A new GLO Discussion Paper investigates the 2008 policy change in Sweden’s immigration policy. The new non-selective labor-migration policy lowered labor migrants’ mean income by opening the door to unskilled labor.
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GLO Discussion Paper No. 680, 2020
The Effects of the 2008 Labour-Migration Reform in Sweden: An Analysis of Income – Download PDF
by Irastorza, Nahikari & Emilsson, Henrik
GLO Fellow Nahikari Irastorza
Author Abstract: In 2008, Sweden changed its labor-migration policy in order to facilitate more labor migration from countries outside the EU. The unique design of the new law meant abandoning most state ambitions to shape labor migration. Under the new regulation, there are no labor-market tests or any consideration of the level of human capital. Instead, policy-makers trusted employers to select workers. We adopt a difference-in-differences approach and apply a series of OLS regressions on register data to assess the effects of the policy change on non-EU labor migrants’ labor-market outcomes, as measured by income. The effects of the policy change are substantial. Non-EU labor migration increased and its composition changed after the reform, resulting in a significant decrease in mean incomes. The regression analysis shows that, despite the favorable economic cycle during the post-reform period, moving to Sweden as a third-country labor migrant following the 2008 labor-migration reform had a negative effect on the migrants’ annual income. However, this effect became marginal after controlling for occupational level. We conclude that changes in their occupational composition were the main drivers of the income drop for non-EU labor migrants. In sum, the new non-selective labor-migration policy lowered labor migrants’ mean income by opening the door to unskilled labor.
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