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Opinion: Low-paid jobs for foreigners aren’t the solution to an unequal labour market

A scheme aiming to give more foreigners a 'fast-track' into the Swedish job market is more problematic than it seems, and ignores many of the issues non-Swedes face on the job market, writes The Local reader Princess Jimenez in this opinion piece.

Opinion: Low-paid jobs for foreigners aren't the solution to an unequal labour market
The 'etableringsjobb' would see newcomers offered a job and training, for a lower than average salary. File photo: Moa Karlberg/imagebank.sweden.se

Starting this summer, the government of Sweden is implementing a new policy, the so-called etableringsjobb or 'establishment job'.

Under this policy, a new low-income category will be created for newly arrived immigrants (as well as for long-term unemployed people), who will receive substantially reduced salaries, the lowest allowed by the collective agreements, as a means of getting them “established in the workforce”. This plan is supported by unions, employers' organizations and the Swedish government.

It’s being sold as a way of helping newcomers get a foothold in the Swedish job market, receiving training and experience while their salaries are partly subsidized by the state. However, no matter how it is presented, it does not stop this scheme from been problematic. In fact, one could say that it’s straightforwardly racist. Why? Because using laws, structures and institutions to discriminate against groups of people based on their origin is racist.

This scheme is tailored with very elaborate language to make it look positive, but it hides questionable practices.

Newly-arrived people will participate in the programme regardless of education, experience, training, or language skills. They are often going to be paid less than a Swede for doing similar work, and employers may take advantage of the scheme, turning jobs that would otherwise be fully paid into lower-waged ones, and create a new category of underpaid jobs where membership is based on ethnicity. The lowest level allowed by collective agreements will be almost always thousands of kronor less than the salary a Swede would receive for the same work.

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Photo: Berit Roald/NTB/TT

By giving discrimination a legal and legitimizing platform, the government is helping to normalize treating immigrants as if they are worth less in Swedish society. 

It is worth considering whether this policy contravenes the Swedish constitution and EU law. According to chapter 2, paragraph 12 of the Swedish constitution, no law or other directive is allowed to put someone at a disadvantage because the person is part of a minority in terms of ethnic origin, skin color, or other similar condition. In the EU, anti-discrimination laws clearly prohibit discrimination on the grounds of racial or ethnic origin.

The main reason why many foreigners, and indeed many non-white Swedes, have a hard time finding jobs in Sweden is discrimination.

HAVE YOUR SAY: How good is Sweden for international talent?

Minorities in Sweden, especially black people, already make less money than white Swedes. In 2018 a report on discrimination in the Swedish labour market by the Centre of Multidisciplinary Studies of Racism and Uppsala University found that black people in Sweden make less money than their white counterparts. Researchers also found black workers are more likely to be unemployed for longer periods of time regardless of their education, receive lower average salaries than white people with similar jobs and qualifications, and tend to be in jobs for which they are overqualified.

Six out of ten unemployed people in Sweden come from non-European countries, which means that in addition to recent arrivals, immigrants will make up the majority of the long-term unemployed group that will also be part of the etableringsjobb scheme.

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Pushing minorities to the outskirts of society has proven to not only hurt those minorities affected by institutionalized racism, but also the rest of society.

It creates segregation, poverty, it normalizes aggressive forms of racism, and it creates distrusts in institutions. In a 2018 survey from the European Union Agency for Fundamental Rights, Sweden ranked 8th of countries with the highest perceived racist violence against people of African descent in Europe.

A survey commissioned by The Living History Forum in 2017 showed that almost half of Swedes said they think racism will grow in the coming year. The policy of etableringsjobb is just part of a trend whereby racism is normalized. What Sweden needs is to go the extreme opposite direction; to create civil rights institutions which will use legal and institutional frameworks to protect minorities from discrimination, instead of using taxpayers’ money to sponsor unfair policies.

From the centuries-long bigoted state-sponsored violence against the Samis, Jewish, Finnish, Roma people and Travellers, to the participation of Sweden in the colonization of Congo, the creation of eugenics institutions, and the open and shameless discrimination of black Swedes and immigrants in the Swedish job market; the history of racism in Sweden is long and complex.

But we cannot allow Sweden to go back to a discourse where we think it is acceptable to even consider paying lower salaries to a group based on their origin. Racism affects us all, it weakens institutions and our society’s ability of coexistence, and we all must work together and be vigilant in order to stop structural racism in our nation.

Princess Jimenez moved to Stockholm, Sweden in 2018 and has a Special Education degree. Some of her interests are social sciences, politics, drag queens, memes, and heavy metal. You can follow her on Twitter here.


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EUROPEAN UNION

Should Sweden abandon a weak krona for the euro?

With the 20th anniversary of Sweden's euro referendum this month, the weak krona has revived the long dormant debate over Swedish membership. We look at why joining the single currency looks more attractive today.

