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MONEY

What’s caused a drop in disposable income in Norway?

Households in Norway no longer have the highest disposable income in Europe, and several factors have been pointed to as the reason for the drop.

Published: 21 February 2024 15:44 CET
Pictured is a housing development in Oslo.
Norway has seen a drop in disposable income over the last few years. Pictured is a tower block in Oslo. Photo by Emmanuel Appiah on Unsplash

Norway is the European country with the sixth highest disposable household income, figures obtained by the Norwegian newspaper Aftenposten from the European data agency Eurostat show.

This is a significant fall for the Nordic country, which was top of the table as recently as the beginning of 2022. Disposable income in Norway has actually fallen from 8,337 euros per month to 7,475 euros between the start of 2022 and the end of 2023.  

This decline has seen Norway overtaken by Belgium, Denmark, Germany, the Netherlands and Austria.

READ ALSO: How much money do you need to earn in Norway for a good life in 2024?

Several factors have been pointed to as reasons why Norway has seen a drop in disposable income. Roger Bjørnstad, chief economist for the Norwegian Confederation of Trade Unions (LO), said the drop was due to rising interest rates.

“Norwegian households have record debt in a housing market that has been under pressure for decades. No other country has experienced such a sharp decline in household incomes,” he told Aftenposten.

For the purpose of the figures, disposable income was defined as gross income minus tax and interest expenses.

Norway’s central bank has implemented 14 interest rate hikes since 2021 to try and curb inflation. The higher interest rates had made loan and mortgage repayments much more costly, especially for those who borrowed when rates were set to the historically low value of zero per cent.

However, Øystein Dørum, the chief economist at the Confederation of Norwegian Enterprise (NHO), pointed to the exchange rate as the reason for the drop.

As the krone has become weaker against the euro, then those paid in euros see a boost to their disposable income, while those paid in euros lose out even if their wages increase.

Norway’s krone slumped against almost all other major currencies in 2023, reaching near-historic lows against the euro, pound and the dollar.

In addition to skewing measurements between Norway and countries that use euros, the weak exchange rate was seen as one of the key drivers of inflation in Norway due to it pushing up the cost of imported goods.

As Denmark’s krone is pegged to the euro, it has also increased significantly in value against its Norwegian counterpart – playing a factor in Norway being leapfrogged by its neighbour.

The weak krone was a reason the central bank in Norway continued to hike interest rates even as inflation slowed.

Norwegian wages could also be a factor in disposable income in the country slipping. Real wages, which account for how much salaries rise in line with inflation, fell slightly in Norway last year.

Despite average wage increases of 5.3 percent, real wages fell by 0.2 percent due to high inflation.

A previous study from Norway’s national data agency, Statistics Norway (SSB), predicted that by the end of last year, workers in Norway would only be marginally better off than they were in 2015.

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MONEY

EXPLAINED: How wealthy is the ‘average’ Norwegian? 

Norway is known for its high wages and stable economy. New figures have revealed the wealth of the average resident in the Nordic country. 

Published: 23 April 2024 15:50 CEST
EXPLAINED: How wealthy is the 'average' Norwegian? 

High salaries go hand in hand with the high cost of living in conversations about Norway.

However, other factors, such as high homeownership rates, indicate that there is plenty of disposable income for locals to save and invest in their futures. 

Previous studies have also suggested that Norwegians are the seventh wealthiest nationals in the world. 

Norway’s national data agency, Statistics Norway, has compiled its own set of figures indicating that the average Norwegian household has a net wealth of around 3.8 million kroner. 

Net wealth accounts for everything a person owns, including property, stocks, or cash, minus any debts or liabilities. 

The vast majority of this wealth was derived from the estimated value of property. This alone gives the average Norwegian an estimated wealth of 3.74 million kroner. 

READ ALSO: How much does an apartment in Norway cost?

The value of second homes was included, which skewed things as only around 10 percent of households owned a secondary residence. 

The average price of a home in Norway was 4.5 million kroner in March of this year, and house prices have increased substantially in recent years. 

Savings, cash, stocks and other capital accounted for 1.72 million kroner, giving Norwegians an average wealth of 5.46 million kroner. Average debts of 1.68 million kroner gave Norwegians an average net wealth of 3.8 million kroner.  

The figures from Statistics Norway were obtained using figures from tax returns for 2022, which were submitted in 2023.  

Those aged between 67 and 79 years old were the wealthiest generation in Norway on average. This is partly because they have more capital than most other groups and more expensive property. 

However, the most significant factor is the lower levels of debt. They had half the debt of the next richest group, those aged between 55 and 69. 

Younger age groups weren’t as wealthier as they had much higher debts and lower capital. 

Still, Norway’s wealthiest individuals significantly boosted the average. When using the median, the average Norwegian household had a net wealth of just under 2 million kroner. 

When the median was applied to capital, the figure was 339,300 kroner compared to the average of 1.76 million kroner. 

The large difference in capital was attributed to Norway’s wealthiest individuals significantly pulling up the average. 

“This is mainly due to large fortunes in shares and securities, where a few own very much. Shares and other securities and share savings accounts are assets with a median value equal to zero, which indicates that these are not important asset items for most households,” the report said. 

Money kept in the bank was still important for most residents of Norway, though. The median value of bank deposits in Norway was 215,000 kroner, compared to the average of 600,000. 

The gulf between the average value of property owned and the median was roughly 500,000, with the median being 3.25 million kroner. 

Furthermore, Norway’s median debt level was around 860,000 kroner compared to the average of 1.67 million kroner. Around 85 percent of Norwegian households were in some form of debt. 

Significant differences also exist between Norway’s wealthiest and poorest residents. Residents belonging to the country’s poorest ten percent had an average net wealth of almost minus 1 million kroner. 

Meanwhile, Norway’s wealthiest ten percent had a net wealth of 19 million kroner. The top 50 percent also owned considerably more than the bottom 50 percent. 

“Despite the former comprising 1.27 million households, while the latter comprises approximately 25,000 households, the bottom 50 percent own only 4 percent of the total net worth, while the top 1 percent owned as much as 22.3 percent in 2022,” the report read. 

There was also significant variation in wealth depending on household type. For example, a single mother or father with a child aged between 6 and 17 had a net wealth of 2.24 million kroner, compared to a couple with children of the same age with an average net wealth of 5.12 million kroner. 

Typically, households with more than one person had more money as more than one wage earner likely lived at the address. 

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