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The Swedish population passed the 9.5m mark during the first half of 2012, and is set to continue growing, according to Statistics Sweden. The population increase was mainly attributable to immigration, although birth rates have also been increasing. The Swedish population is ageing and the proportion of immigrants is growing, creating pressure on the public finances.Policies are expected to push back the retirement age, incentivise care-giving occupations, encourage skilled labour immigration and seek better to integrate immigrants in the workforce.
The Swedish population has been growing continuously throughout the last century and is expected to reach 10.2m in 2020 and 11.6m by 2060, according to Statistics Sweden. The development of the Swedish population displays two significant trends. The first is that of an ageing population, whereby the proportion of the population aged 65 or above is set to increase from around 18% in 2010 to 20% by 2020.
Meanwhile the proportion aged 20-64 is forecast to fall slightly from 58% in 2010 to 56% in 2020. Although this will not have sharp short- to medium-term implications, we expect policies to start addressing the effects on the pensions system and public finances in the forecast period.
Successive policies push the retirement age beyond 65
The Alliance for Sweden government has taken measures to tighten the criteria for various early retirement schemes, and reforms of the old-age pensions system are likely in the coming years. Since the 1990s, there has been no general pension age , but de facto the retirement age has remained 65 for over two-thirds of the workforce. In 2011, the government launched a commission of inquiry to assess a potential increase of the pension age. The commission, whose concluding report is due in April 2013, is expected to suggest a number of measures to make people stay active in work for longer, which the government is likely to present as reform proposals within the forecast period. According to projections by Statistics Sweden, every additional year of work among the older population would increase employment by between 80,000 and 90,000 people by 2030. Nonetheless, even an increase in the retirement age by four years would be likely to result in a slight rise in the dependency burden by 2030.
Demand for trained labour in health and medical care-particularly elderly care-and in social services is also expected to increase sharply up to 2030. Based on current education choices, a significant shortage of labour in those areas is likely over the medium term. At the same time, teachers for pre-school, special education and secondary school levels have been in short supply and the shortage is expected to continue in the forecast period. We may thus gradually see policies incentivising the choice of healthcare training and making teaching more attractive.
Integration of immigrants in the labour market remains a policy challenge
The second main population development has been the rise in immigration. Since the 1970s, the vast majority of non-Nordic immigrants have been political asylum-seekers and their families, particularly from the Balkans, Iraq, Iran and the Horn of Africa. Currently around 15% of the population were born abroad. Statistics Sweden projects that this proportion will increase and level out at around 18% in 2020.
Just below 60% of foreign-born residents were in employment in 2008, according to an earlier report by Statistics Sweden, compared with over 80% of the Swedish-born population. Although these figures hide significant variations across regions and immigrant groups, the net effect on the public finances has been negative. The current and previous governments have taken a number of steps to increase the integration of immigrants in the labour market, such as language training and anti-discriminatory measures. Moves have also been made to encourage skilled labour immigration. The effects of these measures are not yet known, but they could help alleviate particular labour shortages outlined above. If the employment rate of immigrants came 50% closer to that of native Swedes, Statistics Sweden estimates that employment among 16-74 year-olds will increase by 330,000 people by 2030. A 75% reduction in the difference would increase employment by 430,000 people; nonetheless, this would not fully offset the rise in the dependency burden from its current level. Over the near term, we do not expect the level of immigrant participation in the labour market to shift significantly.
Sentiment towards immigrants is less negative than in many European countries
As in many other countries, immigration is a divisive political issue in Sweden. This was reinforced by the entry into parliament of the immigration-critical Sweden Democrats (SD) in 2010. Public opinion on immigration is divided but appears to have been improving over the past 20 years. According to data from the SOM Institute at Gothenburg University, around 40% of the Swedish population were still negatively disposed to immigration in 2011, but this represents a decline since the early 1990s. We expect the trend towards increased tolerance of immigration to continue, although the issue will remain divisive. Recurring outbursts of ethnic tension are possible, but not of a magnitude likely to affect social or political stability. Opinion polls suggest that the SD will remain in parliament after the 2014 election, possibly with an increased number of seats. At only around 5% of voter support, the party is smaller than many of its right-wing counterparts in other parts of Europe. The party is likely to consolidate its parliamentary presence, but as it is politically isolated, it should only have a small direct influence on immigration policy.
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