Highest wage growth recorded in 10 years
Norwegian wages increased by 6% between 2007 and 2008. Together with increased inflation, this generated a growth in real wages after tax of 2%. The 6% wage rise represents the highest increase since 1998. Wage growth was at its highest in the financial services sector. Nonetheless, while the forecast for 2009 is uncertain because of the global economic situation, all signs are pointing to weaker developments in Norway’s mainland economy and an increase in unemployment.
The Norwegian Technical Calculation Committee for Wage Settlements (Teknisk beregningsutvalg for inntektsoppgjørene, TBU) estimates that the average wage growth between 2007 and 2008 amounted to 6%, increasing from the 5.4% growth of the previous year (NO0804019I). This constitutes the highest wage growth since 1998, when wages grew by 6.2%.
Preliminary report published
In February 2009, TBU published its preliminary report (in Norwegian, 2Mb MS Word doc), which included economic predictions for the forthcoming wage settlements (see TBU press release (24Kb PDF)). These annual reports provide figures on wage growth for Norwegian wage earners as a whole, as well as figures for different subgroups and industries. In addition, TBU publishes figures on price growth, real wage developments, as well as figures on developments in the Norwegian economy and competitiveness.
Wage developments in 2008
As outlined, the average wage of all earners is estimated to have increased by 6% from 2007 to 2008, which is the highest annual wage growth rate witnessed since 1998. Wage growth in companies affiliated to the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) is estimated to be at about 5.75% for blue-collar workers and at around 6.25% for salaried employees (see table). On average, wages grew by 4.4% in retail and wholesale trade. In the financial services sector, which mainly consists of enterprises involved in banking, finance and insurance, the average wage growth rate is estimated to be at 9.2%. In the public sector, wages grew by about 6.66% within state enterprises and by 6.5% in the municipal and county municipal sector.
| Company/sector | 2007 | 2008 |
|---|---|---|
| NHO companies in the manufacturing industry – blue-collar workers | 5.5 | 5.75 |
| NHO companies in the manufacturing industry – salaried employees | 5.7 | 6.25 |
| Retail and wholesale trade, HSH* companies | 5 | 4.4 |
| Financial services sector | 5.2 | 9.2 |
| Public sector | 5.1 | 6.66 |
| Municipalities and counties | 4.8 | 6.5 |
Note: Refers to companies affiliated to the Federation of Norwegian Commercial and Service Enterprises ( Handels- og Servicenæringens Hovedorganisasjon, HSH)
Source: TBU preliminary report 2009
TBU has also calculated wage figures for management salaries in selected sectors. The average salary for chief executive officers (CEOs) in the bank, finance and insurance industry was NOK 1,602,900 (about €179,930 as at 8 April 2009) in 2008, representing a 28.6% increase from 2007. The increase in CEO salaries in this industry was much higher than in the other industries. In the manufacturing industry, CEO wages grew by 13.3% between 2007 and 2008, and from a lower level than in the banking, financing and insurance industry. The average salary of CEOs in the manufacturing industry was NOK 889,400 (€99,880) in 2008.
High price growth and lower real wage growth
The consumer price index (CPI) increased by an average 3.8% from 2007 to 2008, compared with 0.8% the year before. This is the highest price growth rate in Norway since 1990. Increased prices in electricity contributed to a 1% increase in the CPI alone. The increase in real wages after tax was 2% from 2007 to 2008, compared with the 4.5% increase witnessed in the previous year. The fall in the real wage increase is mainly due to higher price growth in 2008, compared with 2007.
Competitiveness and hourly wage costs
The competitiveness of Norway’s manufacturing industry has declined in recent years, falling by 1.9% between 2007 and 2008. This is partly due to the fact that Norwegian wages have increased more rapidly than the country’s trading partners, and partly due to a stronger Norwegian currency. The average hourly wage cost for employees in the Norwegian manufacturing industry is estimated to be 28% higher than the weighted sum of average hourly wage costs for Norway’s main trading partners in the EU. For blue-collar workers alone, Norwegian hourly wages are estimated to be 43% higher than the average hourly wage among the trading partners in the EU.
Lower growth in gross domestic product
The Norwegian mainland economy has been in decline since the beginning of 2008. Mainland gross domestic product (GDP) – that is, GDP excluding oil production – grew by 2.2% in 2008, almost four percentage points less than in 2007. Higher interest rates and high price growth also led to weaker developments in the Norwegian household economy. A significant reduction in housing investments and in consumption also contributed to the slower growth rate. TBU emphasises that the forecast for 2009 is highly uncertain because of the global economic situation, but that everything is pointing in the direction of weaker developments in the mainland economy and an increase in unemployment.
Jørgen Svalund, Fafo Institute for Applied Social Science