Norway: Social partner’s involvement in unemployment benefits regimes.

  • Observatory: EurWORK
  • Topic:
  • Social protection,
  • Published on: 20 December 2012



About
Country:
Norway
Author:
Tom Erik Vennesland
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The Norwegian unemployment insurance system is a universal, state financed system. The social partners at national level are involved in the country’s UB system in that they consult the government on issues regarding labour market- and welfare policies and present their views on UB-relevant issues in the national media. The social partners’ involvement in the UB-regime was particularly visible in 2009, when demands from the grassroots of the two confederations contributed to more flexible regulations on the right to unemployment benefits during temporary layoffs.

1. The characteristics of the UB system in the country

Table 1: Types of Unemployment Benefit and Social Assistance programmes
 

Benefits

Main qualifying conditions

Funding

Unemployment Insurance (UI)

earnings-related

involuntary unemployment - employment record - actively looking for work

contributions from employer and, sometimes, also employees, often topped by government payments

Unemployment Assistance (UA)

social minimum, partly means-tested

unemployment insurance expired or not eligible for it - (often) a short employment record - actively looking for work

contributions from employer and employee and/or government payments

Social Assistance (SA)

social minimum, comprehensively means-tested

unemployment insurance expired or not eligible for it - (for most categories of claimants) actively looking for work

taxes

1.1. Recent changes/transformations of the UB system in your country:

1.1.1. In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

Yes.

  • Regarding the UI:

In 2002/2003, regulations were introduced (we have given the regulations codes as they are referred to throughout the text):

AI: In order to be eligible for UI the worker had to have their working time reduced by 50%, compared to 40% previous to 2003. A2: The requirement of minimum income the previous year for entitlements to UI was raised from 1.25 to 1.5 times the “NSI base amount” (from NOK 99 000 / EUR 13 000 to NOK 119 000 / 15 000 EUR). A3: A new regulation on activity requirements was adopted. Prior to this change the beneficiary was committed to take offers of employment and participate in labour market measures. With the new regulation The Norwegian Labour and Welfare Administration (NAV) could also set more specific activity requirements, such as requirements for documentation of job search activity. A4: The maximum period for UI was reduced from 156 to 104 weeks. v) Holiday pay for beneficiaries of UI was removed ( (and reintroduced in 2006) and A5: the number of waiting days (days as unemployed) before to earn the right to UI was increased from 3 to 5 ( (and reduced to 3 again in 2008).

In 2009, some new regulations were introduced on the temporary lay-offs scheme: B1: The requirement for working hour reduction for entitlement to UI for temporary laid off employees was reduced from 50 to 40%. B2: Prior to this change, employees who were laid off with less than 50% had no right to unemployment insurance. Employers’ wage obligation under layoff periods was reduced from 10 to 5 days. B3: The period where employees are entitled to state-financed UI during layoffs was increased from 30 to 52 weeks. An employee who is laid off temporarily is not dismissed and technically not unemployed (the employment contract is only suspended). If the employer terminates the employment relationship during this period the employee is entitled to salary from the employer until the end of the dismissal period, as stated in the work contract and the Working Environment Act. When the dismissal period is over the unemployed person can apply for UI again. When the application is granted, the number of weeks the unemployed received UI during the layoff period is deducted from the maximum period.

If the employment relationship is terminated by the employer during this period the employee was entitled to salary from the employer until the end of the dismissal period, as stated in the work contract. When the dismissal period was over, the unemployed person can apply for normal UI. The changes in the layoff rules were reversed and the old regulations came into effect again in 2012.

C1: In 2009, The Ministry of Labour (Arbeidsdepartementet) changed a regulation regarding the combination of UI with Norwegian language training. Prior to the change only the fully unemployed had the opportunity to combine the two. With the new regulation both temporary laid off and partially employed people earned the same opportunity.

D1: In September 2011, the requirement for at least eight weeks of work in Norway before UI rights can be transferred from another EEA country was repealed. The repeal means that workers from EU/EEA countries who have worked full-time for at least 16 weeks (alternatively 32 weeks the last three calendar years) in another EU/EEA country now are entitled to UI in Norway, provided they have been working in Norway for at least one day .

  • Regarding the UA:

Norway does not have any form of unemployment assistance (UA) in addition to the actual unemployment insurance benefits. The Norwegian unemployment insurance benefit scheme is universal and financed over the State Budget (taxes).

  • Regarding the SA (if relevant):

Persons who do not satisfy the minimum income requirement for entitlement to UI can qualify for the state-financed and means-tested social assistance (SA). The social assistance is a general scheme, not restricted to situations of unemployment, and administered by the municipal NAV-offices. Employed persons as well as unemployed persons may qualify for social assistance. The scheme is means-tested, and there are no minimum /standard pay-outs. However, some measures linked to the social assistance scheme is relevant in the UI-discussion as they are mainly directed at helping people into employment.

