Foreign Affairs on Swedish Immigration

Ivar Ekman is a Swedish journalist and host of radio show Konflikt on international affairs. He has written an in-depth article about the Swedish welfare state and migration for prestigious Foreign Affairs. I am one of the people cited in the article, which also features Erik Ullenhag.

Stockholm Syndrome

”Tino Sanandaji is among the last people one would expect to argue that immigrants pose a threat to Sweden’s way of life. An economist at Stockholm’s renowned free-market think tank Research Institute of Industrial Economics, Sanandaji is a member of a Swedish elite that has long defended open borders. And his own life offers a clear example of an immigrant success story: Sanandaji arrived in Sweden from Iran in 1989, with his mother and younger brother, when he was nine years old. With financial assistance from the Swedish government, Sanandaji was able to attend the elite Stockholm School of Economics. From there he moved to the United States, where he earned a Ph.D. in public policy from the University of Chicago.

And yet Sanandaji now argues that Sweden should stop taking in people who share his background. “Immigration has meant that Sweden has imported a bunch of social and economic problems that to a degree didn’t exist before,” he tells me, sitting in a modern conference room at his office in the upscale Östermalm neighborhood of Stockholm. “For a number of reasons — a long period of peace, a homogenous population — Sweden has had a unique combination of welfare, growth, and equality. That idyll is to a certain degree over.”

Over the past several decades, a stream of people from countries such as Bosnia, Iraq, and Somalia have taken advantage of Sweden’s asylum policies, the most generous in Europe. As a result, this once homogenous Nordic country has been utterly reshaped. In 2000, 11 percent of Sweden’s population was foreign-born. Today, the proportion is closer to 17 percent, higher than any comparable country in Europe — and higher also than the United States, where only 13 percent of the total population is foreign-born.”

Read the whole thing.

In the comment section, some aggressively deny Swedens integration problems. One of them is Andreas Bergström, former political aid to Erik Ullenhag and currently the vice-president of the think tank Fores.

I replied:

”I am Tino Sanandaji, the Kurdish economist cited above. Mr. Andreas Bergström who also commented here is a former aide to Mr. Erik Ullenhag, Sweden’s integration minister interviewed in the article. Let me explain why I disagree with their optimistic views.

International comparisons have shown that no other OECD country performs worse than Sweden in terms of integrating immigrants in the labor market. The unemployment rate is 18 percent among immigrants, compared 7 percent among the native born. The explanation is hardly that immigrants enjoy being unemployed. Studies show that unemployed immigrants in Sweden search for more intensely work than unemployed Swedes, but often have their job applications ignored. Due to low employment rates, 57 percent of welfare payments in Sweden in 2012 went to immigrant household.

One official report used register data to estimate employment rates for the working age (20-64) population: “82 percent of the native-born and 57 percent of the foreign-born were gainfully employed.”

The employment rate has since increased by one percentage point or so for both groups. Sweden’s failure in provide immigrants with work is neither new nor temporary. The employment gap is higher today than it was in 1990 (page 47). Due to of the combination of lower employment rates and lower average wages, the earnings of immigrants is around 40 percent below the native born. Rather than converging, earnings disparities between immigrants and native born Swedes have grown larger since 1990.

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Erik Ullenhag is hopeful that current problems will be resolved in  20 to 25 years. I would find this more reassuring if he had offered an explanation for why the employment situation of immigrants compared to natives has not improved during the previous 25 years or the 8 years of the current administration.

The OECD writes about Sweden ”The growth in inequality between 1985 and the late
2000s was the largest among all OECD countries”. Immigration is not the main cause of increased income inequality, but it has reinforced the trend. This finance department report describes the increase in relative poverty rates between 1991 and 2012 (page 19). Ignoring potential indirect effects, the poverty rate increased one third less when looking at only the native born. One interpretation is that immigrations has driven around 33% of the increase in poverty since 1991.

finans

I believe that the fundamental cause for these problems relates to human capital. The increasingly high-tech Swedish economy simply doesn’t shows much demand for low or medium skill labor anymore.

PIAAC is the adult equivalent of PISA. In 2012 this ambitious new survey estimated the proficiency in language, math and computer skills among adults in most OECD countries. Tests produce a more accurate measure of human capital than formal degrees from underdeveloped countries.

The results are striking. Sweden turns out to have the largest gap in skills between the native born and foreign born amongst all countries in PIAAC, in all three sub-tests. This is a fundamental fact which no economist who analyzes the issue can ignore.

Of course, immigration doesn’t only affect economics. Mr Bergström points to Sweden’s high trust rates as an argument for current policies. However the latest numbers indicate an erosion in Sweden’s historically high trust. The share in Sweden who answer that “most people can be trusted” declined from 70% in the 2005 World Value Survey to around 62% in the latest one. In Malmö, Sweden’s most ethnically diverse city, the generalized trust level is only 52%.

Trust remains far higher in Sweden than United States (around 40%), Italy (around 30%) or the Middle East (around 5-20%). Deep-rooted institutions are hard to undo with only a couple of decades of failed policies, but equally hard to rebuild.

The first generation choses to migrate, and often improved their lives compared to their home countries. Mr. Ekmans article vividly illustrates the deeper injustice when someone born and raised in Sweden who has no other reference point is treated as a second class citizens.

It is important to point out that many second generation immigrants have integrated successfully. Second generation Iranians outperform native born Swedes in educational outcomes. Nevertheless, much of inequalities are passed on to the second generation. This is shown in this detailed report from Statistic Sweden on second generation outcomes and in school statistics.

By the age of 30, around 35% of second generation immigrants with parents born outside of Europe obtain college degrees, compared to almost 50% among those with Swedish origin. Second generation immigrants performed significantly worse in PISA and are more likely to fail to graduate eight grade with full grades.

If we want to predict and improve the labor market outcomes for second generation immigrants 20 years from now, we can start by looking at current school results.

I may be wrong in my pessimistic conclusions, but now readers understand my reasoning.”