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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 7: Future challenges for the welfare state

Mårten Blix

Extract

Little Sweden has taken in far more refugees per capita than any country in Europe. But in doing so, it’s tearing itself apart. (James Traub)1

Can the welfare state be in a crisis when public debt is low, GDP growth is strong and there are no rating institutes knocking on the door with credit downgrades?

Alas, the answer is yes. It will take a different shape than the crisis initiated and fueled by the throes of spiraling public debt that the Social Democratic government was able to bring under control in the 1990s. It will also take a different form than reversing the growing disincentive to work and the high rates of absenteeism that were the main targets of the reforms by the Center-Right governments in 2006–14.

Granted, Sweden is a country where most things work reasonably well and so far public trust has been high. Though Sweden has experienced one of the largest increases in income inequality in the OECD, the level still remains one of the lowest in the world. Those who wish for a return to the lower levels of inequality prevailing in the 1970s and 1980s tend to disregard the unsustainability of the Swedish Model in those decades. There were many destructive conflicts in the labor market and incentives for entrepreneurship and work were crumbling.

Looking ahead, it could appear that Sweden’s starting position to address the challenges from digitalization and immigration is good. There is...

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