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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 4: Digitalization changing the economy and the labor market

Mårten Blix


In the twenty-first century, stable, long-term employment with a single employer will no longer be the norm, and unemployment or underemployment will no longer be a rare and exceptional situation. Intermittence will increasingly prevail, with individuals serving as wage earners, freelancers, entrepreneurs, and jobless at different stages of their working lives. (Nicolas Colin and Bruno Palier)1

In this chapter I discuss how digitalization is affecting economic forces and altering the way the economy works. I then discuss some implications for the labor market. While the previous chapters were focused on Sweden, most of the arguments here are applicable to all OECD countries.2 This chapter is also the bridge from the experiences of reforming the Swedish Model and its labor market to the coming challenges for public finances (Chapter 5) and inequality and immigration (Chapter 6).

Why is it necessary to have a full chapter on how economic forces are affected by one form of technological change, that is, digitalization? The reason is that the changes are broad and deep; almost all sectors are affected, including the conditions for the labor market on which the welfare state is built. Digitalization is akin to a rejuvenation of arteries and capillaries in the economy. All the same functions are there, but the interdependencies and speed of circulation have increased and some dormant abilities have come to life.

In economic terms, digitalization is reducing transaction costs, paving the way for new business models and above all creating...

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