The Relationship between Ethnic Segregation and Economic Inequality in Sweden (1980-2020)

An Academic Literature Review

Introduction | Prosperity for Thee but not for me?

Sweden has a reputation for being a prosperous egalitarian social democracy, and many metrics support this notion. For instance, in 2020 Sweden ranked 7th on the United Nations Human Development Index (United Nations Development Program, 2020). But is this perception truly reflective of all Sweden’s demographics? While living in Sweden I’ve walked through both the posh neighbourhoods of Östermalm in Stockholm, and the streets of Rosengård in Malmö. The differences are stark, and it is abundantly clear that Sweden’s egalitarian reputation may not be reflective of the experiences of many disadvantaged groups in Sweden.

While Sweden still retains strong positions in developmental global rankings, the degradation of important societal services has led to a large increase in segregation. For example, Sweden’s charter school experiment appears to have largely contributed to an increase in segregation (Sweden’s Ministry of Finance, 2020). This was particularly exemplified by the stress Sweden was placed under following the Syrian refugee crisis in 2015, which has since affected Swedish public discourse on the topics of migration and integration (Hagelund 2020).

Inequality has been associated with a wide range of negative societal outcomes, including a reduction in economic growth (Neves et al. 2016), public health (Kondo et al. 2009), and crime (Fajnzylber et al. 2002). Segregation is a complex social phenomenon that sociologists have to grapple with. There are a wide variety of causes and outcomes to it, socio-economic, socio-political, and socio-cultural in nature. This literature review will try to establish the connection between ethnic segregation in Sweden and economic inequality over the past four decades. Furthering understanding on the topic and analysing it on a case-by-case basis grants a platform for future policy aimed at curtailing segregation and increasing equity.

This link will be delineated through analysing the factors that contribute to ethnic segregation, and how that ethnic segregation causes economic inequality. Specifically, this review will be focused on the domains of the labour market and housing. A stark theme present in the research on this topic is how tightly ethnic segregation and economic inequality are interwoven, and how they reinforce one another in a self-perpetuating cycle. 

Methodology

Finding academic literature on my specified research topic was a lot more straightforward than I initially anticipated. I had initially produced a list of 38 search terms that I may have to utilise in order to get suitable literature. My fluency in Swedish allowed me to include a number of Swedish terms as well, and they were added in anticipation of the possibility that there may not be sufficient English literature on the topic. In the end however, only 5 of these search terms needed to be drawn upon in order to obtain sufficient relevant literature. 

Using three Google Scholar searches containing three different combinations of 5 search terms, (“Sweden”, “Segregation”, “Wealth”, “Crime”, and “Economics”) I was able to find the 8 pieces of academic literature that this review will be drawing upon for the main body. The three combinations were “Sweden Segregation”, “Sweden Segregation Wealth”, and “Sweden Crime Economics”. These searches were split up between two dates, 8/03/2022 and 24/03/2022, with two of my search combinations (Sweden Segregation and Sweden Segregation Wealth) occurring on the 8th and the final one (Sweden Crime Economics) taking place on the 24th. 7 out of the 8 sources were found on the 8th, with the final one being acquired on the 24th. 

The papers were selected for their ability to elucidate the nature of the link between Swedish ethnic segregation and economic inequality. If the papers assisted me in understanding the constitution of ethnic segregation, the mechanisms through which ethnic segregation may impact economic equality, or could establish an effect, they would be included. For example, I had one study which established a link between ethnic segregation and public unrest (Malmberg et al., 2013), a mechanism through which ethnic segregation could potentially impact economic equality. However, no effect was established, so to supplement this I later found another study which bridged the gap between the mechanism found in the aforementioned study, and found an effect on economic inequality (Ceccato & Wilhelmsson, 2011).

Initially I was seeking, and planning to lay out and present a one-way relationship between ethnic segregation and economic inequality. However, through reading the literature it turns out that these two phenomena are deeply intertwined, and thus I settled on synthesising and presenting the existence of a self-perpetuating mutually reinforcing cycle between the two rather than a one-way relationship. As such the main body of this review will utilise and reference the literature in order to build a case for the existence of ethnic segregation and economic inequality cycles in the domains of the labour market and housing. For the purposes of this paper, ethnic minorities and migrant populations refer to any non-ethnically Swedish group.

The Cycles of Segregation and Economic Inequality

In this section I will be illustrating the existence of a self-perpetuating, mutually reinforcing cycle between ethnic segregation and economic inequality in two key domains of economic capital acquisition. Those being the labour market and housing. I will first be explaining the reasons behind the segregation in the two respective domains, and then demonstrating how said segregation affects economic prosperity and thus creates economic inequality through the domain of reference. Finally, I will be tying together how these effects contribute to the root causes of ethnic segregation, formulating the cycle. 

