Will Future Immigration to Sweden Make it Easier to Finance the Welfare System?

Will future immigration to a country with a large public sector alleviate the increasing burden on the public welfare system due to an ageing population? The question is based on the experience that the age structure of immigrants differs from that of the native population. Fiscal impacts due to immigration depend mainly on the size, the age composition and the labour market integration of the additional population which arises because of immigration. A projection from Statistics Sweden about future immigration combined with the latest Long-Term Survey of the Swedish Economy has been used in this study. Calculations for Sweden up to the year 2050 show that the positive net contribution to the public sector from the additional population is rather small even with good integration into the labour market. The reason is that future immigration will increase the size of the population and thereby raise not only revenue from taxation but also public expenses. The fiscal impact is sensitive to the labour market integration of the additional population. The yearly positive/negative net contribution effect is less than 1% of GDP for most of the years. On the whole, the results are about the same even if we change the assumptions concerning the composition of future public revenues, the growth of public expenses, return migration, or the age-specific birth and death rates in the additional population. More considerable net fiscal effects would require a much higher and probably unrealistic level of future immigration.