Abstract
Selected Issues
Gender at the Frontier: Policies to Underpin High-Quality Labor Supply in Norway1
This chapter focuses on how to underpin long-term growth in Norway through high-quality labor supply Norway ranks first globally in female economic participation and opportunity; but women and men face very different labor market challenges, making a gender perspective useful to explore which policies can be effective at the frontier of gender equality2 While female employment rates are high, considerable potential remains to increase full-time work incidence and foster women’s upward mobility to reduce persistent wage gaps. There is also considerable potential to reintegrate men, whose employment rates have declined after the global crisis and not recovered, and increasing numbers of youth who have been unable to gain a solid foothold in the labor market.
A. Introduction: Macro-Criticality of Gender and Gender-Divergent Labor Market Trends in Norway
In the long term, there are two factors that determine how quickly an economy can grow: the supply of labor and labor productivity.
Øystein Olsen, Norges Bank Governor, February 2017
This chapter focuses on labor supply. It approaches the topic from a gender perspective for two reasons.
1. First, higher gender equality in labor markets can have several favorable macroeconomic implications. While Norway’s labor market is among one of the most gender equal worldwide, complete equality is still a way away. Potential benefits from fostering equality further are:
Higher output. Elborgh-Woytek et al. (2013) document the positive link between gender equality and GDP per capita. They find that raising the female labor force participation rate to country-specific male levels would, for instance, raise GDP in the United States by 5 percent, in Japan by 9 percent. While in Norway, female participation rates already stand close to those of males, the analysis here shows that increasing female full-time work could considerably increase earnings (Section B).
Higher productivity. Christiansen et al. (2016b) show on a large dataset covering two million firms in 34 European countries that firms with a larger share of women in senior positions have higher profitability, which may support corporate investment and productivity. They find that an additional woman in senior management or on the corporate board is associated with an 8- 13 basis points higher return on assets. However, more mixed results from previous literature suggests that effects can vary by country and studies specifically for Norway have been less sanguine (Section B). At lower levels of organizations, greater gender diversity can improve productivity by increasing the heterogeneity in values, beliefs, and attitudes, resulting in more creativity and critical thinking (Lee and Farh 2004).
Lower volatility. Many studies have suggested that female executives lead to improved corporate governance through less risky financing and investment decisions, less aggressiveness in pursuing tax avoidance, more conservative accounting, and less equity-based compensation (Adler, 2001; Khan and Vieito, 2013; Huang and Kisgen, 2013; Francis et al., 2014)
Lower inequality. Female labor force participation can compensate for the negative impact of higher inequality on growth. Grigoli and Robles (2017) find that inequality reduces growth for countries with Gini coefficients higher than 28. Higher-than-average female labor force participation can increase this threshold and thus help avoid that inequality retards growth. For very equal countries such as Norway with Gini levels in the mid-twenties, this suggests that higher female participation could help safeguard growth, even if inequality were to increase.3
2. Second, labor market performance of females and males in Norway has varied considerably during the last decade. Participation rates are high in Norway, but have been declining during the last decade. Looking at gender here is important: The decline has been almost exclusively driven by men, was caused by the global crisis, and a rebound has remained elusive. For females, their earnings remain at only two-thirds those of males for two main reasons. First, women still face notable wage gaps, despite Norway’s considerable efforts to promote equality. Second, while women remain as highly integrated into the labor market as before the crisis, incidence of part time work is high. This may be driven by preferences for leisure at an income level as high as Norway’s, but there could be potential to increase hours worked to the extent that part-time preference is driven by policies and incentive structures. Finally, youth are having more trouble integrating into the labor market, and although the outlook is brightening, boys are struggling more than girls.
3. The chapter proceeds as follows. Sections B through D evaluate the developments in Norway’s labor market in comparison with peer countries, focusing in turn on women, men, and youth. Section E focuses on labor market policies and how they could be adapted to further enhance equality and labor market performance. Section F concludes.
B. Females: High Part-time Work and Persistent Wage Gaps
Employment Rates and Hours Worked
4. The gap in employment rates between females and males has declined, but due to falling male employment. The decline in male employment rates—at 5 percentage points since 2000—outstripped the 1 percentage point decline in the female rate over the same period. Among peer countries, only Denmark and the United States experienced similar developments. The decline in employment gaps has been broad based across ages; gaps increased only among the oldest cohorts as Norway has been more successful in extending the working lives of males more than females among the baby-boomer generation. However, in the youngest age groups, female employment is now as high or higher than that of males. On average across all ages, the female employment rate is 5 percentage points lower than that of males.
