There was a slight recovery in the Norwegian economy in 2000, according to the report of the Technical Calculating Committee on Wage Settlements (Teknisk beregningsutvalg for inntektsoppgjørene, TBU), made public on 28 March 2001. However, although high oil prices contributed to a record balance of payments surplus, the improvements in economic performance were still relatively modest compared with the growth witnessed in the mid-1990s. Employment and unemployment rates remained relatively stable, and there is still a significant shortage of labour. The tight labour market may lead to growing problems in the future in the form of a drop in productivity, and further increases in national wage growth compared to Norway's main trading partners. The findings of the TBU - which comprises representatives from the main trade union confederations and employers' organisations, along with the relevant ministries and Statistics Norway (Statistisk sentralbyrå, SSB) - is supported by two further reports issued earlier in March by the Bank of Norway (Norges Bank, NB) and Statistics Norway.
There was a slight recovery in the Norwegian economy in 2000, according to the report of the Technical Calculating Committee on Wage Settlements, issued in March 2001. However, the tight labour market may lead to growing problems in the future in the form of a drop in productivity, and further increases in national wage growth compared with Norway's main trading partners.
There was a slight recovery in the Norwegian economy in 2000, according to the report of the Technical Calculating Committee on Wage Settlements (Teknisk beregningsutvalg for inntektsoppgjørene, TBU), made public on 28 March 2001. However, although high oil prices contributed to a record balance of payments surplus, the improvements in economic performance were still relatively modest compared with the growth witnessed in the mid-1990s. Employment and unemployment rates remained relatively stable, and there is still a significant shortage of labour. The tight labour market may lead to growing problems in the future in the form of a drop in productivity, and further increases in national wage growth compared to Norway's main trading partners. The findings of the TBU - which comprises representatives from the main trade union confederations and employers' organisations, along with the relevant ministries and Statistics Norway (Statistisk sentralbyrå, SSB) - is supported by two further reports issued earlier in March by the Bank of Norway (Norges Bank, NB) and Statistics Norway.
Economic developments in 2000
Norwegian GDP rose by 1.8% from 1999 to 2000, compared with the 0.8% rise from 1998 to 1999. Growth in GDP in 2000 was very much helped by an upturn in the oil-related industries, which have enjoyed a relatively long period of high oil prices. The growth in mainland industries was marginal over same period. A general, though relatively minor, improvement in productivity, and slightly lower wage growth than in 1999, may also help to explain the upward trend in the economy. Most commentators believe that the oil-producing sector will continue to lift the Norwegian economy, because oil prices are expected to remain stable throughout 2001, and the exploitation of crude oil on the Norwegian continental shelf is expected to reach a peak in 2002.
Worries about further wage growth
Although the high oil prices contributed to boosting the disposable income of Norway considerably in 2000, all is not well in the economy. A priority goal of Norwegian incomes policy in recent years has been to reduce the national wage growth rate, and although wage growth has dropped slightly over the past couple of years (NO0001174F), it still remains at a much higher level than among Norway's main trading partners and the EU Member States - see the table below. The wage growth rate dropped from 4.9% in 1999 to 4.5% in 2000, which was nevertheless somewhat higher than anticipated prior to the 2000 wage settlement (NO0005192F). The corresponding figures for 2000 produced by NB and SSB are 4.25% and 4.3% respectively. The equivalent figure for 1998 - when the highest recent level of wage growth was witnessed - was 6.5% (NO9902116F). In the largest collective bargaining areas, central wage increases for 2001 were laid down in the 2000 wage settlement. However, neither SSB nor NB expect any significant changes to the wage growth rate in 2001.
| Period | All groups | Manufacturing industry* | Public sector** |
|---|---|---|---|
| 1995-6 | 4.4 | 4.2 | 4.3 |
| 1996-7 | 4.3 | 4.1 | 3.9 |
| 1997-8 | 6.2 | 6.1 | 6.0 |
| 1998-9 | 4.9 | 4.7 | 4.8 |
| 1999-2000 | 4.5 | 4.6 | 4.6 |
* Blue- and white collar workers in member companies of the NHO employers' organisation; ** municipal and state collective agreement area.
Source: TBU 2001.
