The Nordic Welfare Model and the Refugee Crisis: Buffer or Weakness?

social justice reportAnne Skevik Grødem, research director at the Institute for Social Research in Oslo. In collaboration with Bertelsmann Stiftung.

Demanding labor markets, high social benefits – many people believe that the universal Nordic welfare states may be less able to face the challenges of migration than other countries. But does empirical evidence support this view?

The Nordic countries tend to be found near the top when levels of living, redistribution and social inclusion are measured and ranked. In the Bertelsmann Stiftung’s latest EU Social Justice Index Sweden, Denmark and Finland occupy the first three positions in the ranking.

The inclusive Nordic welfare model, and its long tradition for social investment, has been discussed with fascination and often admiration for decades. But in the current situation, with unprecedented high levels of migration to Europe, new concerns emerge: can this model survive a mass influx of “outsiders”?

The Nordic countries have seen very high levels of immigration in recent years, both as labour migration from the European Economic Area (EEA) and as humanitarian migration from third countries.

The different countries have chosen different approaches to migration management: Sweden has gained a reputation as one of the most liberal countries in Europe, Denmark as one of the strictest. When it comes to migration management, there can be no talk of a distinct and unified Nordic model.

The challenges facing the welfare states are however similar: how can comprehensive and inclusive welfare states absorb thousands of immigrants, often with limited laboor market skills and different cultural and religious beliefs?

This can be seen as a challenge to all European countries in the current situation, but given the universal nature of the Nordic welfare states it can be argued that the challenges are written particularly large here. On the other hand, it can also be argued that the Nordic model, with its emphasis on activation and inclusion, has unique strengths when it comes to integrating newcomers.


Nordic labor markets may pose a particular challenge to integrating migrants

There are two main lines of argument as to why immigration can be particularly challenging for the Nordic welfare states: one economic and one political.

The economic line of reasoning points out that the Nordic welfare model is premised on high employment rates, among women as well as men. Given the combination of high taxes and high social benefits, non-employment represents a “dual loss” at a higher scale than in other countries: high incomes are lost for the state while high costs are incurred.

At the same time, the well-regulated Nordic labour markets may be difficult for immigrants to gain access to. The compressed wage structure implies that even the lowest wages are relatively high. For this reason, there are few “working poor” in Scandinavia. This however gives employers an incentive to replace unskilled labor with capital where possible, leading to fewer available jobs for low-skilled workers.

It also potentially makes employers extra risk-averse, as they will be particularly careful to hire workers who are assumed to have a productivity to match the high wage. Immigrants’ expected productivity is often low or uncertain: either because they lack education or language skills, or because they are unable to document the skills they have.

In short, then, the need to include immigrants in employment may be more acute in the Nordic countries than elsewhere, but the odds of success may be lower.

The Nordic tradition for inclusive policies seems to benefit migrants

These concerns are high on the political agenda in all the Nordic countries, and a number of measures are put in place to increase employment among immigrants from outside the European Economic Area (EEA). Benefit systems have been tweaked in order to avoid perverse incentives, and there are ongoing discussions about whether lower wages or short-term contracts should be allowed in some cases.

The most important approach is however the systematic endeavours to increase employability of immigrants. The emphasis on education – including state-sponsored kindergartens with high rates of participation, free schooling, and activation and life-long learning programs for adults – is an important part of the reason why the Nordic countries have high labour market participation rates.

This approach is extended to refugees and their family members through the so-called introduction programs. Such programs exist in all the Nordic countries. The aim of the programs is to teach newcomers a minimum of language skills and knowledge about the country they now live in, and thus to make them better able to move on to employment.

Available data do not indicate that immigrants systematically fare worse in the Nordic countries than elsewhere in Europe in terms of employment. The Nordic traditions for inclusive and qualifying policies therefore also seem to benefit migrants.

Little evidence that ethnic and religious cleavages undermine support for welfare state

Even if immigrants are reasonably well included in the labour market, it can still be argued that it is more difficult to sustain universal welfare arrangements in countries with large ethnic and religious cleavages. This is the political argument for immigration as a challenge: the feeling of community and shared risk will crumble when strangers settle in the country.

