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You are here: Home i In Focus i In focus 2017 i The 100-year-wave hits the Nordic labour market i "The welfare model is vulnerable to high levels of immigration of adults with low skills levels."
"The welfare model is vulnerable to high levels of immigration of adults with low skills levels."
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"The welfare model is vulnerable to high levels of immigration of adults with low skills levels."

| Text: Björn Lindahl, photo: The Norwegian Ministry of Justice and Public Security

There was great concern in the Nordic countries a few years ago that they would be hit by an age shock. The fear was an increasing lack of labour as a result of falling numbers of young and middle aged people. But out of the four main demographic drivers, only one developed as expected: Populations are ageing.

The newest study on demography and the large influx of refugees combined with labour immigration in later years, is the one presented on 1 February called Brochmann II. It is the second major study on refugees led by Grete Brochmann. It concludes that high levels of immigration of people with little chance of supporting themselves will represent a further challenge which will increase pressure on public finances:

"High levels of immigration by people with few opportunities for self support will represent an added challenge and increase pressure on public finances. The Norwegian welfare model is both a resource and a problem when it comes to the integration of immigrants and their children.

"The model is vulnerable to high levels of immigration of adults with low skills levels. At the same time, small economic differences and solid educational systems ensure a high level of mobility for the children of immigrants."

The difference between different immigrant groups is large, however, for instance that between people from Europe and people from the African continent. This will not start to even out until 2070.

The report looks at possible developments all the way until 2146.

"By that time we will have had the internet for more than 150 years," comments Aftenposten's Andreas Slettholm and warns that there is much uncertainty in this.

It might seem easy to create predictions for demographic developments. All you need to do is look at how many are born, how many move to and away from the country plus how many die. How hard can it be?

Yet if you compare what Statistics Sweden believed at the start of the millennium with today’s reality, they made a serious miscalculation. The Swedish Migration Studies Delegation, Delmi, compared prognosis from the year 2000 with numbers for 2015:

“Rather than the prognosticated net annual immigration of 15,000 people, the real net annual immigration between 2000 and 2015 was around 50,000. Rather than a total net immigration of 240,000 in those 15 years, the net immigration has risen to 750,000 people in total,” write researchers Bo Malmberg, Thomas Wimark, Jani Turunen and Linn Axelsson.

The fact that immigration became more than three times larger than expected, shows how inaccurate prognosis can be. If that much can happen in 15 years, how much faith can we have in the UN’s world population prospects towards the year 2100? It says the demographic balance will shift dramatically in the Nordic by the year 2100:

Source: UN

Source: World Population Prospects 2015, UN

Norway, which in 2015 was smaller than both Denmark and Finland, will bypass both these countries in the number of immigrants according to the UN prognosis. Sweden, which had 4.2 million more citizens than Finland in 2015, will have 8.6 million more citizens than Finland by 2100. Finland will only increase its share by 250,000 citizens over the same period of time. Iceland will be the first Nordic country to see its population start to shrink.

If immigration can vary by 300 percent, how uncertain are the other factors that influence population growth? In the Nordic region, birth rates vary a lot. 1,000 women aged 15 to 49 give birth to 1,650 children in Finland and 1,849 children in Sweden, according to 2015 statistics. The difference might not seem that big, but in order to keep the number of citizens stable, 1,000 women need to give birth to 2,100 children, because she must also reproduce the child’s father, some women do not have babies, and some children never reach their reproductive age. 

In Finland there is serious concern that birth rates for 2016 will be the lowest in 100 years. Between January and November last year, 48,810 children were born. That is 2,382 fewer than for the same period in 2015. Denmark was in a similar situation a few years ago. Their 2013 birth rate was the lowest for 27 years. But thanks to various measures and campaigns, they managed to turn  the trend:

Source: Statistics Denmark

A growing population is considered to be an advantage, at least compared to a shrinking population. This year the Faroe Islands will celebrate becoming 50,000 inhabitants in March, and in Sweden the population passed the 10 million mark on 20 January. Statistics Sweden had a population clock on their website which showed that a new Swede is born on average once every four minutes:

 Source: SCB

“The model contains some uncertainty, and Statistics Sweden will only know after the fact when Sweden's population reached the 10 million mark. Also, we will not know the identity of the person responsible for helping Sweden reach the 10 million mark – it may be a newborn child, a person who receives a residence permit or someone who re-immigrates to Sweden after a few years abroad,” writes Statistics Sweden.

For a country’s welfare the most important figure, however, is the dependency burden; the ratio of dependent young and old to the population of working age. In Sweden things are looking better than what they did a few years ago, because of the large number of refugees who have arrived to the country:

“For the main part they have been young people aged 15 to 39. That means immigration has changed the Swedish age structure. The large 1940s generation is still visible in the age group 65 to 74. But as a result of immigration and high birth rates in the late 1980s and early 1990s, there is now a large group of 20 to 40 year olds. Sweden is therefore not the ageing society we envisaged at the change of the millennium,” write the Delmi researchers.

Norway has seen a similar increase in labour immigration, while the situation in Denmark, Iceland and particularly in Finland looks bleaker. 

A high level of immigration does not automatically bring an increase in welfare, however. The problem is that the work which immigrants carry out does not necessarily help pay for the existing population’s welfare, since immigrants must also pay for their own welfare. 

According to a calculation model often used in Denmark, called DREAM, refugees must reach a 65 percent employment rate in order to achieve that goal. That is somewhat lower than what native Danes must reach, 76 percent, in order for not to be a net burden on public finances over a lifetime. The difference can be explained in that refugees are on average 28 years of age when they arrive, and therefore do not need any education as children.

For Sweden to maintain today’s dependency bruden levels until 2030, you need nearly 600,000 more people in work compared to today, despite immigration, according to Statistics Sweden. 

While migration means people crossing physical borders often under dramatic circumstances, it is less dramatic when working people turn pensioners – or less dramatic still when they live longer than previous generations. 

This development is seen across all of Europe. What used to be called a population pyramid now looks more like a soufflé:

Source: Eurostat

The chart shows the size of different age groups relative to the total population. Source: Eurostat

In the end the large top will disappear and the shape will look more like a silo. But until that time, most European countries, including the Nordics, will have to struggle with a shrinking working population who must look after an increasing number of older people. 

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