Should Sweden abandon a weak krona for the euro?

The krona hitting rock bottom has reawakened a debate that had been dead for twenty years.

Hedge fund manager Christer Gardell kickstarted the debate before the New Year, when he said Sweden should abandon the krona, which was now “a shitty little currency”. In January, the Moderate Party grandee Gunnar Hökmark, chief of the Frivärld think-tank and long-term euro advocate, argued that Sweden should join.

Veteran economist Lars Calmfors, who chaired the government inquiry which in 1999 recommended that Sweden stay outside, made a similar call shortly afterwards. Carl Hammer, chief strategist at SEB, who had voted against joining in the 2003 referendum wrote in May that he, too, was now “leaning towards a ‘yes'” on euro membership. 

Now one of Sweden’s three government parties has started to campaign on the issue. The Liberal Party, long in theory in favour of euro membership, on September 4th called for a new government inquiry on joining the currency. 

“We can quite simply no longer afford to stay outside [the euro],” the party’s leader Johan Pehrson wrote in the Aftonbladet newspaper. “Let’s upgrade our EU membership from ‘basic’ to ‘premium’. Let’s bring in the euro now!'” 

Is it a hot topic? 

According to Calmfors and Hammer, the debate is raging in the circles they move in, but has yet to really spread to the general public. 

“Between 2010 and the end of last year, I don’t think I was asked even once to speak about Sweden and the euro. But now I have two or three invitations each week, and in fact six this week when we are approaching the 20th anniversary of the referendum.” 

“I see a lot of academic and business seminars on the weak krona,” Hammer agreed.

For both of them, the revival in interest has come about mainly due to the weakness of the krona, which Calmfors complained had been trading as if Sweden were a “banana republic”. And unlike during the 1999 internet crash or the 2007 financial crisis, when a drop in the krona helped bolster Sweden’s economy, this time the weak currency was causing problems. 

“Earlier it has benefitted us,” Calmfors said. “The krona depreciated and firms could gain market share. It helped stabilise output and employment,” he explained. “But this time, it’s different. Now, the depreciation of the krona counteracts the efforts of the Riksbank to get inflation down and reduce aggregate demand. So this time, it is a problem.” 

For Hammer, the weakness of the krona was more understandable, reflecting a flight to strong currencies in reaction to the war in Ukraine.

“Had we not had Ukraine, and had we not had other global issues, I think the krona would have been stronger,” he said.

Calmfors isn’t so certain about this, pointing out that the Swiss Franc, another small floating currency, has not been similarly weak. He does, however, see the invasion of Ukrainian as the second big reason why the euro debate has revived. 

“The war in Ukraine has made Swedes recalibrate our view of our position in the world,” he said. “The application for Nato membership is the most obvious evidence for this, but I think it spills over to the euro issue as well.”

Lars Calmfors, Professor Emeritus in Economics at Stockholm University. Photo: Anders Wiklund/TT

HOW HAVE THE FUNDAMENTALS CHANGED? 

1. Sweden’s government finances are much stronger

While the weak krona is the catalyst for the debate, for Calmfors, the improvement in Sweden’s government finances is a much better reason for sceptics to change their minds. 

When he submitted his report in 1999, his committee’s main argument against joining was the risk of a country-specific economic shock which would affect Sweden, but not other EU countries. Such a shock would be hard to combat if Sweden no longer had the freedom to set its own interest rates or devalue its currency. 

“We argued that (…) it’s good to have your own monetary policy, an exchange rate that can change,” he said. 

At that time, Sweden’s national debt was at 70-75 percent of GDP, well above the 60 percent that is the (increasingly theoretical) maximum for countries signed up to the EU’s Stability and Growth Pact.

“This was very important in the 1990s, because we had a sovereign debt crisis in Sweden, so fiscal policy could not be used as a substitute for monetary policy,” he remembered. 

Now, Sweden’s national debt is just 35 percent of GDP, well below that of France at 98 percent or Germany at 60 percent and, for Calmfors, this removes the biggest obstacle to joining, as Sweden’s government would be able to spend its way out of any country-specific shock.

“That’s very low in an international context, so we have a lot of fiscal firepower. No one would argue with us if we had an expansionary fiscal policy.” 

Hammer, arguing along the same lines, pointed out that in the years before and since the euro referendum, Sweden had never in fact suffered the sort of country-specific shock that Calmfors and his committee had worried about. The Riksbank, meanwhile, had always run a monetary policy in line with that of the European Central Bank. 

“For the past 30 years, Sweden has been living with a floating exchange rate but living as if we’ve had a fixed exchange rate,” he said. 

The country, he explained, had had strict limitations on government spending, a surplus target, a very coordinated and orderly wage bargaining process, and a fully funded pension system. “So if any country would have the room and possibility to live with a fixed exchange rate, it’s Sweden.”  