While this argument is plausible, empirical evidence is weak: support for welfare arrangements in the Nordic countries – indeed in Europe as a whole – is high and stable. Anti-immigrant parties have increased their support in Norway, Denmark, Sweden and Finland, but these parties are not (any longer) anti-welfare parties: instead, they portray themselves as the saviours of welfare for the insiders.

It has also been argued that inclusive and universal welfare arrangements have the capacity to breed trust, even as societies become more diverse. This is because such arrangements are transparent and outcomes are easy to predict, which gives less room for speculation about discrimination and favourable treatment of specific groups. Again, therefore, features of the Nordic welfare states can be buffers rather than weaknesses.

Immigration at a mass scale is likely to be challenging for any country, and how the challenges are perceived will be influenced by institutional arrangements in the host countries. The current challenges may look different in the Nordic countries than they do in the South or in Central- and Eastern Europe, but available evidence does not allow us to conclude that the universal Nordic welfare states are less able to face these challenges than other countries.

As the EU Social Justice points out, “If policies are designed well and EU countries act on the basis of solidarity, the current “refugee crisis” can – in the longer run – also turn into a chance for Europe.

Useful links

The Bertelsmann Stiftung conducts an annual study of developments in opportunities for social participation in all 28 EU member states. The latest report (Social Justice in the EU – Index Report 2015) shows that despite economic recovery, the gap between young and old is growing and the social divide between northern and southern Europe remains immense.

OECD Migration Insights

Are migrants settling in?

Immigrant integrationThomas Liebig, OECD International Migration Division

Always a hot topic, integration of immigrants is high on the policy agenda in many countries and one of the main issues of concern for public opinion. Yet, the discussion is shaped by plenty of misunderstandings and misrepresentations – a regular feature of the migration debate. Against such a backdrop, there’s never been a greater need to get to the facts – to inform public debate and to guide sensible policymaking.

A step forward in helping that to happen comes in a new report from the OECD and the European Union, Indicators of Immigrant Integration 2015: Settling In. The report offers the first broad set of international comparisons of how well migrants and their children are “settling in” across all EU and OECD countries – a key issue, and not just for immigrants. When immigrants integrate successfully, it greatly increases their potential to contribute to the economy and society of their adopted homes. And their integration is a precondition for the acceptance of further immigration by the host country society.

So what do the numbers show? To start with, they underline how hard it is to generalise about how both countries and individuals experience immigration. These experiences range from the likes of Australia, Canada and New Zealand, which have traditionally seen migration as part of nation-building, to much more recent migration destinations in Europe, such as Spain and Ireland. But even here there are substantial variations. Immigrants to Spain in recent years have tended to have fairly low levels of education; by contrast, newcomers to Ireland have been pretty well educated.

Nevertheless, despite all these variations, not to mention the differences between immigrants themselves in terms language ability; education; reasons for migrating – be it for employment, family, or humanitarian; and so on; certain broad themes emerge in the report:

There is no “integration champion”: Whereas countries such as Australia and Canada – which have taken in large numbers of skilled labour migrants on top of family and humanitarian migrants – have better outcomes than most European destinations, they too face some challenges, for example with respect to making the most out of migrants’ skills.

More immigrants doesn’t mean less integration: There’s no obvious link between the proportion of immigrants in a population and how well they do across a range of areas, such as in employment, income levels and education. In terms of employment, countries that are home to larger proportions of immigrants even tend to have better outcomes.

Things get better over time: In many areas immigrants tend to do a less well than native-born. In particular, recent arrivals face difficulties virtually everywhere. However, the longer immigrants stay, the narrower the gap with native-born becomes. That underlines the reality that integration is a process, not an overnight transformation, and reflects the success – or otherwise – of immigrants in making friends, learning local ways and acquiring a new language.

Immigrants’ kids still face problems: The acid test of integration is the fate of the so-called “second generation” – that is, the native-born children of immigrants. If integration efforts are working, the children of migrants born in adopted countries should be doing about as well in education and, later, the workforce as the children of natives. But the signs of success for them are mixed. While they’re narrowing the gap in educational performance and with respect to labour market outcomes – particularly for women – they still lag behind in other areas, particularly in Europe when it comes to employment. In Europe also, the proportion of locally born children of immigrants who say they feel discriminated against is worrying high – a feeling that could have grave implications for social cohesion.

