News we don’t hear here. An article in the Chicago Tribune
Here’s how the refugee crisis threatens Swedish social model
By Amanda Billner
A passenger train passes the makeshift shelters of migrants and
asylum seekers at a temporary encampment in Stockholm, Sweden, in 2014.
Bloomberg photo by Casper Hedberg)
In a Sweden grappling with an unprecedented inflow of refugees, many unthinkable things are becoming thinkable.
The government is now facing pressure to interfere in the sacrosanct
labor market — where pay is traditionally set by employers and unions.
The argument goes that Sweden needs a lower minimum wage to help create
the thousands upon thousands of jobs needed to absorb the record inflow
of people seeking refuge.
“The Swedish model was a competitive advantage when Sweden was a
homogeneous industrial society,” said Andreas Bergh, an economist at the
Research Institute of Industrial Economics. “But now it’s become an
obstacle as no one really knows who should take responsibility for the
changes that need to be made.”
Several cornerstones of the fabled Swedish model with free education
and health care are also being put under the magnifying glass. The
government has started a review of rent controls, negotiations that
politicians normally stay out of.
Three of the opposition parties have become so worried about the
bleak job prospects for migrants that they are prepared to legislate to
lower wages. They have so far been rebuffed by the ruling Social
Democrats and the largest opposition party, the Moderates. The collectively
bargained minimum wages are among the highest in Europe at about 20,000
kronor ($2,468) a month.
The ruling Social Democrats say the model is robust enough to deal
with the 250,000 migrants that have flooded into the 9.9 million-people
nation over the past two years. But their concern is evident. In
December, they erected border controls, ending an open-door policy.
“Politicians can’t stand with their arms crossed and do nothing,”
said Mats Persson, a parliamentarian for the opposition Liberals.
“There’s a high risk that the labor market parties won’t take the
general public interest into account and that large groups will continue
to be left outside the labor market. The government completely lacks a
plan for how newly arrived refugees will be able to enter the labor
market.”
Prime Minister Stefan Loefven, the former head of the metal workers’
union, says the opposition’s proposals constitute an attack on the
Swedish model. He has vowed to safeguard the wage system and the welfare
state. What Sweden needs, he says, is more welfare workers rather than
lower salaries.
Strains are also showing in the tightly regulated housing market as
the inflow of people exacerbates an acute housing shortage. The
government and the opposition are holding talks on how to speed up
building. An estimated 700,000 new homes will be needed over the next
decade.
Reinhold Lennebo, head of the Property Federation, hopes the talks
will be the starting point for a reform of the rent-control model. “We
have gigantic demand for housing in Sweden but no one has an incentive
to meet this demand,” he said. “Rent control puts a lid on the market.”
The influx of 70,000 children last year will also add to a severe
shortage of teachers. Eight out of 10 elementary schools struggle to
recruit staff, according to the Swedish Association of Local Authorities
and Regions.
To sustain the tax base and pay for these efforts, the overarching
concern is getting immigrants faster into the labor market. But if
Sweden’s record is anything to go by, it will be tough. Only about 25
percent of refugees that arrived over the past eight years now have a
full time job.
Still, with the economy booming, fueled by negative interest rates
and recovering exports, the labor market is showing greater demand.
Unemployment among those born in Sweden is already low and there’s an
increasing labor shortage in some sectors, according to Jesper Hansson,
head of forecasting at the National Institute of Economic Research.
“The current employment numbers are a result of a quite deep downturn
over the past 10 years,” said Hansson. “All else being equal, we should
be more optimistic” about the employment prospects for refugees, he
said.
Even so, the current wave is unprecedented and so is the political
fallout. The nationalist, anti-immigration Sweden Democrats are polling
at nearly 20 percent after winning 13 percent in the last election. A
SKOP poll on Friday showed that a record number Swedes, or 64.4 percent,
said that the country is going in the wrong direction.
In the end, tax increases may be needed. While the tax base will grow
in the coming four years, costs will rise twice as fast, according to
the Swedish Association of Local Authorities and Regions, SKL.
In Malmoe, Sweden’s third-largest city, population growth of
especially school-aged children is expected to crimp tax revenue in
relation to the population by 15 percent until 2030, according to the
city’s long-term budget planner Mats Hansson.
“The pluses and minuses don’t add up,” he said. “That means we’ll
need to consider what we see as welfare. The risk otherwise is that
everything just gets 15 percent worse.”
No good deed goes unpunished.