NAV (The Norwegian Labour and Welfare Administration) was a result of a 2006 reorganisation of the public employment, national insurance and welfare services into one service. The aim with the NAV-reform was, amongst others, to achieve a better link between Employment and Welfare Services. Following the reform the government, amongst others, launched the qualification program (“Kvalifiseringsprogrammet”) aimed at getting long-term unemployed people who are not entitled to UI back into the labour market. The program is administered by the municipal NAV-offices. The participants are offered individual guidance and training, and are entitled to an annual sum equivalent to 2G (2 times the National Insurance Act’s base amount, in total NOK 158 000 NOK per April 2012).

1.1.2. For each of these changes/innovations indicate:

  • date of introduction:

In 2002 the Norwegian Parliament (Stortinget) adopted the 4 significant changes to the National Social Insurance Act (NSI), regulating unemployment insurance (UI)) discussed above (A1-A4). The changes came into effect from the 1th of January 2003. In addition to these significant changes, there were two minor changes introduced in 2003 (A5-A6). A5 and A6 were reversed in 2006 and 2008, respectively.

From February to July 2009, Parliament adopted 3 significant changes to regulations regarding the right to unemployment insurance during temporary layoffs for employees in companies with collective agreements (B1-B3). The changes in the temporary layoff rules were reversed and the old regulations came into effect again on the 1th of January 2012 (B4).

On the 17th of November 2009, the ministry of labour changed a regulation regarding the combination of UI with Norwegian language training (C).

In September 2011, the requirement for at least eight weeks of work in Norway before UI rights can be transferred from another EEA country was repealed (D).

  • who took the initiative (government, unions, employers’ associations, other organisations):

Changes A1-A6 were initiated by the Norwegian government.

The reintroduction of holiday pay for beneficiaries of UI (reversal of A5) and the reduction of waiting days to earn the right to UI (reversal of A6) were introduced after demands from Landsorganisasjonen i Norge, The Norwegian Confederation of Trade unions (LO) to the Labour-, Centre- and Socialist left-party coalition in the government.

Changes B1-B3 were originally proposed in the Government’s stimulus package (response to the financial crisis), and the government followed requests from LO and Næringslivets Hovedorganisasjon, The Confederation of Norwegian Enterprise (NHO). The reversal of B1-B3 was initiated by the government.

Regulation C was initiated by the government.

Regulation D was initiated by the government, after the former practice was seen as in breach with the EEA agreement in a reasoned opinion delivered by the EFTA Surveillance Authority. EFTA argued that the requirement of having to have worked in Norway for at least eight weeks prior to the unemployment was in conflict with the EU principle of equal treatment.

Regulation E was initiated by the government as part of a major reform of the Social Welfare System (NO0610069I).

  • the content of the change / of the new programme:

See 1.1.1 a).

  • the aim pursued:

In regards to A1, the government’s argument was that it is difficult to provide jobs to job seekers who have small reductions in their working hours. In regards to both A1 and A2, the government argued that these requirements could strengthen the job seeking activity and thereby reduce people’s dependence on social security in combination with short part-time jobs. In regards to A3, the regulation was based on OECD conclusions that requirements to job searcher behaviour, consultations with labour authorities and participation in other work-related measures seems to be more effective for transition to work than the effects of different qualification measures. In regards to A4, the reduction in the maximum period was based on reports/research which show that the transition from unemployment increases by 30-60% when the unemployment period is nearing its end.

In regards to B1-B3, The Government’s aim was to meet the economic crisis by helping viable companies to keep their employees in a period of lower demand from the private sector. In regards to B4 (the reversal of B1-B3), the reversal was made when the government saw that the employment rates increased and the number of laid off employees fell from 2008/09 to 2010/11 in Norwegian industries where layoffs are most prevalent (e.g. the building- and construction industry). The reversal also followed OECD recommendations.

In regards to C, the ministry of labour argued that it is of great importance that immigrants acquire Norwegian language skills in order to function in the workplace and society at large, and underlined the importance of supporting initiatives that could contribute to this.

In regards to D, the reason for the repeal was to make sure that Norwegian legislation was in accordance with the EU principle of equal treatment (see above).

In regards to E, the government’s aim was to contribute to improved contact with the labour market, and better living conditions, for people who have been out of work for longer periods of time with significantly impaired earning capacity and no right to UI.