2. Businesses don’t use the krona anyway 

For Hammer, the biggest new argument against the krona is not so much improved government finances as the fact that Sweden’s big companies now barely use it.

And the same goes for Sweden’s pension funds.

“Large corporations don’t want to deal in the krona – they prefer to make transactions and trade in euros and dollars – and we channel a huge part of our surplus or excess savings into foreign asset markets,” he said. “So, we’ve already to some extent adopted foreign currencies, but we’ve also kept the krona, which from my perspective makes the arguments for having it less strong.”

It is this which has pushed him towards a “yes” despite continuing to believe that the euro is “a suboptimal currency union”.  

“I’m leaning towards voting yes if we were to have a new referendum on the basis that the foundation for the currency has been undermined by the fact that we’re so dependent on foreign currency,” he said. “From that perspective, I think, you can make a case for joining the euro on the grounds of greater financial stability.” 

3. After Brexit Sweden looks more and more alone

With the UK leaving the European Union altogether, Croatia joining the euro this year, Bulgaria scheduled to join in 2025, and Romania in 2026, the number of countries who are in the EU but not the eurozone is falling. 

“If you ask people, like Swedish commissioners in the EU or people that have been doing negotiations in in the EU, they have the view that we have lost out by not belonging to the core,” Calmfors said. “The risk that we will lose out probably becomes bigger, the greater the share of EU countries that adopt the euro.”

Carl Hammer, chief strategist at Sweden’s SEB Bank. Photo: SEB

WHAT ARE THE STRONGEST ARGUMENTS NOT TO JOIN?

1. The risk of country-specific shocks is real 

Just because Sweden has more fiscal firepower to deal with a country specific shock does not mean the risk of such shocks is not a major drawback to euro membership. 

Finland suffered one when Nokia, far and away the country’s biggest company, mismanaged its reaction to the launch of the iPhone and exited to the mobile phone business. Between 2008 and 2022 its debt to GDP ratio more than doubled from 33 percent to 74 percent. 

Greece, Italy, Spain and Portugal arguably suffered from the issue during the European banking crisis.

As Sweden’s economy is unusually sensitive to interest rates, with much higher private debt and a high share of variable rate mortgages, the ECB could easily set an interest rate that, while right for most eurozone countries, would be too high for Sweden. 

“That could be a problem, but it’s also a problem that could be dealt with by using fiscal policy,” Calmfors argues. 

2. The risk of bank bailouts and country bailouts remains 

The other big argument against joining the euro, which was clearly demonstrated during the European debt crisis from 2009 until about 2014, is that Sweden would have to help bail out countries, such as Italy and Greece, which have been less disciplined in the management of their government finances. 

Joining the euro would also mean joining the European Banking Union, which means that Sweden might also have to participate in rescuing banks in countries with less well-functioning financial supervision.

Calmfors acknowledged that this was still a risk, but argued that members of the European Union who are not part of the eurozone were increasingly being asked to contribute to rescue packages anyway. 

“If you look at the support after the Covid crisis and during the Covid crisis, we had to pay that as well, even though we were not a member of the monetary union,” he said. 

And when it came to bank bailouts, Sweden was, he argued, as likely to benefit as to lose out, given the high indebtedness of Sweden’s citizens. 

“We might end up having to pay for bank crises in other countries. But on the other hand, we would also be helped if we had a financial crisis, which of course is not something we can rule out,” he said. 

Also, he said there might be an advantage in having banks and other financial services regulated by the European Central Bank and other European regulators, as a European regulator might have more expertise, there are many cross-border links between banks, and there would be less of a risk of a cosy relationship building up between local banks and the regulator.   

HOW HAVE THE ADVANTAGES OF EURO MEMBERSHIP CHANGED?

Calmfors argues that while the negative risks of adopting the euro have diminished, the advantages remain more or less the same. 

“The biggest benefit is of course that having different currencies is a kind of trade impediment and that would be eliminated, which would mean more trade, which would mean that we use our resources more efficiently, so it would give slightly higher growth over a long period, which, even if small each year, would accumulate to quite a lot in the long term.” 

Recent research suggested, he added, that this effect might be more significant than people previously thought. 

“Studies seem to point to much bigger effects than we expected in the 1990s. We’re talking about a 10 to 20 percent increase in trade, not from one year to another, but over a number of years,” he said. 

The problem with the debate over euro membership had always been, he concluded, that the benefits and risks were of such a different character. 

“You can’t really make an economic calculation, because you are comparing different things: We are comparing small, but certain positive gains – because there will be more trade that we will get slowly over years – with a risk of big macroeconomic shocks that can have huge effects over a few years.”

This makes it hard for economists to reach a firm conclusion. 

“You can’t really say what is right and wrong, but I think what you can say is that the balance has shifted in the direction of being a more positive calculation for being a member today than there was 25 years ago.” 

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