Open-Borders Daydreams [Updated]

The Swedish government Framtidskommissionen is poised to release a report on Somali immigration. It argue that Somali immigration in the United States, Canada and the U.K has been successful and that Sweden should learn from those countries:

“Hittills har somalier haft svårt att ta sig in på den svenska arbetsmarknaden. Nästan fyra av fem somalier i arbetsför ålder har inte ett arbete. Däremot har somaliska invandrare lyckats betydligt bättre i länder som Storbritannien, USA och Kanada.”

Their source for these claims are apparently “field studies”. But why rely on anecdotal evidence when there is high-quality official statistics available?

The OECD reports the employment rate of working age Somali immigrants in Sweden, the U.K, the United States and Canada. To provide context, typical employment rate for natives in those countries is around 70-80%.

Here is the employment rate for Somali immigrants aged 16-65:
Sweden 24%.
U.K: 15%
Canada: 36%
United States: 52%

America does best but still poorly. Not only do half of Somali-immigrants not work and those who do are often low-income (earning around half the U.S average wage). 

The Census Bureau finds that: “The foreign-born from Somalia and the Dominican Republic had some of the lowest median household incomes…about 51 percent of residents born in Somalia are living in poverty.” That is for 2007, following the recession the poverty rate has increased to 58 percent.

Nor is the situation encouraging in Canada. According to this U.N report “One study of national poverty rates by ethnicity found that 62.7 percent of Somali-Canadians lived in poverty, one of the highest levels of all Canadian ethnic and immigrant groups”.

A report for the British government similarly concludes: “Somali born migrants have the lowest employment rate of all immigrants in the UK and levels of education within the community are also low, with 50 per cent having no qualifications and only 3 per cent having higher education qualifications.”

Relying on anecdotal evidence and wishful thinking, Swedish libertarians have convinced themselves that Somali immigration in Anglo-Saxon countries is a great success-story. This Utopia is undermined if we instead look at statistics from official sources. The countries which Erik Ullenhag and Fores paint as role-model for Sweden to be inspired by have 50-60% poverty rates among Somali immigrants.

Sure, Sweden can increase employment among low-skilled immigrants a bit by lowering wages. Disregarding the fact that the Swedish public never asked for Dickensian inequality, low-wage immigration is also a bad deal for Sweden.

The economics of immigration is after all not magical. If immigrants pay in more taxes than they get back in transfers and public services the economy benefits. But working is a minimum requirement,  not a sufficient condition to be a net-contributor. The welfare state was after-all designed so that workers with low income would be subsidized by high-income workers. Estimates are that about two thirds of the Swedish population pay in less taxes than they receive in benefits, with a minority of high-income earners financing the rest.

In order to be net-contributors, immigrants should as a rule of thumb have as high or preferably higher employment rates than native and as high or preferably higher average wages. In 2010 the average market income of adult non-European immigrants was 45% of native born Swedes. You have to either ignore economics or arithmatics to think that a group that earns half the average income is a net contributor in a generous welfare state. 

Integration minister Erik Ullenhag likes to say “600.000 foreign born go to work every week”. Moderate party MP Lars Beckman bids one up and writes that “700.000” foreign born go to work every week.

First of all the oft-repeated figure is incorrect if taken literary. What Ullenhag and Beckman probably mean is that around 700.000 foreign born aged are employed among those 15-74. However not every employed person goes to work (for instance you can be sick or on maternity leave). According to SCB 540.000 foreign born went to work in a given reference-week while 720.000 foreign born did not go to work. This is to a large extent due to people being on vaccation or on sickleave.

Ullenhag has also said that “the number of foreign born who work has increased six quarters in a row” and that “never as now have so many foreign born gone to work every week”.

Counting the number of people who work rather than the employment rate is just silly. 500 million Indians go to work compared to only 5 million Swedes, does that prove that India is richer than Sweden? The employment rate of the foreign-born is lower now than it was five years ago and has not increased sex quarters in a row

Another amusing line of reasoning increasingly advanced by libertarian economists is that low-skilled immigration is good for “society”, as long as we redefine “society” to include the entire planet! Andreas Bergh thus concludes that immigration is “en samhällsekonomisk vinst” (societal gain). You see, immigrants benefit more from immigration than native Swedes lose, and Bergh thinks gains must be taken into consideration “wherever they arise”. According to this confused interpretation economic theory compels us to redistribute our assets to others as long as their gain is greater than our loss.

I guess if a company hired Andreas as a consultant he would enthusiastically encourage them to sell their assets at below market price to their competitors, as long as they gain more than you lose. What gives you the right to privilege your self-interest over others? 

It is of course trivial that immigrants benefit from immigration. What the Swedish public pays Swedish economists for is determining what policies Swedish society benefits from, in this case immigration policy. Bergh never even addresses this question, preferring instead to daydream about donating Sweden to the world based on some private utilitarian morality. 

I guess dealing with depressing reality is less fun than fantasies about redistributive universalism or Somali utopias in Minnesota.

Update:

Fores Vice President Andreas Bergström criticizes me in the comment for not being impressed by the Somali-American employment numbers I provided. If  around 25% of working age Somali immigrants work in Sweden but around 52-54% in the United States, isn’t it still correct to view the U.S experience as a “success story”?  

No, it is not. As I have written previously, labor market success is not just about working, it is also about income. Even if immigrants work, they will not be net contributors if they earning are low.

Fores and has written reports proclaiming Somali-immigration success in the United States without providing national data on employment, poverty or income. Let me fix that for you. I have looked at Census Bureau numbers for 2006-2010 for those aged 15-65. 

The employment rate for Somali immigrants in the sample is 53 percent, including both full-time and part-time workers. 

The low employment underestimates the problem, since Somali-Americans who work earn less than average. Among the 53 percent of Somali-American immigrants who work, the median income (wage and self-employment income) is 17.000$, which using PPP-adjustment comes to around 13.000 kr per month. Even if we look at full-time workers, thirty percent of Somali-Americans earn less than the equivalent of 13.000 kr. per month. 

In fact the aggregate labor market income of Somali immigrants in the U.S relative to others is probably not far above levels in Sweden. Sure, the share that works is higher in the U.S, but those who work earn around 45 percent less than the national average. In Sweden a lower share of immigrants works, but wages are closer to the national average. I cannot find data for Somali workers. According to this LO-report wages for immigrants from Africa, Asia and Latin America were 16 percent lower than the national average.

Because of effective minimum wages and generous welfare, Sweden lacks an extreme-low-wage sector, a conscious decision. Therefore labor market problems for an immigrant group will be reflected more in the quantity margin (employment). In the U.S the same problem will be reflected in the price margin (lower wages). In both examples the immigrant groups ultimately earns too little to be net contributors. 

About 6 percent of employed American’s are still below the American poverty rate. Among employed Somali-Americans the number is 34 percent. Andreas Bergström doesn’t like me talking about libertarians. Fair enough. Does left-liberal Fores believe that these poverty numbers and half of Somali-American employees earning less than around 13.000 kr. per months is an example of success for Sweden to be inspired by? Is this the vision of Sweden’s future the Center-Party is running on in 2014?