1.1.3. For each of these changes / innovations please indicate from the main SP who was in favour or supported and who was against or resisted to it, and why:

LO opposed the 2003 regulations (A). LO feared that, particularly, regulation A4, A5 and A6 could create more poverty instead of fighting it and argued that the regulations, in that respect, were antisocial. NHO, on the other hand, supported the regulations arguing that changes in the incentive-system would motivate the unemployed to look for employment and make them more capable of getting back into the labour market. Both the reintroduction of holiday pay for beneficiaries of UI (A5) and the reduction of waiting days (A6) were introduced after demands from LO to the Labour-, Centre- and Socialist left-party coalition in the government. LO did not manage to influence changes to regulation A4, but finally accepted the reduction in the maximum period under the precondition that the beneficiary would be guaranteed work or other work-related measures at the end of the period.

All changes in regulations regarding entitlement to UI during layoffs (B) followed requests from LO and NHO, (EEO Review: Adapting unemployment benefit systems to the economic cycle 2011). The social partners had received several demands regarding the need for more flexible temporary layoff regulations in downturn periods from companies and union representatives in industries affected by the financial crisis. These demands were most strongly articulated in the export-industry. The social partners argued that the new regulations would make it easier for companies to distribute the disadvantage of layoffs on a larger number of workers over a longer period of time. Both LO and NHO were against the reversal in 2012 (B4) and argued for maintenance of the 2009 rules. The argument was that current insecurity in international financial markets easily could affect Norwegian industries. Both sides argued that less flexible layoff regulations, which for example don’t permit the combination of UI and work 3 days per week, potentially could contribute to increasing unemployment in difficult financial times by discouraging both companies and workers from seeing temporary layoffs as an alternative to termination of employment contracts. The government still chose to reintroduce the old rules with an intention to reassess the regulations if the labour market worsens again.

LO supported the change in regulations that enabled the combination of UI and Norwegian language training for temporary laid off and partially employed people (C). LO argued that the measure makes it easier for immigrants to become integrated in Norwegian working life and established in the Norwegian labour market.

LO supported the repeal of the requirement for at least eight weeks of work in Norway before UI rights can be transferred from another EEA country (D). LO argued that the repeal of the old requirement was in line with the confederation’s belief that foreign workers must have Norwegian wage and working conditions when working in Norway.

LO also supported the implementation of the NAV-administered qualification program, and has argued that the measure must be strengthened in order to intensify the fight against poverty. NHO has stated that it is positive that the program contributes to bringing people back to work.

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance.

  • Coverage:

The state financed unemployment benefits apply to all workers who have had their working time reduced by at least 50%, and meet the requirement to previous income over the minimum level (see b).

  • Eligibility:

Payments are based on previous income and the beneficiary must have had an income of minimum NOK 119 000 (EUR 15 000) in the last completed calendar year, or at least NOK 227 000 (EUR 29 000) in the last three completed calendar years. The minimum income requirement does not apply to young people who have served in the army for minimum three of the last twelve months.

  • Duration:

Persons with a former average annual income under NOK 158 432 (20 895 EUR) can receive daily subsistence allowance for up to 52 weeks, while persons with former average annual incomes over this limit can receive the allowance for up to 104 weeks.

  • Replacement rates:

The subsistence allowance is estimated as 62.4% of income (income before taxation) for the previous period (the last year or the last three years). Incomes exceeding the sum of 6G (6 times the National Social Insurance Act’s base amount, in total NOK 475 000 per April 2012) is not allocating IU allowances, i.e. there is a cap on the maximum payout.

  • Financing:

The Norwegian UI system is a state financed system, and financed through taxes. Employees, self-employed and employer are paying National Insurance contributions, but the system is a “pay as you go” system, i.e. that these taxes are not earmarked the National Insurance System. The same system applies to all employees, i.e. Norway is different from the other Nordic countries with Ghent-systems.

  • SP involvement: Yes/No.

Yes.

  1. who are the organisations involved and at which level do they operate? (e.g. trade unions, sectoral or national confederations, etc)

Trade union confederations as well as employer organizations such as NHO will be active in hearings as well as in lobbying for changes of the system. The same will apply to nationwide trade unions and employer association, in particular related to issues that affect their members/industries.

  1. why are these organisations involved (legitimacy)? Is it because they are representative?

The nationwide trade unions and employer organisations represent a large number of employees and employers. Norway also has a longstanding tradition of tripartite cooperation and social dialogue in issues regarding labour market regulation and social welfare.

1.2.2. Unemployment Assistance. Are forms of UA present?

Not relevant.

1.2.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present? If yes, please highlight the factors underlying such a relationship.

Not relevant.

2. SP involvement in the UB regime

2.1. The development phase

2.1.1. In your country, did SP participate in the development phase of UB programmes over the last decade?

Yes.

2.1.2. If yes, please provide detailed information on the SP involvement in the development phase of UB regimes with respect to the following dimensions, distinguishing between UI and UA and reporting any important changes during the decade.

  • Who did take the initiative of involving SP in the design process?