Useful links

Indicators of Immigrant Integration 2015: Settling In

OECD International Migration Outlook 2014

OECD work on migration

OECD Insights: International Migration – The Human Face of Globalisation

The Perfect Life for International People? What Surveys Reveal about Life Abroad

Wish you were here?
Wish you were here?

Today’s post is from Margit Grobbel of InterNations

Back in middle school, my classmates and I used to make up a game called “Anywhere but here” to while away the time during cover lessons and study hall. It involved closing your eyes, flicking through an atlas, and randomly pointing your finger at a map. Then you had to invent an elaborate story about your life in wherever you would end up.

Obviously, most adults contemplating a move abroad would want to make a more informed decision. Expat surveys and country rankings are a handy way of comparing potential destinations and getting an idea of what the quality of life, cost of living, etc., is like. But can such surveys actually tell us where life is best for expatriates?

As the world’s largest online community for expatriates, we kicked off the Expat insider Survey 2014 to gain insights into what daily life abroad is like for our international member base. We were particularly interested in seeing how satisfied they are with their respective destination.

A pivotal part of the survey report consists of a comprehensive country ranking, based on participants’ ratings of various factors, from leisure options to childcare costs. However, once we finished analyzing the data and compiling the ranking, some results rather surprised us, sparking heated discussions on our social media channels as well.

The highest-ranking expat destination on our overall index turned out to be Ecuador. The third place went to Mexico, ahead of such presumed favorites as Switzerland, Singapore, or Australia.

At the InterNations office, we hadn’t really given much thought to Ecuador, beyond its great reputation among trekking enthusiasts and wildlife watchers. As for Mexico, we were aware of local issues with personal safety, violence, and the impact of organized crime.

Such seemingly counter-intuitive results prompted us to take a closer look at our data. The areas where Mexico (or Ecuador, for that matter) do particularly well mainly include the “soft” topics featured in our ratings: how welcoming a country and its culture feel to new arrivals, how friendly the people are, or how easy it is to make new friends abroad.

When it comes to the “hard” facts, like working hours or medical care, our respondents’ subjective ratings are less strikingly different from what objective statistics would suggest. Let’s take just one example:

We asked the participants to judge the quality of education in their current country of residence. In this category, Mexico ranks 20th out of 34 countries altogether. If we counted only the OECD member states in this rating, Mexico would rank 15th out of 21.

The OECD Better Life Index, on the other hand, uses several statistical sources to assess the quality of education: the number of years spent in education, the percentage of the population that has completed upper secondary school, and the PISA test results.

Here Mexico sadly comes last out of 36 countries. If we included just the OECD member states also featured in the Expat Insider ranking for quality of education, Mexico would still be last out of 21 destinations.

The subjective assessment in our survey is thus somewhat better than what the statistics suggest. However, our survey population is not representative of the average Mexican citizen.

Our data for Mexico reveal that expat parents are very likely to have an academic degree themselves and to send their children to private schools. It might be reasonable to assume that socioeconomic factors could compensate for some potential disadvantages when it comes to the quality of education, or the quality of life in general.

What really boosted the overall ranking of both Mexico and Ecuador, though, was the respondents’ high personal satisfaction with life abroad. Its impact is partially a methodological issue, as this question was assigned disproportionate weight in the factors contributing to the country ranking.

Interestingly, however, this observation also tallies with life satisfaction in the OECD Better Life Index. Though Mexico doesn’t perform particularly well in areas like safety or income, its life satisfaction score of 7.4 out of 10 puts it among the top 10, on a par with Australia, Sweden, or the Netherlands.

While we can’t explain the somewhat baffling contrast in the OECD index, we can hazard a guess as to why our expat respondents in Mexico might be so happy.

Our survey population in Mexico skews rather differently from the global average with regard to various characteristics. They are noticeably older than the average respondent (by about five years), and they include a disproportionate number of US nationals.

Moreover, there’s a high percentage of people with dual citizenship, who are Mexican due to family background, marriage, or naturalization. Over 80% of respondents also state that they have at least fairly good Spanish skills. Factors like these would mitigate the impact of culture shock and the potential sources of frustration with living abroad.

