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‘We don’t have the skills in Sweden, so we need to recruit from abroad’

Sven-Olof Daunfeldt, the chief economist of the Confederation of Swedish Industry, tells The Local why labour migration is essential and why raising the work permit salary threshold is a "crazy" policy.

Published: 17 July 2024 11:23 CEST
Updated: 20 July 2024 08:07 CEST

'We don't have the skills in Sweden, so we need to recruit from abroad'

Sven-Olof Daunfeldt, chief economist at the Confederation of Swedish Industry. Photo: Ari Luostarinen/SvD/TT

For the Confederation of Swedish Enterprise’s chief economist, Sven-Olof Daunfeldt, labour migration is essential if Sweden is to meet the challenges of the next decade, particularly big investments in infrastructure and electricity systems, and the greening of industry in northern Sweden.

“We need to recruit talent to Sweden, and experts, because we were going to need to make big investments in Sweden during the coming years, and this means that we also need a lot of competence,” Daunfeldt told The Local’s Sweden in Focus podcast. “And we don’t have that in Sweden: we need to recruit from abroad, and the problem in Sweden right now is that we don’t have a national strategy for attracting talent to Sweden from abroad.”

When Daunfeldt speaks with the innovative companes that are crucial to Sweden’s future growth, he says they complain of three main obstacles to international recruitment: high income tax, housing shortages, and trouble getting work permits.

“Taxes on high incomes are very, very high in Sweden,” he said. “This means that a lot of people choose to to go to some other country to work because they get more, they get a higher salary after tax, which is the thing that is important.”

When this was combined with the high cost of housing, many potential recruits felt that they would be worse-off in Sweden, he said.

“The third issue is that the Migration Agency is taking too long to handle work permits: That’s actually been getting better now, but it has been a huge problem.”

SEE MORE: Sweden’s Migration Agency celebrates cutting waiting times for work permits

What Daunfeldt has found frustrating is that rather than make international recruitment easier the government has been raising the barriers.

Sweden on November 1st brought in a new work permit salary threshold set at 80 percent of the median salary, or 28,480 kronor a month, leading to a 2,000 percent increase in the number of work permit applications rejected because the salary was too low. In June next year, the govenment plans to raise the threshold to the full median salary of 35,600 kronor.

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Daunfeldt rejected the argument of the Swedish government that the salary thresholds would only impact low-skilled labour and said it was wrong anyway to assume that low-skilled labour was not needed in Sweden.

“We also need people with more low-skilled labor, and we have a huge problem with the new wage floor,” he said. “I think 50 percent of those that have a salary under that wage level are actually graduates, so highly qualified people are actually earning less than the 35,000 kronor that the government is talking about.”

INTERVIEW: Half of those blocked by Sweden’s work permit salary threshold will be graduates

The system of exemptions proposed earlier this year in the conclusions of a government enquiry, would “definitely” not solve this problem, he said.

“We have tried this before, and it doesn’t work, because you can’t have the government or some bureaucrat choosing which which jobs are suitable for people from abroad and which are not. It is businesses that need to select the people that they want – the government cannot do it.”

What makes these proposals even worse, he complained, was that they risked undermining the Swedish model, which is based around wages being set in collective bargaining between his organisation and the Swedish Trade Union Confederation.

“This means that, actually, the Swedish government will introduce a minimum wage for certain types of workers that is kind of legislated — which is totally against the Swedish model. Previously they were very much against legislating for a minimum wage from the European Union, but now they have themselves legislated for a minimum wage. So it’s kind of absurd, the whole situation.”

He also rejected the government’s argument that raising the salary threshold would force companies to hire more of those who are already in Sweden but unemployed.

“If that had been the case, they would already have had this these jobs. [Companies] would hire [unemployed people in Sweden] if they thought that they were available for those positions. But the problem is that many of those that are long-term unemployed in Sweden are low-skilled, they are low-educated, and and they have a huge problem coming into the Swedish market.”

As well as harming businesses and growth, he said it was “very disturbing” that the hike in the minimum salary threshold would force many former refugees to return to the country from which they fled just as they were starting to get established in Sweden.

“People that are here that are on the minimum salary, they are the ones who should be worried,” he said. “You have a lot of refugees that have not got refugee status and have had a temporary work permit to be a labour migrant instead. And they are now facing the possibility to have to go home to the country from which they’ve fled.”