When it comes to social partner participation in the development of substantial features of the UB system the last ten years, the process leading to new regulations regarding employees’ entitlements to UI during layoffs should be highlighted. Both LO and NHO were strongly involved in the development phase of the new regulations regarding employees’ entitlements to UI during layoffs (B). The two confederations’ leaders took the initiative by proposing 2 out of 3 of the 2009 regulations.

  • Which are the forms of such kind of SP involvement?

The 2009 regulations were proposed by the two confederations’ leaders in a letter to the prime minister. Both LO and NHO argued against the reversal of the 2009 rules in 2012 by responding to the government’s proposition and by sharing their views in the national media.

All the labour market confederations participate in, and respond to government hearings and function as central discussion partners for the national authorities on issues regarding development of labour market- and welfare policies.

  • In which way is/was their involvement in the policy design process legitimated/accepted?

Consultations and exchange of opinions between the government and employee- and employer organisations have traditionally been legitimate and common features of the Norwegian political system. While the Norwegian unemployment benefit system is regulated through the NSI, the temporary layoff rules are regulated through both legislation and collective agreements. This gives the confederations’ participation in the development of such regulations extra legitimacy.

  • How frequent is/was such involvement?

In 2009, the national confederations’ involvement occurred as an ad-hoc response to the demands from local companies and union representatives in industries affected by the financial crisis. In 2012, the involvement occurred in form of regular written and oral confederation responses to government propositions.

  • At what levels does/did such involvement occur?

SP involvement in the development phase of UB regimes most often occur at the national level. Regulations regarding layoffs will normally strongly involve social partners in sectors such as the manufacturing sectors and the construction sector, since the temporary layoff scheme is most often used by companies in these sectors.

  • Which are/were the effects of such involvement?

The social partners’ 2009 proposals were largely accepted by the government. Despite that LO and NHO argued against the reversal in 2012, the government chose to reintroduce the old rules, ensuring the social partners that they will reassess the regulations if the labour market worsens again.

2.2. The implementation phase

2.2.1. Distinguishing between UI and UA programmes, please describe the SP' role in accomplishing specific functions related to UB schemes (such as selecting the officials in charge of UB’ services, collecting contributions, etc).

The relevant social partners do not play any role in accomplishing specific functions related to the UB schemes. 2.3. The management phase

In Norway social partners are generally not responsible for the organisational asset behind the provision of UB. In relation to temporary layoffs companies are obliged to follow certain rules stated in collective agreements regarding valid reasons for layoffs and pre-notification of employees. Such processes will be discussed at company level.

2.3.2. Distinguishing between UI and UA programmes, please describe the role of SP in case they are engaged in the financial management of the UB funds.

Not relevant.

2.3.3. Distinguishing between UI and UA programmes, please answer to the following questions:

Not relevant.

2.4. The monitoring phase

Not relevant.

2.4.2. monitoring the SP involvement in the UB system

Is the SP role within the UB system subject to evaluation and monitoring?

No.

3. Final observations

3.1. Public debates and policy discussion:

Though the system of temporary layoffs are strongly supported by trade unions and employer organisations, labour market economists and the Ministry of labour have, on several occasions the last years, questioned whether the incentives to minimize the inactive period are strong enough (Nergaard 2010: 8). After a 10 day long wage obligation period for employer, the state covers the rest of the period. A related question is whether the system facilitates use of temporary layoffs in situations where the employee in question is more likely to quickly find new employment elsewhere than getting back to the job he/she was temporary laid off from (ibid).

3.2. Research:

Nergaard, Kristine (2010): “Temporary layoffs – saving jobs or delaying readjustments?” Peer review on “Employment measures to tackle the economic downturn: Short time working arrangements / partial activity schemes”. GHK consulting and CERGE-EI: Mutual learning programme 2010.

3.3. Other issues:

Not relevant

4. Commentary

4.1. Assessments and comments:

The relations between social partners and UB policy-makers in Norway will probably not change dramatically in the near future as the social partners’ involvement in the system is a rather uncontroversial matter. This is primarily due to longstanding traditions in the Norwegian political system, as well as to the fact that the unemployment insurance is a universal and state financed scheme and state administrated scheme. The social partners’ main aim in relation to the UB system will still be to influence policy-makers in order to protect the viability of their member companies and the rights and financial security of their member workers.

4.2. Perceived strengths and weaknesses:

The social partners’ proximity to their member companies and workers can be an asset for the shaping of UB regulations. This was exemplified in Norway during the financial crisis in 2009. Warnings about the necessity of changes in the regulations regarding UI and temporary layoffs (B) came from the grassroots of the two organizations. The state dominance in the unemployment benefit scheme – as opposed to Denmark, Finland and Sweden with so-called Ghent-systems – is uncontroversial in Norway.

Tom Erik Vennesland, Fafo

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