Government launches measures to tackle economic crisis

In February 2009, the Norwegian parliament adopted an amended package of measures to address the negative effects of the financial crisis on the labour market. The new provisions follow measures already introduced to tackle the crisis in the financial services sector. Altogether, the whole package amounts to about NOK 20 billion (€2.25 million) and either partly or fully takes into account the demands put forward by the social partners.

On 26 January 2009, the Norwegian government announced a package of measures aiming to safeguard existing jobs and help create new ones. Subsequently, on 13 February, the parliament (Stortinget) adopted a slightly adjusted package of measures. Adjustments to the original proposals were made partly as a result of calls from the social partners. Overall, the financial framework of the package amounts to about NOK 20 billion (about €2.25 billion as at 12 March 2009), of which NOK 16.75 billion (€1.9 billion) relates to direct costs connected with implementing new measures and NOK 3.25 billion (€366 million) to tax cuts for businesses.

Measures to safeguard construction industry

The measures include both concrete provisions directed at specific industries, as well as more general measures. In order to prevent the onset of and expected decline in employment in the construction sector, the government has proposed to increase funds by about NOK 3.6 billion (€405 million) for the operation, maintenance and construction of rail and road networks. The government funds allocated to the municipalities is to be increased by NOK 6.4 billion (€720 million), of which around NOK 4 billion (€450 million) will be used to modernise existing constructions and build new public buildings. An additional NOK 2.8 billion (€315 million) has been allocated for construction projects in the public sector at national level.

Tax measures

The package also contains a number of other components. Tax cuts for businesses are to be introduced through an indexation mechanism by which taxes are adjusted to fluctuations in business cycles. These tax reductions will enable companies with a taxable surplus in the two preceding years (2007 and 2008) to reverse deficits (not exceeding NOK 20 million (€2.3 million)) in 2008 and 2009. In addition, depreciation rates on investments are also to be increased.

New rules for temporary layoffs

The rules pertaining to temporary layoffs will be changed by 1 April 2009. The system of temporary layoffs is an alternative to dismissals, and enables the employer to quickly reduce the workforce at shorter notice than is the case in relation to ordinary dismissals. The new regulations involve a reduction – from 10 to five days – in the period during which the employer is under an obligation to pay wages to the laid-off employees. After five days, workers who have been temporarily laid off will start receiving unemployment benefit from the Norwegian Labour and Welfare Administration (Arbeids- og velferdsforvaltningen, NAV). In addition, the maximum period during which laid-off workers may receive unemployment benefits – that is, before the employer must take the employee back or resort to dismissal – will be increased from 30 to 52 weeks. Other aspects of the regulations pertaining to layoffs will also be reviewed.

Employer organisations have been calling for more flexible layoff rules, including changes in relation to the current provision that makes entitlement to unemployment benefits conditional on the worker not being employed for more than 50% of normal working hours. Trade union organisations are calling for the introduction of new rules allowing companies to make reductions in the working hours of all employees rather than having to lay off a few.

Other measures to counteract negative effects

In order to maintain the current number of apprenticeship places, funds for apprenticeships are to be increased by NOK 185 million (€20.8 million). Additional funds are also being allocated to NAV. Some 6,000 new on-the-job training places are to be created, and 320 new labour market service positions have been established within NAV. Increased funding will also be made available for a project seeking to integrate immigrants into the labour market, as well as to strengthen the efforts of the Labour Inspectorates (Arbeidstilsynet) to prevent social dumping.

In addition to employment enhancing measures, the government has also implemented other measures to counteract the negative effects of the financial crisis. In October and November 2008, the financial measures introduced by the national authorities focused mainly on relief efforts for the banking and financial services sector, the municipal sector, and to address the export industry’s need for loans and credit. On 8 February 2009, further measures were introduced to make it easier for businesses and households to access loans and to stabilise the financial markets.

Commentary

The government’s crisis package has taken into account the demands and requests of the social partners on both sides. The Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) has been calling for a variety of measures which aim to: stimulate the credit system, increase funding for building and construction projects, raise the number of on-the-job training places and amend the rules regarding layoffs. The Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) has also outlined a list of practical measures – these include efforts directed at new building projects, transport, research and development, the environment and employment.

Neither LO nor NHO were entirely satisfied with the package originally presented by the government. The organisations therefore joined forces to demand that the rules on layoffs be amended, the ceiling placed on tax credits be raised, and depreciation rates on investments be increased. All of these demands have been fully or partially met by the parliament in its treatment and subsequent approval of the emergency package.

Kristin Alsos, Fafo Institute for Applied Social Science

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