Digitalization, Immigration and the Welfare State (New Thinking in Political Economy series)

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 labor market in which inadequate policy responses could result in further inequality and polarization. In this regard, a platform-based labor market could help by opening up a vast range of new work opportunities.

Marten Blix 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 labor 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 down the road. There are already signs of economic and political tensions and there is a risk that the social contract could crack.

This new discussion on the future of work and the welfare state will be of interest not only to scholars but in policy circles and corresponding societies in sociology, labor relations, political science and public administration.

Mårten Blix, Research Institute of Industrial Economics, Sweden