Digitalization, immigration and the welfare state

Summary:

The modern welfare state finds itself in the middle of two major upheavals: the impact of technology and immigration. Having taken in more refugees per capita than most other countries, the pillars of the Swedish welfare state are being shaken, and digital technologies are set to strengthen already existing trends towards job and wage polarization. The development of skills to keep pace with technology will enter into a critical period for the labour market in which inadequate policy responses could result in further inequality and polarization. In this regard, a platform-based labour market could help by opening up a vast range of new work opportunities.

The author examines the implications of these trends that drive change in developed economies and, in particular, the impact that they have on Sweden and other European countries with rigid labour markets and comprehensive tax-financed welfare services. Increasing costs from immigration and rising inequality could further reduce the willingness to pay high taxes and erode support for redistribution. Failure to address challenges like this one could herald much more drastic changes further down the road. There are already signs of economic and political tensions and there is a risk that the social contract could crack.

Contents:

1. A perfect storm
2. The welfare state in transition
3. The labour market in transition
4. Digitalization changing the economy and the labour market
5. Fiscal pressures from digitalization and immigration
6. Immigration, inequality and skills in the digital economy
7. Future challenges for the welfare state

• Primary Source