macroeconomic instability lead to lower performance for Sweden. According to OECD statistics foreign born population have reached from 11% in 1995 to 17% in 2010. It is clearly highest among Nordic Countries (Norway 5%-10% -, Finland 2.1%-3.7% ). Besides that, unemployment rate of the foreign born men also had the highest rates which are 8.1% in 2007 16.0% in 2011 . In addition to these datas, rates of native unemployment swings between 5% and 6% of the labor force. Therefore, our first analysis about the unemployment rate gaps seems valid. Accumulation of considerable amount of immigrants could not be absorbed from the labor force obviously. As a next indicator, government spending on citizenship benefits may provide some additional information about the immigrants and unemployment. Public expenditure on the all social benefit have been stagnant since 1990 on 28-30% of the GDP. If all things are considered together, public expenditure on social assistance programs might be a leverage for the higher rate of immigrant unemployment in Sweden.

Lower Immigrant Integration

As Table 1 represents, Sweden does not have bright experience on immigrant integration to the labor Market. This might be one of the quantitative reasons of replacement effect which has not been seen in the Swedish Labor Market despite of the large amount of immigration flow. Most of the immigration waves in 1990’s were the refugee immigrations, so that individuals did not choose or made a research about the Labor market. For example, almost half of the refugees between 1999-2007 were from Iraq and then, former Yugoslavia, Somalia and Afghanistan. In sum It refers 1.5% of total working age population(Ruist,2013). Also government placements in Sweden were totally miscalculated and led further ethnic concentration on places where far away from labor opportunities(Edin, Fredriksson and Aslund). Also in these ethnically concentrated places may create new labor opportunities which can be captured by the immigrants(Borjas 2003). In his research based on the Swedish refugee immigrants Ruist have found that no significant effect on native’s unemployment rates however, there is a significant effect on previous immigrants who was working in low skilled jobs. These immigrants were replaced with the refugee immigrants and crowding out effect is generated(Ruist,2013).

Language restriction might be thought as another negative factor for integration of the immigrants into the labor force. Althought it seems a valid and strong long run measure for creating consolidated immigrant labor force, it may create a disincentive in the short run among workers who does not have a good background of education. Labor authorities are not positive about the labor candidates who does not attend the preparatory courses. Half of the Labor candidates spent approximately two years to become a proficient user of the Swedish Language through these courses and programs so that those people can not be integrated in the labor force directly. Also, local governments may support this introductory stage with the social assistance; it might support to the disincentives of the immigrants to strictly continue to these courses(Lemaitre 2007).

Cost