Were the employers right? The effects of the 2008 Swedish labour migration reform

In 2008 Sweden changed its labour migration policy to promote labour migration. Under the new policy – which was pushed by the Swedish Confederation of Enterprise - there are no labour market tests or any assessment of the human capital of potential immigrants to Sweden. Instead, the policy makers were design to fully trust employers to select their future workers. However, due to an increase in the number of labour migrants in low-skilled occupations, controls over resources of employers before work permits were approved were implemented in 2012 in order to prevent situations of abuse and fraud. This article uses Swedish register data from 1997 to 2015 and regression analysis to investigate the effects and effectiveness of the policy change on labour migrants’ labour market positions, as measured by income and education to job match. In addition, the potential effects of the 2012 employer controls in lower skilled occupations and eventual substitution or unintended effects on the asylum and family reunion programs are also analysed. The 2008 reform resulted in a decrease of about 600 Euros per month for labour migrants. This is largely explained by a change in occupational distribution towards low skilled jobs and lower average human capital among the new labour migrants. There are also considerable unintended effects on the number of accompanied family members and on the asylum system such as the reunification of low-skilled family members who have difficulties in finding employment or the switch of migration paths from labour migration into the asylum system. Our results also show that a free labour migration system without labour market tests and human capital considerations increased the labour supply of low skilled workers. The control measures implemented in 2012 increased average incomes and reduced the substitution effects on the asylum system.