Teachers and other educational personnel at the primary and secondary school level witnessed a much higher wage growth than most other groups in 2000 (6.0%), which may be explained by three factors: in the 2000 wage settlement teachers and educational personnel were given priority (NO0006194F) and as such received substantial general wage increases; they also received wage compensation for the introduction of more flexible working time arrangements, as well as additional wage increases as an alternative to extended holidays. The expected wage growth for teachers from 2000 to 2001 is thus 7.5%, which compares with a wage growth of 3.0% to 3.5% for the rest of the public sector, and growth in the private sector of 2.0% to 4.75%.
The TBU report also shows that there was a slight narrowing of the wage gap between women and men over the period from 1990 to 2000. In 1990, women's average wages were 85% of men's, while the equivalent figure for 1998 was 86%. Although there are still little data available for the period 1999 to 2000, the TBU seems to suggest that there has been little change in this regard in the past couple of years.
Labour market developments
Developments in the labour market were relatively stable in 2000. Figures from SSB show a relatively marginal growth in employment of 0.4% in 2000, which mainly took place in the private service industries and public administration. The employment rate was approximately 73.4% in 2000, which, according to SSB, was the same as in 1998 and 1999. The main growth in employment came among full-time workers, while there was a decline in the number of part-time workers. The unemployment rate also increased for the first time since 1993, from 3.2% in 1999 to 3.4% in 2000. Both SSB and NB predict only marginal changes to the unemployment rate in the years to come. Both the employment rate and the the labour force are expected to grow slightly in 2001, and SSB thus predicts the unemployment rate to be approximately 3.5% in 2001 and 3.6% in 2002.
Prices and competitiveness
The consumer prices index rose by 3.1% from 1999 to 2000 - a significant increase compared with previous years. Since 1996/7, both prices and wages have increased faster in Norway than among its main trading partners, and Norwegian industry's competitiveness has thus been seen to be under threat, and there are fears that this will lead to a dismantling of those parts of Norwegian industry most vulnerable to international competition. The TBU report also provides a comparative analysis of levels of labour productivity in Norwegian industry, and it goes a long way to confirming, although with qualifications, concerns about the decline in productivity of Norwegian industry. Depending on the method of calculation used, labour costs of Norway are between 15% and 18% higher than among its main trading partners.
Commentary
Many commentators see 2000 as a year of consolidation for the Norwegian economy, because it marked the definitive end of the prosperous period of the 1990s. The reversal of positive economic trends started in 1998 with falling economic growth and stagnation in employment, but stabilised during 2000. Furthermore, although the government's balance of payments surplus reached a record high in 2000, labour market and price developments remained relatively stable. The unemployment rate witnessed a slight increase after having dropped steadily for several years since the early 1990s, from 5.4% in 1994 to 3.2% in 1999. The unemployment rate is not expected to rise significantly in the near future.
Nevertheless, there are factors that may change all this. Norway, as a small and open economy heavily reliant on oil exports, is vulnerable to international fluctuations, and especially to fluctuations in the oil price. Furthermore, although the average price and wage growth in Norway is dropping, the gap between Norway and its main trading partners is still an important impediment to national industrial competitiveness. The so-called "solidarity alternative", the incomes policy compromise that marked much of the 1990s, has also come under threat in recent years (NO0012117F). There is no longer a consensus about the issue of wage moderation, and recent reports on increases in management salaries have added to the discontent felt by many trade unions and employees (NO0104127N).
The pressing shortage of labour that exists in many sectors is a continuing problem for the Norwegian economy, and if allowed to continue it may contribute to further undermining wage moderation and national productivity. The problem is felt particularly acutely in the private and public service sectors. Furthermore, the introduction of the four extra days of annual leave agreed in the 2000 wage settlements (NO0005192F) is expected to reduce the average working hours per employed person by 1% in 2001 and 2002, according to SSB, and as such will place additional strains on an already tight labour market. The government have signalled that it intends to initiate measures to combat the problem, among other initiatives by allowing increased labour immigration (NO0012113N). (Håvard Lismoen, FAFO Institute for Applied Social Science)
Eurofound recommends citing this publication in the following way.
Eurofound (2001), Wage growth still high, article.