The Labour Market Cycle

In order to be able to adequately analyse the Swedish labour market and its present state, we must first understand the historical context behind why the Swedish labour market has taken the form it has. According to Knocke (2000) Sweden began taking in heavy labour market migration to compensate for its labour shortage after the second World War. From the 80s onwards Sweden began taking in more refugee migration, accepted primarily for humanitarian rather than labour reasons. In the 90s, when Sweden saw an economic downturn, we saw a further increase in refugee intake coinciding with a shift towards a high qualification and knowledge-based economy. This combination did not bode well for the migrant and refugee workforce, as they often lacked many of the prerequisites for success within such an economy, and integration efforts did not adequately address this. This created a funnelling effect for said migrant and refugee workers in which they were relegated to low skill and low compensation positions with very limited opportunities for career development. This was compounded by hiring discrimination, which further relegates these people into this shrinking pool of low skilled dead-end jobs. Knocke (2000) finds little evidence for a culture-oriented explanation to low labour market participation by certain migrant groups. 

Due to a failure of domestic policy to take into account the position of migrant and ethnic minority groups, the impacts of the 90s ended up having disastrous consequences for minority groups who slipped through the cracks. While we now understand the historical context behind Swedish labour market segregation, we still need to examine the link between it and economic inequality, as well as see if these trends remain in a more contemporary analysis of the labour market.

Reinforcing the findings of Knocke (2000), Åslund & Skans (2010) finds evidence of existing, and increasing, labour market segregation, using labour market data to analyse the entire Swedish workforce from 1985 to 2002. They find that migrant workers are segregated to workplaces with other migrants, especially those of similar origin. Group employment rates are also greatly predictive of segregation, with lower employment rates predicting higher segregation. More migrant dense workplaces tend to have lower wages and worse economic status for its workers, and even in less segregated areas, migrant workers earn less than their native counterparts. While this is true to some extent of all migrant workers, non-Nordic/central European and ethnic minority migrant workers are by far most affected by the effects listed. Just like Knocke (2000) this study also notes the existence of hiring discrimination. Economic upturns are seen to reduce ethnic segregation, while downturns increase it. 

Knocke (2000) and Åslund & Skans (2010) paint a clear picture demonstrating how ethnic minorities are relegated to low skilled, migrant dense workplaces with limited career development and low wages. Thus, we have established a way in which ethnic segregation contributes to economic inequality in the form of career opportunity and the wage revenue derived therefrom. However, (beyond the limited career opportunities) I have yet to establish the reproductive process of this cycle, which is important, as it is a core component of the cyclical argumentation.

E. K. Andersson & Malmberg (2016) analyses the effects of adolescent neighbourhood conditions on the likelihood for an individual to have a high disposable income later in life. To do this they draw upon a longitudinal national data set of people born in 1980, in which they are followed until 2012. They find that adolescents brought up in households that have a low disposable income, receive social assistance, lack parents with tertiary education, and have unemployed parents, all reduce the chance of an individual obtaining a high disposable income later in life. Having non-Swedish born parents also reduces the likelihood of obtaining a high disposable income, the degree of neighbourhood segregation amplifies these effects. 

With the findings of E. K. Andersson & Malmberg (2016) in mind, we can now see how the lower wages, higher unemployment, and lower career development brought about by ethnic segregation in the labour market reproduces economic inequalities in following generations. However, this cycle is not self-contained. This reduction in economic capital, labour market-wise and generationally, also bleeds into other realms of capital acquisition, notably, housing.

The Housing Cycle

R. Andersson (2006) and Grundström & Molina (2016) give us some vital historical context in understanding the reasons behind ethnic segregation in the Swedish housing market. According to both studies, Sweden favoured a domestic housing policy centred around regulation, public housing and subsidies following the second world war. According to Grundström & Molina (2016) this housing policy reached its peak in the 70s, where affordable housing was available in a widespread capacity. R. Andersson (2006) states that while Sweden had always taken in European refugees, it was also in the 70s that Sweden began taking in non-European refugees for the first time. Both studies mention that Sweden began diverging from their golden era of housing policy after the 70s, culminating in the 90s with a neoliberal government. This government’s housing policy was a complete 180 from what was previously in place, incurring deregulation, privatisation, and the elimination of subsidies. This shift marked the transformation of housing from being primarily use value based, to being exchange value based (Grundström & Molina, 2016). These trends have not been meaningfully shifted since then. R. Andersson (2006) finds that this particularly affected ethnic minority groups who are socioeconomically worse off, greatly limiting their housing choices, thus making structural subordination i.e., a lack of economic capital, the primary contributor to residential ethnic segregation. They also find little evidence to support an ethno-centric narrative, i.e., that it is minorities seeking out ethnically similar neighbourhoods that is the major cause of segregation.

