Saturday, September 22, 2012

Free-Market Economies also struggle with unskilled immigration

The Center-party think-tank Fores and its sister site Migrationsinfo are advocates of open borders. Relying on well presented, serious-seeming statistics they argue that immigration is beneficial for the economy. Unfortunately, both Fores and Migrationsinfo have a tendency to distort data. Migrationsinfo recently wrote:

“This is the sixth consecutive quarter where the number of employed is increasing among foreign-born.....the proportion of employed among the population was 66.0 percent. Among foreign-born employment rate was 57.5 percent”

This sounds convincing, but only because it is carefully designed to mislead readers. Let's go through the tricks. First, it is hardly surprising that the “number” of employed immigrants increases, since Sweden takes in 100.000 or so immigrants every year. The employment rate has not increased for six consecutive quarters. 

They include people aged 65-74 in the data. Since there are far fewer retire-aged immigrants than retired-aged native Swedes, the immigrant numbers appear better. They also don’t separate non-European immigrants (the group which has problems in the labor market) from Nordic immigrants, whom we all know are doing fine. 

Instead of comparing immigrants and native Swedes they compare immigrants with the total population (which includes immigrants!). This is despite the fact that data is available for native Swedes. Fooled by this sleight of hand DN writes today: “Reality is not as dark as amongst others SD want it to appear. Statistics from SCB show that 66 percent of the native population [my emphasis] is employed. Among the foreign born the share is 57.5”

Migrationsinfo also bakes second generation  immigrants into the Swedish "population total" with whom first generation immigrants are compared. It is written in a way so that an unsuspecting reader will get the impression that immigrants are being compared to natives. As can be seen DN fell for Migrationsinfo's subtle deceptive writing.

Here are less manipulated numbers from SCB 2008, reporting the share gainfully employed among the population aged 20-64: 

Native Swedes with two parents born in Sweden: 84.5%
Non-European Immigrants: 51.2%

Yes DN, this is a “Fullständigt fiasco”.

Fores is not much better. They like to claim that research has shown that Somali immigration to the U.S is successful”. Reading these myths many on the Swedish right have become convinced that the economic problems associated with immigration is entirely the fault of the Swedish model. Supposedly in countries with smaller welfare states and unregulated labor markets there are no economic problems with unskilled immigration. If Sweden would only abolish labor market protection and cut the welfare state the problem would fix itself. 

I agree that LAS and generous welfare probably make integration somewhat harder. It is nevertheless incorrect to claim that free-market economies have no problem with integrating immigrants. Let's look at the employment rate of three immigrant groups who have difficulties in the Swedish labor market with in other countries using the Database on Immigrants in OECD Countries. By comparing Swedish outcomes with market-liberal countries we can test the theory that everything will be fixed by free-market reform. Some of these countries are often uncritically used as shining examples of success for Sweden to follow. 

The figures refer to the number employed as the share of the 15-65 population for each immigrant group.     

Immigrants from Iraq:
Sverige 29%.
Danmark 22%
Storbrittanien 42%
Nya Zeeland 40%
Australien 32%
Kanada 52%
USA 62%

Immigrants from Afghanistan:
Sverige 24%.
Danmark 18%
Storbrittanien 23%
Nya Zeeland 23%
Australien 34%
Kanada 46%
USA 54%

Immigrants from Somalia:
Sverige 24%.
Danmark 16%
Storbrittanien 15%
Nya Zeeland 25%
Australien 22%
Kanada 36%
USA 52%

As usual the U.S does best, but no country approaches full integration. Clearly neo-liberalism is not a magic bullet which will fix immigration. 

Note that flexible labor markets result in less unemployment, but not necessarily high-income. In 2010 according to the Census, the Somali immigrants in the U.S who did have jobs on averaged earned around half the native wage. A tragically high 58%(!) of Somali families in the U.S live below the poverty line. 

Fores has chosen to present this experience as an paradigm of success (“framgångsexempel”) for Sweden to follow. I am not sure the voters of the Center-party would share their vision of Sweden’s future if they were aware of the true facts.

Sunday, September 2, 2012

Secret Sauce of Scandinavian sucess

My brother Nima Sanandaji has written a new report for the British think-tank Institute of Economic Affairs, using many of my theories as seen on this blog. The report has received favorable attention by the BBC and other media institutions and is well worth reading in full.

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