Sweden Bets Open-Door Policy on Refugees Will Pay Off

  • More immigration seen as an antidote to aging population
  • Sweden proposes new spending to ease labor market entry

As the European Union prepares to force some of its member states to accept a greater number of refugees, one country is already taking far more than its share and is prepared to go even further. 

“If we manage to improve the reception and speed up the establishment of the newly arrived, we could be the country in Europe that can meet the demographic challenge of an aging population, with a smile,” Employment Minister Ylva Johansson said in a text message.

When the highest refugee flow per capita in Europe is added to rising birth rates, the once dire demographic situation in the largest Nordic economy looks much brighter. Sweden’s population is now expected to reach 11.5 million people by 2030, up from almost 10 million today.

“It will be positive in the long run as more people find work and start paying taxes,” Knut Hallberg, an economist at Swedbank, said by phone. “Things are looking much better now in terms of the age dependency ratio.”

In Europe, only Germany and Italy have a higher share of people over the age of 65 than Sweden. And at 15.5 percent, the nation also has a smaller share of under 15-year-olds than the euro zone average of 15.8 percent.

Job Challenges

The intake of refugees is not without challenges: Sweden needs to get better at making jobs available for its newest residents. The employment rate for foreign-born residents is about 66 percent, while the rate for people born in Sweden is about 86 percent.

Allowing lower entry wages in the labor market is one factor that would probably help increase employment for that group, Hallberg said. As many newly arrived refugees lack high school education, Sweden also needs to increase spending in education, he said.

The government on Thursday presented new job and education initiatives to help with the refugee inflows and get people faster into the labor market. In total it will increase spending by 1.8 billion kronor next year and as much as 2.5 billion by 2018 to help people settle faster.

The country’s acceptance of immigrants could also help it with its goal of diversifying its overseas markets. Currently, 58 percent of its exports end up within the 28-nation European Union.

According to Andreas Hatzigeorgiou, chief economist at the Stockholm Chamber of Commerce, there’s a clear connection between migration and companies’ abilities to increase their exports.

“The global economy has created a situation for companies where in taking the step to export to a certain market, finding someone who has knowledge about - and a network in - that market has become more important,” said Hatzigeorgiou, who recently released a study on the issue.

And yet, Sweden’s new Social Democratic-led government is clamping down in areas such as direct labor immigration.

“We think it’s unfortunate that the government is planning to tighten labor immigration rules,” Hatzigeorgiou said in a telephone interview. 
“Export and foreign trade is a cornerstone for Swedish jobs and Swedish growth. If immigration can have a positive effect on exports, it could also have a positive effect on the Swedish economy.”

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