5. Female employment rates have stagnated in Norway. (Figure 1). On the broadest available and preferred measure covering the 15–74 year-old population, the female employment rate stands at 65½ percent, second only to Iceland among advanced country peers. Female employment rates increased by some 3 percentage points during the 2000–08 period, but these gains were wiped out by the global crisis. While such a pattern has not been uncommon among peer countries, Norway also was among a smaller group of countries where female employment continued to gradually decrease further after the crisis.
Norway: Developments in Female Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Developments in Female Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Developments in Female Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
6. A simple regression analysis is useful in benchmarking Norway’s performance in female employment rates to that of peers. The regression relates the 2000–15 change in the employment rate to the initial employment rate in 2000. The analysis shows that advanced countries with low initial employment rates managed to boost those, while the opposite is true for countries with high initial employment rates, such as Norway.
7. Female employment performed slightly worse than may have been expected based on peer experiences and accounting for the initial high employment levels. Norway places slightly below the regression line, suggesting that it performed worse than expected based on peer experiences (Figure 2). If Norway had performed like its peers during 2000–15 on this metric, its female employment rate should have increased by 0.8 percentage points. However, Norway’s female employment rate declined by 1.2 percentage points, resulting in a 2 percentage point underperformance. However, developments in countries with high employment rates were quite heterogeneous. Among countries with high female employment in 2000, Norway did perform better than Denmark and the United States, but lagged Switzerland (considerably) and its Nordic peers Sweden and Iceland (slightly).
Norway: Benchmarking Progress in Female Employment Relative to Peers
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Benchmarking Progress in Female Employment Relative to Peers
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Benchmarking Progress in Female Employment Relative to Peers
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
8. Norway’s underperformance came during the post-crisis period, while it did better than expected in the pre-crisis period. Repeating this regression analysis separately for the pre- and post-crisis periods shows for the broad 15–74 year age group, that Norway outperformed peers by about 1 percentage point during 2000–08. However, it did some 3 percentage points worse than peers during and after the crisis. This post-crisis underperformance extends across all age cohorts.
9. Employment of young and some prime working age women was most negatively affected by the crisis. While the youngest females (15–24) were very negatively affected across countries, the impact in Norway also extends strongly to the next older 25–29 cohort. Among women aged 45–54, the employment rate held steady, but Norway did not manage to boost their participation as peers did. Meanwhile, among older working women (as well as men), Norway matched the advances of peers closely, partly thanks to the 2011 private sector pension reform which increased incentives for continuing to work.
10. Despite similar employment rates, women’s earnings in Norway are 30 percent lower than those of men. The overall earnings gap is about 5 percentage points higher in Norway than among most Nordic peers. This gap is driven in broadly equal shares from lower wages, to be considered later, and lower work input. The latter is mainly driven by less hours worked per female worker, while the difference in male and female employment rates is a minor factor.
Gap in Female versus Male Earnings by Components, 2014
(Percent of male earnings)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.Note: Interaction effects between hours and pay are attributed proportionally. Positive employment rate gaps result because a higher share of males than females is employed.Gap in Female versus Male Earnings by Components, 2014
(Percent of male earnings)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.Note: Interaction effects between hours and pay are attributed proportionally. Positive employment rate gaps result because a higher share of males than females is employed.Gap in Female versus Male Earnings by Components, 2014
(Percent of male earnings)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.Note: Interaction effects between hours and pay are attributed proportionally. Positive employment rate gaps result because a higher share of males than females is employed.
Hours Worked, 2014
(Average paid hours per month)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat.Hours Worked, 2014
(Average paid hours per month)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat.Hours Worked, 2014
(Average paid hours per month)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat.11. Lower hours worked among women are largely driven by a higher incidence of part-time work. (Figure 3). The incidence of part-time work overall in Norway, at 27 percent, is slightly higher than the OECD average and higher than all other Nordic countries, although it has been gradually falling in favor of full-time work over the last decade as child care has become more universal and easily accessible. Two-thirds of part-time workers are women, and although this fraction has been declining, it is still higher than in most other Nordic countries, where it stands around 60 percent. The declining trend is likely to continue as older women, among whom part-time work is more common, retire. Apart from part-time work, the number of hours worked is reduced by a relatively short work week, including for full-time workers of both genders, and high absenteeism (Section E).
