How effective are mobility subsidies in targeting the unemployed? Lessons from the Swedish Model, 1965–1975

Jakob Molinder

doi:10.1177/0143831x211047887

Abstract

The Swedish Model on the labor market has been celebrated as a way to combine mobility with low unemployment and small wage gaps. As part of the model, relocation allowances were pioneered from the late 1950s. The program expanded thereafter and as much as 1% of the population in the high-unemployment north moved with assistance in the 1960s. Today, migration incentives are discussed to address pressing unemployment problems in Europe and the United States. What can Sweden’s experience tell us about the prospects of such programs? This article studies the usage of relocation allowances through a case study of Västernorrland County from 1965 to 1975. The analysis shows that there was a strong selection into the program by younger persons, recent graduates and from sectors with good employment prospects. The experience from Sweden highlights the difficulty of implementing programs to induce migration for those with the highest risk of unemployment.

Highlights

Adjusting to structural changes by shifting labor out of declining industries and into expanding economic activities is necessary for fast growth and low unemployment
The analysis showed that the allowance migrants were similar in age to regular migrants but deviated significantly from the unemployed who were generally much older
Among academics and policy makers in Europe, and more recently in the United States, falling rates of geographical mobility and increased polarization across regions caused by technological change and international trade have spurred a renewed interest in mobility subsidies as a means to reduce regional disparities in incomes and unemployment

Summary

Introduction

Adjusting to structural changes by shifting labor out of declining industries and into expanding economic activities is necessary for fast growth and low unemployment. I observe this from the peak in outmigration in the mid-1960s to the turnaround in the 1970s, when Västernorrland along with the other northern counties instead became net receivers of internal migrants The information from both the relocation allowances and registered unemployed at the labor exchange office gives a unique possibility to compare the age and sector composition of the two groups. This is the year that I have information both on industry before the move and on registered unemployed from the public labor exchanges. The high rate of allowance migration by persons employed in the engineering industry runs contrary to the notion that the program was shifting workers from contracting to expanding industries, since unemployment in this sector was low in Västernorrland. After 50, the probability of moving within Västernorrland without changing sector became more common, suggesting that persons of prime working age were more mobile across space, while older persons were less geographically mobile and relied more on internal flexibility instead

Discussion and conclusions

Findings

Manufacturing