These two studies are useful in understanding the history behind Sweden’s ethnic residential segregation. The fact that the two studies, published a decade apart, have the same findings further support this telling’s reliability. Furthermore, the previous labour market analysis helps elucidate some of the causes behind the worse socioeconomic status of ethnic minorities. While these studies have found the primary cause of ethnic segregation (wealth disparities) it leaves an important question unaddressed. How does ethnic segregation in housing contribute to economic inequalities?

Wind & Hedman (2017) analyses the differences in housing capital gains for different social groups throughout the time period 1995-2010. Due to the fact that “Housing wealth is the largest component of wealth for a majority of Swedish households” (p. 1) it is very pertinent to understand how gains thereof are distributed across different ethnic groups. The study finds that these gains are unevenly distributed towards high income native Swedes. This is primarily driven by the fact that high income native Swedes are likely to have firstly, bought into the housing markets at an earlier stage, allowing them to capture more of the rising value incurred by Sweden’s housing privatisation and deregulation and secondly, own more high value housing assets, such as those in gentrified areas. The ability to engage in both of these flows directly downstream from one’s economic and cultural capital, two types of capital that ethnic minorities have disproportionately little of. Thus, ethnic minorities are largely unable to buy into the increasing capital gains asset that is the Swedish housing market, while hegemonic groups do not face the same difficulties. 

Wind & Hedman (2017) ties together the knot on the second cycle of ethnic segregation and economic inequality. Because of Sweden’s privatised housing market conditions, the lack of economic and cultural capital bars ethnic minorities from being able to buy into affluent segments of the housing market, while hegemonic groups face no such difficulties. Due to housing assets being a primary driver for household wealth, this further increases economic inequality between minority and hegemonic populations, further perpetuating this cycle. However, there is also another, more elusive way in which ethnic segregation limits the ability for ethnic minorities to obtain high value housing assets. 

Malmberg et al. (2013) studies the relationship between ethnic residential segregation and urban unrest, as measured by car burnings, using a national dataset. They find that ethnic segregation and the portion of parents on social welfare are the major drivers behind urban unrest. Migration itself does not appear to have much explanatory effect; it is specifically the segregation process that does. This indicates that ethnic segregation increases crime in those regions. But how does high urban unrest relate to the acquisition of high value housing assets? Well, Ceccato & Wilhelmsson (2011) studies the impact of crime on apartment prices. They pull from a dataset of 9000 apartment sales in Stockholm to do so, and find that zonal crime rates do have a strongly negative effect on housing prices. Different crimes obviously have different effects, but the effects are distinctly negative, all lowering house values to some extent.

These two studies reveal yet another mechanism of economic inequality driven by housing asset gains. On top of the previous cycles discussed, we now find that ethnic segregation increases neighbourhood unrest and crime, driving down local house prices in those regions. Given that the value of the housing assets obtained was one of two major reasons behind housing asset gains discussed in Wind & Hedman (2017), and a phenomenon directly driven by ethnic segregation is driving down that value, this illuminates yet another avenue through which ethnic segregation causes economic inequality, and vice versa. 

In short, the segregated labour market heavily limited the ability for ethnic minority groups to develop prosperous careers, and thus access the economic capital therewith. These effects were shown to contain a generational carry-on effect, perpetuating the cycle in ethnic minority populations. The worse socioeconomic position of ethnic minority groups (driven in part by the aforementioned labour market segregation) lock them out of rapidly appreciating high value housing assets, and segregate them to low value areas. This further limits their economic capital acquisition and contributes to the worse socioeconomic position that locked them out in the first place. The segregation brought upon by this socioeconomic imparity causes other social ills, such as urban unrest, which further lowers the value of housing assets in segregated, ethnic minority majority neighbourhoods, once again perpetuating the cycle.

Conclusion | A Systemically Embedded Problem

The discrepancies between the neighbourhoods in Rosengård and those of Östermalm are no sudden departures from Sweden’s egalitarian reputation. These discrepancies have been in the making for many decades, and not enough was done to prevent them. In this literature review I have demonstrated the existence of a range of cycles reinforcing the relationship between ethnic segregation and economic inequality. I have delineated labour market conditions, housing access, and crime rates as three key ways through which this is perpetuated. As such, it is clear that there is not just one, but many ways in which ethnic segregation has contributed to economic inequality, and vice versa, in Sweden over the past four decades. With these phenomena delineated, I hope we can utilise this information to draft targeted policy to break these vicious cycles, and to further contribute to sociological understanding on the relationship between ethnic segregation and economic inequality.

Bibliography

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