Norway: Part-time Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Part-time Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Part-time Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
12. Incentivizing female part-time workers to work more hours holds potential to increase earnings and output. An important caveat is that more strongly than in other countries, part-time work in Norway seems to be a choice of the worker. Only about 6 percent of Norwegian part-timers state that they are involuntarily working part time, much less than in peers and other Nordics. However, there is also the possibility that some part-time workers are not working more hours, because there are disincentives to going full-time, which could be lessened by policy changes.
13. For part- to full-time converts, the increase in earnings could be even larger because full-time compensation per hour is higher. In Norway, this wage gap between part- and full-time work is above 10 percent for females and close to 20 percent for males. It also rises across age cohorts. Some studies suggest that such a wage penalty is often associated with part-time jobs in exchange for providing more flexible hours, opportunity for telework, or limited travel (e.g., Bertrand et al., 2010). However, also part-time work is not a possibility in many high-paid professional and managerial jobs, in which a larger number of working hours is necessary given the indivisibility and complexity of the task.
14. Two simple calculations are illustrative in quantifying possible macroeconomic effects of increasing female full-time work.4 Both of the calculations are inspired by Figure 3. The first supposes that incidence of female part-time work were reduced from two-thirds to 60 percent—the level observed in Finland, Sweden, and Denmark—by converting female part-time workers to full-time workers.5 The second calculation supposes that incidence of part-time work would be reduced by one third, from 27 to 18 percent in Figure 3, to reach the levels of Sweden. Again, this would be achieved by shifting female part-timers into full-time employment. Coincidentally a shift of this magnitude would also result in full equality in part-time work of males and females; i.e., the proportion of workers of both genders that are in part-time work would be equal.
15. The two calculations show that resulting economic impacts would be sizable—and suggest even incremental changes would have a notable impact. (Table 1). Scenario 1 would expand earnings by 3.8 percent. Most of this effect is driven by the longer hours worked (2.9 percent), but also the increase of hourly compensation linked to moving to full-time employment has an impact (0.5 percent), with the interaction of the two effects accounting for the remainder. In the more ambitious Scenario 2, the overall effect would come close to 10 percent of GDP. Based on the 57 percent labor share observed in mainland GDP in 2015, Scenario 1 suggests that GDP could increase by over 2 percent. In Scenario 2, the GDP increase could exceed 5 percent.
Scenarios Illustrating Macroeconomic Impacts of Expansions in Female Full-time Work
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Th e comparable actual 2015 figure is 40.4 percent.
Scenarios Illustrating Macroeconomic Impacts of Expansions in Female Full-time Work
| Gain in Earnings (percent) | Gain in mainland GDP (percent) 1/ | Females’ earning (percent of total earnings) 2/ | ||||
|---|---|---|---|---|---|---|
| Total | due to hours worked | due to higher full-time wages | Interaction | |||
| Sc. 1: Reduce female part-time incidence to 60 percent | 3.8 | 2.9 | 0.5 | 0.4 | 2.2 | 42.6 |
| Sc. 2: Reduce incidence of part-time work by 1/3 | 9.6 | 7.1 | 1 | 1.4 | 5.5 | 45.6 |
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Th e comparable actual 2015 figure is 40.4 percent.
Scenarios Illustrating Macroeconomic Impacts of Expansions in Female Full-time Work
| Gain in Earnings (percent) | Gain in mainland GDP (percent) 1/ | Females’ earning (percent of total earnings) 2/ | ||||
|---|---|---|---|---|---|---|
| Total | due to hours worked | due to higher full-time wages | Interaction | |||
| Sc. 1: Reduce female part-time incidence to 60 percent | 3.8 | 2.9 | 0.5 | 0.4 | 2.2 | 42.6 |
| Sc. 2: Reduce incidence of part-time work by 1/3 | 9.6 | 7.1 | 1 | 1.4 | 5.5 | 45.6 |
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Th e comparable actual 2015 figure is 40.4 percent.
