Varieties of capitalism and labor migration policy

Abstract

Faced with a declining workforce, why does the Swedish Social Democratic Party (SAP) oppose employer proposals for increased labor migration from non-EU countries? This article explores whether perspectives on policymaking in the varieties of capitalism (VoC) literature can account for this puzzle. VoC scholars maintain that policymakers prefer reforms conforming to the national political economy, improving firm capacity and ensuring better economic performance. Employers are also thought to support policies incentivecompatible with the prevailing model of capitalism. My analysis shows that while the SAP backed labor migration policies compatible with the Swedish coordinated market economy, it did not do so for reasons of efficiency or economic performance. The SAP fears that liberal reform, preferred by employers, will damage the Swedish model, undermine active labor market policies and weaken unions. The case of Swedish labor migration policy underscores how economic reform reflects political conflict and not the desire to preserve equilibrium.