How Sweden's Immigration Crackdown Puts Innovation and Growth at Risk
By Simon Johnson
The Impact of Stricter Immigration Policies on Sweden's Economy
STOCKHOLM, June 25 (Reuters) - Sweden's centre-right government plans to deepen its immigration crackdown if it wins in the September elections, but business leaders say tougher rules are undermining the innovation-led growth model that has helped the economy outpace Europe for decades.
Driven by the populist Sweden Democrats, the government has focused on cutting the asylum seeker numbers. However, its policies, such as minimum wages for migrants and tougher citizenship rules, are also throttling the inflow of skilled workers the country's startups need.
Sweden's Startup Success and Economic Growth
Known for creating global firms, such as music streaming service Spotify and payments firm Klarna, Sweden's startup sector has been driving its economy's outperformance over the past quarter of a century, with average annual growth of 1.7% against 1.3% in the European Union, according to Eurostat.
This growth engine is now at risk. Applications from non-EU entrepreneurs seeking to start businesses or highly qualified individuals looking for jobs have fallen 51% since 2022, when the current government took office, figures from the Stockholm Chamber of Commerce show.
"The next Klarna or Spotify will be founded somewhere other than Sweden if we keep these rules," the Chamber's head of business policy, Carl Bergkvist, said.
TechSverige, Sweden's organisation for IT, telecom and tech companies, reckons it needs around 18,000 new workers a year.
"If there is anything countries like ... Sweden need it is labour migration," Borje Ekholm, the outgoing CEO of telecoms giant Ericsson, told daily Svenska Dagbladet this month.
Sweden Democrat leader Jimmie Akesson, however, signalled last month the government had no intention to change course, saying it had "much, much more left to do" on immigration.
The Dilemma: Balancing Growth and Social Concerns
DILEMMA
Sweden faces a dilemma common across Europe: immigration can help mitigate the effects of ageing populations and weak productivity growth. But concerns over crime, integration and stagnant living standards have fuelled support for parties promising tougher controls.
Government Measures and Rationale
Sweden has restricted residence permits and benefits for asylum seekers, implemented tougher rules on family reunification and introduced financial incentives for voluntary returns.
Stricter labour migration policies are aimed at stopping fraud and protecting wage levels, while longer qualification times for citizenship and language and civics tests will help new arrivals integrate, the government says.
"Criminality, shootings and a gang crisis, that's what is damaging Sweden's reputation," Sweden Democrat migration policy spokesman Ludvig Aspling said.
"There is a real risk that the immigrants we don't want will scare away the immigrants we actually need."
The Risk of Brain Drain
BRAIN DRAIN
While the government presents last year's drop in asylum applications to a 40-year low as proof its policies are succeeding, others warn of a brain drain.
Case Study: Entrepreneurial Setbacks
The experience of Abhijith Balasubramanya is a case in point. After studying sustainable management in Sweden and working at battery maker Northvolt, the Indian national returned to Sweden in 2024 to launch a hydroponic farming startup. On a temporary visa, he secured financing and a contract with a supermarket chain. Balasubramanya says he met all requirements for a work visa.
But in February he got mail from the Migration Agency giving him 20 days to leave Sweden.
"They gave me a visa to start a company, but then they rejected me after I started the company," he said. "The entire dream I had just got demolished."
Balasubramanya is now running his parents' coffee business in Bengaluru.
When contacted by Reuters, the Agency said it did not comment on individual cases.
Innovation-Driven Sectors Under Pressure
GAMES INDUSTRY
The Gaming Industry's Talent Shortage
Beyond startups, innovation-driven sectors like gaming, which includes companies behind such global blockbusters as Minecraft and Candy Crush Saga, have warned of talent shortages among smaller studios.
"The difficulties around employing the personnel we need ... are a threat to our development," Daniel Torbjornsson at the Swedish Games Industry organisation said.
Around 20% of sector employees were from non-EU countries in 2023.
Economic Impact of Reduced Labour Migration
However, the number of highly qualified non-EU workers granted work visas roughly halved in 2024 to around 3,600 from 6,600 in 2022, statistics office data shows.
According to the Confederation of Swedish Enterprise migrant workers added 52 billion crowns ($5.34 billion) to the economic output in 2023 alone.
"This government's barriers to broad labour immigration have no economic basis; they are purely ideological," Charlie Karlsson, professor emeritus of economics at Jonkoping International Business School, said.
Policy Adjustments and Ongoing Uncertainty
The government has rowed back after heavy criticism, easing requirements on key jobs, such as IT or chemical engineers, but many labour migrants still worry what could happen if the right wins the election.
Pedjman Pourmohamadiyan, an Iranian-born senior engineer at mining equipment maker Epiroc who moved to Sweden in 2014, is waiting for his four-year-old daughter's citizenship even though he got his Swedish passport in 2022.
Uncertainty about the outcome means the family is considering leaving.
"I love my house. I planted trees ever since my daughter was born," Pourmohamadiyan said. "But nowadays, I get the feeling that I'm not welcome anymore."
($1 = 9.7465 Swedish crowns)
(Reporting by Simon Johnson; editing by Niklas Pollard and Tomasz Janowski)