Gender Wage Gaps
Stylized Facts
16. While wage gaps in Norway are modest, there may be potential to learn from certain peer countries regarding how to accelerate further narrowing. Gender wage gaps in Norway narrowed rapidly before 2000; since then further progress has been very gradual. Measured at the median wage, the gender wage gap in Norway was 7 percent in 2015, down from 10 percent in 2000. This reduction was broadly in line with peers, which during the same period experienced a 4 percentage point reduction—but many from higher initial levels. Certain peers achieved especially large reductions in wage gaps. They include Belgium during the past 15 years, where legislative action and continued focus in the political debate bore fruit in a 10 percentage point reduction of the gap (Box 1). New Zealand achieved a similar-sized reduction during the 1990s.6
Gap in Median Wages
(Percent of Male Median Wage)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: OECD.Gap in Median Wages
(Percent of Male Median Wage)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: OECD.Gap in Median Wages
(Percent of Male Median Wage)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: OECD.17. Wage gaps are higher for full-time workers. (Figure 4). Full-time workers recorded a wage gap of 12 percent in 2015, while that of part-time workers was small at 0.8 percent on average. As a result, the analysis here focusses more strongly on full-time employment.
Measures to Reduce the Gender Pay Gap in Belgium
The Belgian case is of interest to Norway, because some structures of the labor market are similar. For instance, the incidence of part-time work is on par with that of Norway at slightly below 30 percent. The success in Belgium has come despite very high female representation among part-time workers (Figure 3). The latter is important, as part-time work often carries a wage penalty compared to full-time employment, which can work in the disfavor of women.
Attention to gender wage gaps was significantly stepped up in Belgium around 2000. The efforts included an evaluation committee, on which social partners were represented. It devised a manual of gender-neutral job classifications which became the obligatory basis for collective labor negotiations in 2008. Annual Gender Pay Gap Reports were released by the federal government from 2006 and in receiving considerable media attention, kept the issue on the political agenda.
The process culminated in a 2012 law aimed, which states that gender pay gaps need to be discussed at all levels of collective labor negotiations (national, sector, subsector, company). It furthermore makes it mandatory for all firms over 50 employees to release a gender pay gap report every two years. Finally, mediators can be appointed in companies to resolve claims of unequal pay. Van Hove (2015) provides additional information on the Belgian case.
Norway: Female-Male Wage Gaps
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Female-Male Wage Gaps
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Female-Male Wage Gaps
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
18. Wage gaps increase with age. Within the full-time employed, the mean wage gap rises constantly with the age of cohorts, from 6.7 percent for those younger than age 24 to 17.6 percent for those above 60. It also increases with age among part-time workers, but wage gaps in favor of women among the young offset this effect in the average figures. The rise of wage gaps across cohorts could be a result of education differentials, which in Norway sway more strongly in the favor of females in younger cohorts. However, this can hardly explain the level of gaps in disfavor of females, given that they are more highly educated than men, except in the oldest cohorts.
19. Wage gaps are higher at higher wage levels. In 2015, the gender wage gap with low-wage earners (25th percentile) was slightly below 4 percent, while there was a wage gap of almost 15 percent for high-wage earners (75th percentile). While this pattern is common across countries, it is conceivable that high wage compression in Norway and other Nordic countries and its resulting high entry-level wages also help compress gender wage gaps for low-wage earners. Notably, also wage gaps for lower wage earners have narrowed in recent years, while they stayed stable for high-wage earners. With the distribution of earnings skewed to the upside, the mean wage gap for full-time employees—at 12 percent—is higher than the median wage gap.
20. This reflects that wage gaps are higher for highly educated women and in managerial and professional occupations. Women with university education recorded the highest wage gaps, of 20 percent in 2015, which have not shown any tendency to decrease since data became available in the late 1990s. Across occupations, female managers, professionals and technicians suffered from the largest wage gaps. Mean wage gaps in those skilled occupations are higher in the private and health sector standing well above 10 percent. In government employment, meanwhile, mean wage gaps are relatively constant between 6–10 percent across occupations. The persistence of large gaps in the health sector is important, because it is employs one third of all women in Norway, making it the largest sector for female employment.