We have used a fairly broad definition of “expat” that includes people from all walks of life who have chosen to live and/or work abroad. In Mexico, the “typical” expat (a senior employee or manager on a foreign assignment) is actually rare among our survey respondents. They rather feature a fairly high quota of retirees, teachers, or expats in various forms of self-employment. Their choice of destination was probably not subordinate to the demands of their career.

When we look at the reasons they give for moving to Mexico, these imply a certain degree of personal freedom as well. Participants say that they enjoy living abroad in general or that they were looking for a place with a lower cost of living; that they have always wanted to live in Mexico, or even that they moved for love.

Therefore, it’s not all that surprising that four in ten respondents in Mexico consider staying forever, compared to a global average of one in four.

This case study leads us back to our original question: Do expat surveys tell us where life is perfect for expatriates? Maybe they tell us it’s time to rephrase the question: Where is life abroad perfect for whom?

Useful links

OECD Better Life Index

Paris police capture Eiffel Tower

Some of this is copyright
Some of this is copyright

We’ve just learned that a special police unit has busted an Eiffel Tower smuggling ring. Well, more of key ring really, since the raid netted 60 tonnes of souvenirs with a street value of, er, 5 for a euro. I’ve no idea how many you need to make up 60 tonnes, but sources say it’s a lot. (If you read this article to the end, I’ll tell you how much the original weighs). A police inspector told Le Figaro that they’re not after the hundreds of sellers you may have seen around various touristy areas of Paris. They’re after the ringleaders who control what is in fact an international business, or a global value chain (GVC) as we would say, importing the merchandise from China into France for sale by mainly African sellers to tourists from the world over.

The OECD is usually all in favour of GVCs and often asks governments to do more to open up international trade. The OECD Trade Facilitation Indicators for example estimate that comprehensive implementation of all measures currently being negotiated in the World Trade Organization’s Doha Development Round would reduce total trade costs by 10% in advanced economies and by 13-15.5% in developing countries.  Reducing global trade costs by 1% would increase worldwide income by more than $40 billion according to the OECD, and most of this would go to developing countries, where the people selling Eiffel Towers come from.

Those gains from the Doha Round may or may not be realised. Progress in the negotiations is slow to non-existent, and in the meantime, selling key rings and other cheap souvenirs allows those who do it to make a living and to help their families. It’s a very precarious living and they can’t send much money home, but at least whatever they send goes directly to those who need it, and those little sums soon add up. According to the 2013 African Economic Outlook, remittances from workers abroad overtook foreign direct investment and aid as the main financial flow into Africa in 2010 (and that’s only for remittances that are recorded).

But the situation of the workers sending the remittances can be terrible. According to a Malian I spoke to, many of the young men selling souvenirs and employed in other dead-end jobs are trapped in France. They expected to do great things here, based on the stories they’d heard and the fact that usually they’re the brightest, most dynamic members of their community.  They don’t dare tell their families what it’s really like, and that the money they spent to help them emigrate could have been put to a better use. So they perpetuate the myth with stories of the good life, and live in utter poverty to be able to keep up appearances and send money back. That encourages their younger siblings and friends to try their luck too, and although satellite TV and the amount of information available on Internet are changing perceptions, many still think that the grass is greener on this side.

It’s not just in France that immigrants have a harder time than the others. The 2013 edition of the International Migration Outlook says that “on average in OECD countries, immigrants’ labour market outcomes are below those of the native-born of similar age and education levels. Immigrants also find themselves more often living in sub-standard housing conditions.” You could argue that language difficulties and different work experiences or types of qualification explain the fact that immigrants have a harder time finding a job and keeping it. But that wouldn’t explain why their children face the same problems.

For the Outlook, “Discrimination is a key obstacle to the full integration of immigrants and their offspring into the labour market and the society as a whole” adding that “it is not uncommon for immigrants and their offspring to have to send more than twice as many applications to get invited to a job interview than persons without a migration background who have an otherwise equivalent CV.”

