Read news from:
Austria
SHARE
COPY LINK
For members

WORKING IN NORWAY

Will wage increases from strike deal lead to higher prices in Norway?

This week the parties in the wage settlement negotiations agreed on a framework to increase wages by 5.2 percent. But it might not all be good news as a prominent Norwegian economist has warned.

Published: 21 April 2023 17:11 CEST
Wallet
On Thursday, the unions rejoiced over what they deemed a significant victory, but economists swiftly cautioned about the possible negative impact of the deal that ended Norway's general strike. Photo by Nicolas J Leclercq on Unsplash

A four-day general strike in Norway’s private sector ended on Thursday afternoon after the parties in the labour conflict reached an agreement.

The Norwegian Confederation of Trade Unions (LO) and the Confederation of Vocational Unions (YS) represented the employees, while the Confederation of Norwegian Enterprise (NHO) represented the employers.

The two sides agreed on a framework of 5.2 percent wage growth, with a large proportion of this given in general supplements.

While the unions were celebrating what they called a “historic win,” economists were quick to warn about the potential adverse effect of the deal on inflation.

A wage-price spiral in the making?

The agreement between the unions and businesses in this year’s wage settlement could lead to price pressure, chief economist Harald Magnus Andreassen at Sparebank 1 Markets told the news bureau NTB on Friday.

“If we set aside the industry and the power producers, then the rest of the business world is not doing so well. The increased prices were less than the rise in costs last year,” Andreassen said.

With wage growth of 5.2 per cent, these companies will be clearly pressured to increase prices, according to the economist, who believes the business world outside of industry and energy sectors will struggle with this year’s wage settlement.

Furthermore, the chief economist warned that the combination of the wage settlement and increased productivity could lead to inflation over time being well above 2 percent, which is the inflation target of Norway’s central bank (Norges Bank).

Other economists have also warned of the danger of a wage-price spiral forming, as rising wages put upward pressure on prices and inflation.

What will happen with interest rates?

In the run-up to the 2023 wage settlements talks, there has also been some discussion in Norwegian media on whether the outcome of the negotiations could – indirectly – lead to higher interest rates down the road.

Andreassen thinks the settlement will not lead to higher interest rates than what is already planned by Norges Bank.

“Norges Bank assumed wage growth of 5.1 percent. So this does not change much for them; Norges Bank will not reassess the outlook for wage and price growth (based on this outcome),” Andreassen said.

He pointed out that it is difficult to say anything for sure about inflation and interest rate trends, but he encouraged people to be aware that interest rates will rise.

“We could very well get a mortgage interest rate of around 5 percent. Adjust your personal finances today, and expect interest rates to rise. Use less money and pay down more debt. For many who have a lot of debt today, that is obviously the most sensible thing to do,” he said.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

WORKING IN NORWAY

Why overqualified foreigners in Norway struggle to find work

Norway is one of the worst countries in Europe when it comes to overqualified foreign labour being stuck in jobs that don’t make the best use of their skills, a new analysis has found. 

Published: 23 April 2024 11:38 CEST
Why overqualified foreigners in Norway struggle to find work

Norway is one of many European countries struggling with “brain waste”, which is where immigrants struggle to find suitable full-time work or are overqualified for their roles due to their education not being recognised. 

The findings are part of an investigation by Lighthouse Reports, the Financial Times, El País and Unbias The News that found that most European countries fail to provide good job opportunities to educated foreigners – potentially at the cost of their labour forces and economies. 

“While the results differ slightly between labour market outcomes, a consistent pattern emerges: immigrants lag behind natives everywhere, but brain waste is worst in Southern Europe, Norway, and Sweden,” the report read. 

Some of the metrics used to measure brain waste were the proportion of foreign residents who were overqualified for their role, underemployed (meaning they weren’t working as much as they could), or unemployed. 

In Norway, 27.6 percent of university-educated Norwegians were overqualified for their roles, according to the report. Meanwhile, just over half of the university-educated immigrant population were overqualified for their job. 

This figure made Norway one of the countries with the largest raw difference in the percentage of the native population being overqualified compared to the immigrant population. 

Furthermore, the number of immigrants who were underemployed, 3.9 percent, was more than double the rate of Norwegians in the same position. 

The investigation used figures from Eurostat between 2017 and 2022. 

Norway’s Directorate of Integration and Diversity has recently investigated the obstacles facing the country’s foreign population in the workplace. 

Its report found that immigrants faced barriers both when trying to progress their careers or simply trying to get their foot in the door. 

Immigrants working in Norway were also more likely to leave working life earlier or lose their jobs. 

READ ALSO: The biggest barriers foreigners in Norway face at work

Factors such as working in temp positions, physically taxing occupations, and industries exposed to economic turbulence contributed to this. 

However, a lack of Norwegian proficiency, a lack of relevant skills and poor health also played a part. 

Discrimination prevented immigrants from entering the workplace and affected those who were employed. 

“More and more people in the population have contact with immigrants in working life, and most experience that contact as mainly positive. At the same time, one in four immigrants has experienced discrimination in the workplace, and this discrimination can occur in different forms and in different working situations,” the report read.

The directorate also said that most companies didn’t have concrete measures to try and promote diversity.

One factor holding back immigrants in Norway was their Norwegian language skills, the report said. 

While Norwegian skills were moving in the right direction, less than half of foreigners in the country had advanced Norwegian language skills (level B2 according to the European framework) after completing language training.

Meanwhile, Lighthouse Reports’ investigation found that brain waste in Norway varied from profession to profession. For example, Norway was one of a number of countries where college-educated immigrants were more likely to be doctors. 

Immigrants with a university education in IT-related subjects were also far less likely to be overqualified. There, the difference between migrants being overqualified compared to natives was just 2 percent. 

However, physical and engineering science technicians, engineering professionals (excluding electrotechnology), and those who have studied education at a university level were the immigrant groups in Norway most likely to be overqualified. 

One thing to note is that immigrants who obtained their qualifications in Norway were far less likely to be overqualified than those who got their degrees outside of Norway, even if they still fared worse than natives overall. 

SHOW COMMENTS