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Digitalization, Immigration and the Welfare State

Mårten Blix

The Swedish welfare state finds itself in the middle of two major upheavals: The impact of technology and immigration. Having taken in more refugees per capita than most other countries, the pillars of the welfare state are being shaken. Digital technologies are set to strengthen already existing trends towards job and wage polarization. This book explores how these trends are more pronounced due to the rigidity of the labor market and the comprehensiveness of tax-financed welfare services.
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Chapter 2: The welfare state in transition

Mårten Blix

Extract

At some rare moments a nation pauses to reflect its future. Such moments usually occur in periods of crisis and decline. The ability of a nation to reconsider past decisions and rejuvenate itself is then put to the test. (Assar Lindbeck, Per Molander, Torsten Persson, Olof Petersson, Agnar Sandmo, Birgitta Swedenborg and Niels Thygesen)1

In this chapter I discuss how the Swedish welfare state has evolved, especially from the 1970s and onwards. Only against these past decades’ experience is it possible to understand the welfare state’s capacity to change and, by extension, address future challenges. A key question is if those elements that allowed – or did not prevent – the welfare state transformation are still present and to what extent they are relevant for coping with the choices ahead.

The welfare state has proved remarkably resilient and has survived various challenges, not least increased competition stemming from globalization. This feat was by no means inevitable.2 The combination of high taxes and an increasing volume of trade with other countries, most of which have lower taxes, might have become untenable in the long run. In particular, Sweden might have been faced with an increasingly difficult equation with a cost and competitiveness disadvantage that would need to be compensated for by higher levels of skills and productivity.

But those that have proclaimed the death of the welfare state have so far vastly underestimated its ability to adapt. In this chapter I briefly discuss the main economic...

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