21. Female-dominated sectors feature moderate, but relatively persistent wage gaps. The two largest sectors for female employment after health are education and public administration. In education, the mean wage gap was 6 percent in 2015, but there has been only a very slight reduction since 2008. In public administration, the wage gap even opened further during this period, resulting in a 11 percent gap by 2015. On average across sectors, there has been convergence, with high-gap sectors converging more strongly and the large health sector making an important positive contribution. However, overall convergence has been quite gradual. The sectors with the largest gender wage gaps in 2015 represented 10 percent of female employment. These sectors were finance and insurance (28.6 percent wage gap); professional, scientific, and technical activities (21.6 percent); and other services (21.6 percent).
Sectoral Full-time Gender Wage Gaps and Convergence
(Percent)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Note: Bubble size is female employment share in the sector. These are used as weights in a weighted regression, which omits the three sectors that experienced wage divergence.1/ For the financial sector, the start year is 2009 to purge results of financial crisis induced layoffs.Sectoral Full-time Gender Wage Gaps and Convergence
(Percent)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Note: Bubble size is female employment share in the sector. These are used as weights in a weighted regression, which omits the three sectors that experienced wage divergence.1/ For the financial sector, the start year is 2009 to purge results of financial crisis induced layoffs.Sectoral Full-time Gender Wage Gaps and Convergence
(Percent)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Note: Bubble size is female employment share in the sector. These are used as weights in a weighted regression, which omits the three sectors that experienced wage divergence.1/ For the financial sector, the start year is 2009 to purge results of financial crisis induced layoffs.22. Continued work toward closing gender wage gaps could have notable macroeconomic impacts. Reducing the gender wage gap in full-time employment to levels of Belgium would increase earnings by 2.4 percent and the share of female in total earnings by 1½ percentage points. Complete elimination of the gender wage gap would roughly double these impacts. Given that wage gaps in part-time work are already small on average, their elimination would only have a small impact.
Scenarios Illustrating Macroeconomic Impacts of Elimination of Gender Wage Gaps
Corresponds to a 54 percent decrease in the gender wage gap.
Th e comparable actual 2015 figure is 40.4 percent.
Scenarios Illustrating Macroeconomic Impacts of Elimination of Gender Wage Gaps
| Gain in Earnings (percent) | Females’ earnings (percent of total earnings)2/ | |
|---|---|---|
| Sc. 3: Reduce full-time gender wage gap to Belgian level 1/ | 2.4 | 41.8 |
| Sc. 4: Eliminate full-time gender wage gap completely | 4.5 | 42.9 |
| Sc. 5: Eliminate part-time gender wage gap completely | 0.2 | 40.5 |
Corresponds to a 54 percent decrease in the gender wage gap.
Th e comparable actual 2015 figure is 40.4 percent.
Scenarios Illustrating Macroeconomic Impacts of Elimination of Gender Wage Gaps
| Gain in Earnings (percent) | Females’ earnings (percent of total earnings)2/ | |
|---|---|---|
| Sc. 3: Reduce full-time gender wage gap to Belgian level 1/ | 2.4 | 41.8 |
| Sc. 4: Eliminate full-time gender wage gap completely | 4.5 | 42.9 |
| Sc. 5: Eliminate part-time gender wage gap completely | 0.2 | 40.5 |
Corresponds to a 54 percent decrease in the gender wage gap.
Th e comparable actual 2015 figure is 40.4 percent.
Possible Reasons for the Persistence of Gender Wage Gaps
23. There are several possible reasons for the persistence of gender wage gaps in Norway. This subsection discusses limitations to upward mobility, sectoral gender segregation, skill advantages in favor of males in highly-paid areas, impact of family policies and career-progression penalties for extended absence from work, and regional factors.
24. Norway has been one of the trailblazers in promoting women’s career progression. In particular, it was among the first countries to introduce minimum female representation (of 40 percent) on boards of directors of publicly-listed companies (Figure 5). Also, Norway is among the countries with the highest female representation in parliament and the cabinet.
Norway: Upward Mobility of Females
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Upward Mobility of Females
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Upward Mobility of Females
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
25. However, the trickle down into management positions has been slow, although there are promising signs in recent years. During 2011–15 Norway managed to increase female representation in management positions from one third to 39 percent. However, it still lags Sweden, Iceland, and the United States and the increase was driven mostly by advances of women into lower and mid-level management.
