The Norwegian economy

- Benefits of wage coordination and

social dialogue

Knut Thonstad,
Department for Economic and Social Affairs
The visit from Poland
5 June 2016
The Confedration of Trade Unions (LO)

• Founded in 1899
• 22 National Branches in Industry, Service, Municipalitites
and Central government.
• 895 000 members.
• The board (4 from leadership and 11 from major branches)
meet every week.
• The representative committte – from branches and regions
decides on wage strategy.
• The national level is strong. One of few european unions
where the national level is responsible for wage bargaining.
• The Basic agreement between LO and NHO (first time in
1935) is the «constitution» of the Norwegian labour market.
 The Norwegian economy

4 Important facts:
 Population 5 million, increase 1,4 pct. a year, 3/4
is immigration, mainly work-related from EU.
 Small open economy: Exports 40-50 pct of GDP
(petroleum 2/5 of exports). Imports 30-35 pct.
 Rich in resources – Petroleum, fish, hydro power,
forests and metals.
 Member of the European Economic Area
(integrated product-, service-, capital- and labour
market with the EU).
 Norwegian/nordic model

Denmark, Finland, Sweden and Norway

have:
 3 highs: Tax, public services and
transfers
 A regulated labour market with important
role for trade unions. High level of
coordination of wage bargaining. Most
centralized in Norway
 Small income differentials. Low
unemployment.
Rate of unemployment

Kilde: Harmonisert ledighetsrate i pst fra OECD. *2012: Jan.- Nov.

6. jul. 2019 side 5

High employment
15-64 years per cent, 2011

Kilde: OECD Employment Outlook 2012

06.07.2019 6 Liv Sannes

 Women:
Share working %
15-64 years, 2011

Kilde: OECD Employment Outlook 2012

Earnings disparities

7 The relationship
6 between decile 1 and
decile 10 (gross
5
wages)
4
3
2
1
0
k

rtu y
lg s

Ire ce

Po UK
Ne Sw ly
er n
Fi ay

Es via

a
l
Fr m

er d
nm d

La d
ga
ar

Po an

ni
Be nd
th ede

n
G lan
De lan

Ita

iu
an
rw

la
t
to
m
la
n
No

Eurostat, Statistics in focus

7/2006

8
High wage level – high productivity

Labour productivity 2012

GDP per hour worked, PPP USA=100
120
110 115
111
100
90 94
91 93 93
80 85
83
70 76 76 78
73
60 65
50 54
53
40 44
30 37
20
10
0

source: OECD, LO for correction for

oil
The labour market model

- Ambitious employment policies/active labour

market measures (Goal: full employment)
- Strong employers’ and employees’
organisations
- Central institutions for wage formation and
conflict solutions
- Tri-partite cooperation

- High employment rates

- Low unemployment rates
- Low wage disparities
10
Benefits of coordination
The possiblity of taking account of
the situation across sectors and the
general economy
Makes it easier to achieve full
employment
 Background

• Export sector wages must reflect

competitiveness.
• Wages in the rest of the economy should not
develop very differently. Wage coordination with
export industries as anchor (sectoral agreement
and wage drift combined).
• Coordination gives the Confederation political
influence and make unemployment , distribution
and government finances and policies major
concerns.
 Parallell wage growth

Manufacturing (NHO)

Municipalities Central government

 Capital income and wage share, Manufacturing
100
90 Capital share
80
70
60
50
40 Wage share
30
20
10
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Kilde: TBU/SSB
 Coordinating mechanisms

• High union density and bargaining coverage

• Moderate trade union rivalry
• Coordinated/centralized decisions in main organisations
• Parallel terms of agreements (two years)
• Tripartite committee on economic data
• Strong position of state mediator
• Labour court
• Compulsory arbitration
• Dialogue between employers and unions,
participation in public committees
Source: OECD and Fafo
 EU and the labour market

EU regulations may interfere with national labour market

regulations.
In 2004 much of Eastern Europe joined EU. 2005-2013
employment in Norway increased by 15 per cent, 60 per
cent was immigration, mainly from Europe.
Numerous examples of low pay/ breaches of regulations.
Rapid increase in agencies for temporary employment,
undermining fixed employment, and destroying employer-
employee –relationship. In Oslo half of construction
workers are from agencies.
 Policies

Organize new groups

Follow up ILO 94 in public purchases
Follow up on agencies.
Making wage agreements legally binding for a whole
sector when necessary.