From state-controlled to free migration: The income effects of the 2008 Swedish labour-migration reform

Abstract In 2008, Sweden changed its labour-migration policy to facilitate more labour migration from countries outside the EU. Most state ambitions to shape labour migration, including practices such as the use of labour-market tests and the assessment of migrants’ human capital, were abandoned and the responsibility to select migrants was transferred to employers. We use Swedish register data and adopt a difference-in-differences approach to assess the effects of the policy change on labour migrants’ labour income, in comparison to non-EU migrants who moved to Sweden for reasons other than work. The effects of the policy change are substantial. Labour migration from outside the EU increased and its composition changed after the reform, resulting in a significant decrease in mean income. We conclude that changes in their occupational composition were the main drivers of the income drop for labour migrants. In sum, the new non-selective labour-migration policy lowered labour migrants’ mean income by opening the door to unskilled labour.