Analysis: Sitting on too much money, Norway risks going off course – by Balazs Koranyi and Victoria Klesty (Reuters India – March 24, 2013)posted in Canadian/International Media Resource Articles, Oil and Gas Sector-Politics and Image |
(Reuters) OSLO – Middle East-style oil wealth combined with a generous Nordic welfare model is slowly throttling big chunks of Norway’s economy, threatening western Europe’s biggest success story.
On the surface, Norway is the envy of the world: growth is strong, per capita GDP has exceeded $100,000 and the nation sits on a $700 billion rainy day cash reserve, or $140,000 per man, woman and child.
But it may just be too much money as Norwegians, more keen on leisure and family life are working less and less.
Immigration is not filling the gap in the skilled part of the workforce, so productivity is stagnating, wages are surging and firms are pricing themselves out of their own market.
“Oil is a metaphor for winning the lottery,” said Ivar Froeness, a sociology professor at the University of Oslo. “Affluence has slowly crept into society… people just don’t really notice it because it’s been so gradual.”
“These days more people leave Oslo on Thursday afternoon than on Friday, taking long weekends,” he said. “We may take for granted that we have a house and a cabin in the mountain, and maybe another house on the beach.”
Wage costs are up 63 percent since 2000, about six times more than in Germany or Sweden, while the employment rate, adjusted for part time work, is 61 percent, below rates anywhere in the Nordics and even below Greece, the central bank says.
Still, unemployment is a barely visible 3 percent as more prefer part time work.
“Why should I work more when I don’t have to?” said Elise Bakke, 36, who recently cut her work day at a major telecom firm to 6 hours.
“Maybe it’s luck, maybe we earned it, it doesn’t really matter. We have the money to live the Nordic life: go to the cabin, ski, bike, spend time with the children.”
The government recently warned that unless working hours are increased by 10 percent over time, the state will eventually start eating into its savings. The central bank also warned that the welfare model is simply encouraging people to leave the labour market.
“The number of working hours for full time employees in Norway have fallen by 270 hours a year since 1974,” says Jostein Hansen, director of employment policies at Norwegian Hospitality Association. “Norwegians should follow Iceland’s example and work 100 hours more a year.”
OIL UNDER THREAT
The oil sector, the source of the problem, is also becoming a victim of its own success.
Aker Solutions (AKSO.OL), the nation’s top oil services firm, will hire 4,000 engineers this year but only a third will be Norwegians.
For the rest of this article, please go to the Reuters India website: http://in.reuters.com/article/2013/03/24/norway-oilwealth-idINDEE92N03O20130324