Norway: labor and the welfare state

Speaking at the research meeting of the ISSA, the Secretary of Labor of Norway makes some points:

1. Norway is currently one of the leading countries in terms of "trust" among the population.
2. Oil wealth is not enough to finance the welfare system. Actually, the total work effort is the main determinant of the sustainability of the welfare state. Labor supply will decrease 7% towards the middle of the century due to aging, but the Government of Norway thinks that policies to raise labor supply are being successful. They think that the more realistic path is that for decades the labor participation rate can increase, because the average hours per worker will not increase.
3. To reduce benefits is not considered necessary to raise participation rates. Rather, if the welfare system is reliable, the population will be more businesslike, more trusting. On the other hand, a policy to graduate benefits may be needed. The system (as it is in most of the world) is "all or nothing": If someone receives a disability pension or sick pay, he receives 100% or nothing. There has been a massive increase in child care services, and to improve the quality is seen as critical to raise labor supply.

 

 

In this graph we see some interesting things: Norway has taken advantage of the boom in the price of oil to reduce public debt significantly (this is the inverted-U seen from 2000 to 2012). They are achieving in effect a raise labor participation (which is something that is not happening in general in the European Community). Norway is not in the community and does not use the Euro, and they have maintained a more stable exchange rate (they have had the revaluation from 2000 to today, but the exchange rate is approximately the same as in the 1990s).