That discrimination is often fuelled by stories of immigrants abusing the welfare system or health services. According to the OECD’s figures however, the effect on public finances “is around zero on average across the OECD countries considered […] It is highest in Switzerland and Luxembourg, where immigrants provide an estimated benefit of about 2% of GDP to the public purse.”

I wonder if the Swiss and Luxembourg papers are full of stories about immigrants coming over here, boosting our economy, reducing our borrowing requirements and helping keep taxes down. Probably not.

And since you’ve read, or skipped, to the end, the Eiffel Tower weighs 10,100 tonnes, 7300 tonnes of which is the metal structure. And it’s not illegal to make souvenirs featuring it since it’s in the public domain. The lighting however isn’t, so you should pay to film or photograph it at night. But we’ll talk about knowledge-based capital another time.

Useful links

International Migration: The Human Face of Globalisation an OECD Insights book by Brian Keeley

Happy Migrants Day!

Click to see the publication
Click to see the publication

Manila’s main airport is rarely a quiet place. But it will be even busier than usual over the next week as some of the Philippines’ 10 million or so emigrants head home for the holidays. When they land, they’ll get the red-carpet treatment – literally. In a tradition dating back to the 1990s, returning Overseas Filipino Workers get to walk down red-carpeted lanes and are promised speedier processing at immigration and customs. They can also look forward to raffles and prizes and even a visit from the president. “This is the government’s tribute to the heroism of OFWs who come home during Christmastime to be with their families,” an official explained.

Emigrants are on the mind of many at this time of year, and not just because of holiday homecomings. For today – December 18 – also brings International Migrants Day, marking the anniversary of the adoption of – big breath – The International Convention on the Protection of the Rights of all Migrants Workers and Members of Their Families.

Of course, it doesn’t take a special day to draw attention to migration – the topic is rarely out of the news. Just this week, for instance, we learned that two-thirds of Germans think immigrants “cause problems”; that at least 20 immigrants are feared dead after their boat capsized in the Mediterranean; and that there’s a rising level of anti-immigrant sentiment in Europe.

There’s a negative feel to much of what the media says about migration. Less often reported – and surely worth noting on this of all days – are the positive stories. Did you know, for example, that migrants head up just over half of Silicon Valley start-ups? Migrants are also behind many household names in computers and technology – think of Sergey Brin at Google, Jerry Yang at Yahoo!, Pierre Omidyar at eBay. They’re also strongly represented in the arts and popular culture – think of Joni Mitchell, Junot Diaz, Rihanna. (OK, you can stop thinking of Rihanna now.) It’s no wonder that the authors of a book on migrants – and the source of most of these factoids – entitled it Exceptional People.

Away from the star names, migrants contribute to development. Worldwide, they sent home an estimated $325 billion in remittances in 2010, far more than what OECD countries gave in assistance to developing countries. As we noted recently here, their role as a source of ideas, innovation and investment through diaspora networks is also increasingly recognized. And, of course, they contribute to the economies of their adopted countries: A 2007 report from the U.S. Council of Economic Advisers estimated that immigrants contribute about $37 billion to U.S. economic activity every year.

Still, there’s no denying that, in many OECD countries, immigrants aren’t integrating as well as they could do. That doesn’t just mean “fitting in”; it also means the extent to which they match, or even exceed, locals in areas like employment, earnings, health levels and education. Failures in integration carry a high economic and social cost, which helps to explain why governments in OECD countries are increasingly interested in the subject. It was also recently investigated by the OECD in Settling In, which looks at the performance of immigrants in several areas, including household income, work and civic engagement.

Some of the factors behind success or failure to integrate are obvious. For example, countries like Australia, New Zealand and Canada that essentially select most of their new immigrants tend to attract better-educated people, who, in turn, tend to integrate better. Other factors reflect everything from language ability to how long immigrants stay in their adopted countries. And, unfortunately, some of the factors relate to discrimination and racism. Numerous experiments have shown, for example, that employers are often more likely to choose a CV with a “native,” rather than a “foreign,” name.

Given the signs of tension over immigration, there’s likely to be growing pressure on governments to make a success of it, both for migrants and the countries they settle in. Understanding the reasons why migrants succeed – and why they don’t – will be an important part of that effort.

 Useful links

OECD work on international migration

OECD Insights: International Migration – The Human Face of Globalisation