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'Lower wages will give more immigrants jobs'

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'Lower wages will give more immigrants jobs'
14:24 CEST+02:00
The best way to boost employment levels among Sweden's foreign-born is by reducing wages for low-paying jobs, argues Jenny von Bahr, author of a report on the subject commissioned by liberal Swedish think tank Timbro.

Having a job not only brings an income, but it is also serves as a way for people to build their professional networks and skills. For those who have migrated to a new country, work is an important bridge to the new country's culture and an opportunity to develop skills in their new language. Employment is therefore important not only for economic security, but also a prerequisite for successful integration.

The WSP Analysis and Strategy consulting firm has therefore been commissioned by the liberal Swedish think tank Timbro to conduct an evaluation of Swedish integration policy. The aim has been to answer the question as to whether current policy is sufficient to eventually reach the goal of full employment among Sweden's foreign-born.

Today, the employment rate for foreign-born workers in Sweden is 61.8 percent, far below the rest of the population's level of 76.5 percent. The rate is particularly low among foreign-born women, for whom the employment rate is 56.5 percent and which has fallen in 2010.

In our report "Bidrag - vägen till arbete?" ('Benefits - the way to work?), we identified four key explanatory factors for the lower employment rates among Sweden's foreign-born.

Foreign-born earnings are on average much lower in the first years in Sweden before later increasing. This is due to the relocation factor, namely that a person's human capital is initially less valued in a new country than at home. This is because language and social skills, personal networks and the like, to some extent become useless with a move.

Our study shows that the relocation factor increases the more culturally and linguistically distant a country is. For example, immigrants from Asia and Africa in Sweden earn on average earned incomes of 86,000 and 95,000 kronor per year ($13,960 and $15,420), respectively, after five to nine years in Sweden, while the corresponding level for a newly arrived immigrant from the northern hemisphere is 205,000 kronor. The relocation factor, of course, also affects Swedes moving abroad - most of them would have an easier time finding a new job in Oslo than in Mogadishu.

The merit factor describes how employers have a hard time judging the merits of a foreign-born worker. Most employers have less knowledge of higher education standards in other countries and language barriers also make it difficult to take references from previous employers. According to the study, there is also a trend for employers to weed out applications from foreign-born workers. Meanwhile, the general trend of discrimination in Sweden is significantly lower than in other countries.

The third factor is the wage factor. The high minimum wages in Sweden exclude people who, because they are immigrants for example, have a lower productivity when entering the labour market. The work they can perform is simply not valued at the same level as the lowest wages currently agreed upon between unions and employers.

High unemployment among immigrants is not a natural law; in countries with a significantly lower minimum wage than Sweden, employment levels among the foreign-born are often the same as those for people born in the country, or even higher.

The fourth factor is the incentive factor, which deals with welfare benefits that can counteract pro-work policies. The Swedish social welfare system can work against the incentive to find a job for large groups of foreign-born because, on the margin, they earn little or nothing more by working than they would by remaining on benefits.

This is of course also the case for native-born Swedes as well, but the relocation factor reinforces this tendency. One consequence of this is that up to 12 percent of Sweden's foreign-born receive some form of income support, compared with 2 percent for people born in Sweden.

The study also examines how Swedish integration policy is currently designed.

Swedish integration policy has a very clear focus on the relocation and merit factors, by providing language training, employment training and validation measures. In the 2008-2009 academic year, for example, just over 110,000 foreign-born took Swedish For Immigrants (SFI) languages classes and 70,000 were enrolled in adult education programmes. At the same time, Sweden's National Public Employment Service (Arbetsförmedlingen) provides different types of work traineeships, wage subsidized employment opportunities, and validation measures.

Measures to mitigate the effects of the relocation and merit factors are both extensive and generous. The conclusion of our study is that further action in these areas will not result in anything more than marginal effects on employment levels of Sweden's foreign-born.

On the other hand, very little has been done to tackle the wage factor. Wage formation is the responsibility of labour market parties, but politicians who see the problem can also take up the discussion with unions and employers.

Awareness of the incentive factor has, however, increased. The government declared in December 2010 that it had "broken with the dependency mentality" and has introduced a full-time attendance-requirement for newcomers participating in establishment measures in order for them to receive full compensation.

The government has also introduced an option for newly arrived refugees participating in establishment programmes to maintain an income of 8,000 kronor per month without having their establishment benefits reduced. This is good, but the measure only covers 1 to 2 percent of the approximately one million foreign-born people of working age living in Sweden.

Despite increased awareness of the incentive factor, there is much to be done to strengthen pro-work policies within the benefit system. Special focus should be placed on encouraging foreign-born women to enter the labour market.

The conclusion of the study is that current integration policy, with a focus on comprehensive reception measures, is inadequate. This policy has been in place for decades and has no potential to increase employment more than very marginally.

The reason is that improvements in the reception system for newly-arrived immigrants have little use if there isn't a labour market that takes over when the reception measures end.

In order to reduce unemployment among immigrants, the focus should instead be on reforms in wages and incentive factors: general reforms that encourage more jobs with lower requirements for language skills and a clearer pro-work approach within the benefits' systems.

Such a policy has - in contrast to the current policy - a good position to reduce social exclusion among immigrants in Sweden.

This article was originally published in Swedish on the Newsmill opinion website. English translation by The Local

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