Despite all these arguments, Daunfeldt said he did not expect the government to drop plans for the median salary threshold.

“I’m quite skeptical. I very pessimistic at the moment. It seems that they have decided already on this crazy policy. So unfortunately, I think they want to have this new wage floor.”

The salary threshold also, he warned, risked harming the very people it was intended to protect: workers already in Sweden.

“One of the big investigations we have done at the Confederation of Swedish Industry is this paper where we look at the productivity in firms, when they actually hire experts from abroad on a high salary. And what we can see is that this increases the productivity within the firm from 6 percent to 11 percent.”

“What is also interesting is that for up to five years after you hire this expert from abroad, you can actually see that the salary for the other workers in the firms increases from between 1 percent to 2 percent.”

Despite these problems, however, Daunfeldt said that there was some progress being made on attracting competence to Sweden.

“On the whole, Sweden is a fantastic country and we need so many workers. I think it will be easier for those that are more high-skilled to come into the Swedish labour market, because there we can see that the government is actually listening. And I think they will try to do certain things to attract more high talent people to Sweden, and I can see that they’re listening to that.”

This was a relief, he said, as a majority of companies in Sweden say recruiting the right competence is their biggest barrier to growth.

“We have had an investigation at the Confederation of Swedish Industry where we have asked our companies about the growth barriers [they face], and actually 56 percent of the firms said that being able to hire personnel with the right competence was a growth problem for them today. That’s very disturbing, especially now, when we also have high unemployment and a lot of people that are not in the labour force.”

Daunfeldt said that the government’s plans to decrease the threshold for highly skilled foreigners to take advantage of the lower “expert tax” regime would certainly make Sweden more attractive to the more highly paid foreign experts.

But he said that a better solution would be to simply reduce the top rate of marginal tax for all workers in Sweden.

“This will also bring huge benefits to Swedes because they will work more and they will get educated,” he said. “The premium to go into higher education in Sweden is very low at the moment, so I think that the best solution will be just to decrease marginal taxes for everybody who is working in Sweden.”

Sven-Olov Daunfeldt was interviewed by The Local’s publisher James Savage for the Sweden in Focus podcast.

Member comments

Anonymous - 17 July 2024 at 23:40 CEST

They do have the talent and skills. The issue is more “need to fit the exact box” thinking.

Become a Member to leave a comment.

Swedish Migration Agency: Entrepreneur's 35,000 kronor salary 'too low' for work permit

At 32, Hazem Ashour is a celebrated entrepreneur in Sweden, having been honoured in 2021 by King Carl XVI Gustaf for his contributions to the tech industry.

Ashour, originally from Egypt, co-founded Hemavi, a platform that helps exchange students find housing in Sweden, during his studies at Lund University in 2020.

READ MORE:

How you can get a faster decision from Sweden’s Migration Agency

The company quickly grew, attracting tens of thousands of users and securing over ten million kronor in investments.

Yet, despite his successful track record, Ashour is now embroiled in a fight to remain in the country he has come to call home.

Hemavi: A successful business story

Hemavi was founded on October 15th, 2020, by Ashour and his business partner and has since become a respected player in the international relocation industry.

As Ashour told The Local after regional newspaper Sydsvenskan first reported his story, the company was created with the aim of transforming the experience for international students and young professionals moving across borders.

“We wanted to provide them with safe housing, friends with similar interests, and administrative support in their new country,” Ashour said.

The company’s journey began with a strong start.

In November 2020, just a month after its founding, Hemavi secured its first investment of 615,000 kronor.

By December of the same year, Ashour had signed his first employment agreement with Hemavi and submitted a work permit application to the Swedish Migration Agency, after taking on the role of CEO.

Hemavi’s growth accelerated in June 2021 when the company raised an additional 4,050,000 kronor.

This influx of capital allowed Hemavi to expand its team and begin the development of its core tech platform.

As the company scaled, Ashour’s salary was adjusted to 30,000 kronor, reflecting the increased demands of his role.

In November 2021, Ashour’s entrepreneurial efforts were recognised when he was awarded the HMK Kung Carl XVI Gustafs pris Årets Nybyggare (“settler of the year”), honouring him as one of southern Sweden’s top foreign entrepreneurs.

The year 2023 marked a significant turning point for Hemavi.

The company transitioned from offering free services to generating revenue, earning 890,000 kronor for the first time.

