Is the state subsidy for outsourcing of domestic services associated with increased labour market integration and mobility of immigrants?

In 2007, a tax reduction (RUT) was introduced in Sweden, decreasing the cost of outsourcing of domestic services by 50%. The reform vastly increased both the number of households outsourcing domestic work and the number of firms providing these services. A common claim is that RUT facilitates labour market integration of immigrants by increasing the demand of unskilled labour.

This project aims to study if RUT is linked to immigrants’ labour market integration and mobility. More specifically, we test three hypotheses; (1) Does the RUT reform contribute to increase employment among immigrants? (2) Does employment for immigrants in the RUT industry imply a stepping stone in terms of trajectories into more advanced and better paid jobs or are they stuck in low skilled and low paid professions? and (3) Does RUT stimulate immigrants to start their own firms or attain managerial positions?

The project will run for four years and involve two researchers and a PhD student. The analyses will be based on quantitative methods using register data 2000-2022.

The scarcity of research on this topic makes the present project of clear policy relevance not least since politicians across party-lines consider RUT to be a forceful tool to improve the labour market integration of immigrants.

The results of our project are of interest also outside the Swedish context in view of the fact that policies that directly subsidize and stimulate the domestic service sector exist in many European countries.

Project objective

The project addresses the link between the RUT subsidy and immigrants’ labour market entries, as well as the ensuing mobility in terms of wages, earnings, and mobility between industries.