This success was bolstered by a new investment of 3,000,000 kronor in October 2023.

As Hemavi prepared to expand geographically, particularly with its planned launch in Copenhagen, Ashour’s salary was increased to 35,000 kronor in November 2023, then to 42,000 kronor in December 2023.

In 2024, the company continued to expand, successfully launching in Copenhagen and achieving a growth rate of 2.5 times year over year. Hemavi also secured a pilot programme with one of Japan’s largest real estate conglomerates, enabling it to list thousands of properties in Tokyo for expats, Ashour told The Local.

Hazem Ashour

Hazem Ashour, photographed in his office, in August 2024. Courtesy of: Hazem Ashour

At risk of deportation

The initial success convinced Ashour to stay in Sweden and apply for a work permit in late 2020. However, several years later, he finds himself at risk of deportation.

After nearly three years of waiting, the Swedish Migration Agency rejected his application in December 2023, citing that his salary as CEO was too low compared to industry standards.

This decision came at a time when Ashour had been unable to leave Sweden for almost three years due to the pending status of his application.

In November 2023, Ashour was earning 35,000 kronor per month – just below the agency’s benchmark of 40,000 kronor for CEOs. Sweden’s minimum salary threshold for work permits currently stands at 28,480 kronor, but salaries should also be in line with industry standards, meaning the threshold is higher for some professions.

Although he raised his salary to 42,000 kronor before the agency made its final decision, the increase wasn’t considered in its ruling.

Ashour, who says he had deliberately taken a lower salary to reinvest in his company, appealed the decision – with success. His appeal led to the annulment of the initial ruling, and the Swedish Migration Agency is now re-examining his case.

“The court has annulled the Migration Agency’s decision that my salary is insufficient and referred the case back to the Migration Agency for further processing. The court has ruled that I have presented evidence in the form of, among other things, employment contracts, pay slips, and transaction receipts,” Ashour said.

“The documents show that I have received the stated salary of 42,000 kronor since December 2023,” he added.

Despite this, Ashour noted, “the Migration Agency ignored this evidence in their decision and our first and second appeal.”

READ ALSO:

Is Sweden losing the European race to attract highly skilled foreigners?

Ashour’s case also involved a disputed claim by the Migration Agency, which stated that they had sent him a letter on August 31st, 2023, informing him that the lowest market salary for his profession was 39,000 kronor and offering him an opportunity to respond

However, Ashour clarified, “I informed them in my appeal that this is incorrect, and I have never received such a letter.”

The Migration Court found that case documents showed returned envelopes received by the Migration Agency on September 21st, 2023, contradicting their claim that the letter had been successfully sent.

A ‘super frustrating’ process

Ashour has been unable to travel to meet with international investors or visit his family for nearly four years, leaving him in limbo.

The prolonged process has significantly affected his personal and professional life.

In an email to The Local, Ashour conveyed deep frustration with the lengthy and challenging work permit process he has faced.

“Of course, it’s super frustrating! I don’t think words can properly describe how this whole process feels,” he said, highlighting the emotional toll it has taken on him.

“It took me, an entrepreneur recognised by the king and running a tech company valued at 40 million kroner, over three years, countless unanswered phone calls and emails to the Migration Agency, and an appeal to the migration court just to get my salary approved – something that should have been straightforward from the start.

“I moved to Sweden almost six years ago, completed my studies, and built a company that employs people, pays taxes, and provides a service that people appreciate. Yet, in return, I’m being treated like a criminal. It just doesn’t feel right!” he said, adding that his personal life has largely influenced his decision to stay in Sweden.

“If I didn’t have a girlfriend here, I would have probably moved the company somewhere else by now,” Ashour said.

Despite the recent victory in court, he remains concerned.

“It’s worth mentioning that this is not the end of it. The Migration Court sent the case back to the Migration Agency to review the rest of the components of my employment conditions, such as the insurance, vacation days, and others,” he said.

“Let’s hope it doesn’t take the Migration Agency another three years to do that.”

Proposed changes to Sweden’s immigration policies

As Ashour awaits the outcome of his case, Sweden is also reviewing its broader immigration policies.

READ MORE:

What’s the current status of Sweden’s planned migration laws?

Proposed changes include a wage requirement for work permits that matches 100 percent of the median wage in Sweden.

However, the proposals also suggest that certain occupations might be exempt from these new rules, with any changes expected to take effect in June 2025.