26. Integration of women into top management remains an ongoing challenge. Johnsen and Loken (2015) document that Norway is not atypical among Nordics in achieving high female employment rates, but relatively low numbers of female top managers. Recent advances have been more limited in private business, even in large listed companies subject to the quota on female board representation. Among female top executives in the largest private sector companies, Norway only matches the EU-28 average. It is a possibility that women in Norway, more strongly than men, avoid the most demanding jobs to satisfy a preference for work-life balance. However, limitations on female upward mobility could also be driven by a reluctance of private companies to delegate more decision-making powers to females as results from research specifically on Norway could be taken to suggest. For instance, Matsa and Miller (2009) find that gender board quotas are associated with reduced short-term profitability for firms that had no female board membership beforehand, owing to increased labor costs from fewer layoffs and higher relative employment.7 Finally, female entrepreneurship is also low in Norway, though this is in line with lower entrepreneurship rates overall in Norway relative to other Nordics.
27. The public sector has not widely championed females in senior civil servant positions. Norway ranks below the EU average in terms of the share of females in senior public administrator positions. Given that more than 70 percent of civil servants are women and public administration is the third largest sector in female employment, limitations on upward mobility in the public sector also hold back female progression overall, even if not much importance were attributed to a positive signaling effect. In general, promoting females to managerial positions could hold additional rewards in any sector with high female employment as Giuliano et al (2006) point out. The authors document large negative effects of gender and other demographic differences between managers and subordinates in terms of subordinates’ rate of quits, dismissals, and promotions.
28. Gender segregation may explain almost half of the wage gap and may worsen females’ chances at moving up to higher level positions. Norway is among the countries with the highest sectoral concentration of female workers (Figure 6). Over 90 percent work in the services sector. The health, education, and public administration subsectors alone account for more than half of female employment and derives partly from historical reasons as these sectors were strongly expanding in the 1970s, at the same time as female participation.8 This sectoral segregation can explain about 45 percent of the aggregate wage gap as women cluster in sectors and occupations with lower pay levels (Barth et al, 2013). It also implies that in female-dominated sectors, very high share of female (top) managers would need to be observed to achieve equality in aggregate across sectors. Within companies, a study from Denmark finds that female managers also tend to cluster in functional areas such as HR, R&D and IT, which have lower chances of promotion to CEO (Smith, Smith and Verner, 2013). Therefore, addressing sectoral gender segregation can complement efforts for equality.
Norway: Sectoral Gender Segregation
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sectoral Gender Segregation
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sectoral Gender Segregation
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Sectoral Concentration of Female Workers
(Standard deviation of sectoral employment shares)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.Sectoral Concentration of Female Workers
(Standard deviation of sectoral employment shares)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.Sectoral Concentration of Female Workers
(Standard deviation of sectoral employment shares)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Eurostat and Fund Staff calculations.29. Gender segregation starts in education, and competition in female-dominated fields seems particularly high in Norway. Compared to other Nordic countries, both female and male university students seem to lean more towards female-dominated majors such as teaching, health and social work, and arts and humanities. Higher labor supply in these areas would suggest a downward pressure on wages, which affects females disproportionately. Meanwhile, graduates in STEM fields are relatively undersupplied compared to other Nordics, which may underpin higher wages in those fields. This mostly favors men and could partly explain the persistence of wage gaps.
30. Men may have skill advantages in certain highly-rewarded areas. Such advantages could compensate for their lower average level of education. OECD data show that Norwegian men score somewhat better than Norwegian women in “proficiency in problem solving in technology rich environments.” Moreover, men may also be more frequent among top performers. The Nordic Council (2016) points out that men are more frequent among the top performers in math. These high-performing students study and learn mathematics differently, and differ in their perception of control, attribution of success and other motivational beliefs. They report higher perseverance and more positive attitudes to mathematics. This could result in considerably higher earnings, especially as information technology allows superstar performers nowadays to tap into larger revenue pools more easily.
31. Implicit penalties in career progression as a result of extended breaks disproportionately affect women. Johnsen and Loken (2015) document that countries with more generous family policies have higher maternal employment but fewer female managers and senior officials, which matches the Norwegian experience. Longer job leaves have also been found to be more harmful to the careers of highly educated women and women in the private sector (Datta Gupta et al, 2008). Bertrand et al. (2010) find for a sample of U.S. MBAs that controlling for career breaks and hours worked completely eliminates the gender wage gap, i.e. career breaks have very negative effects for males also, but only few men take them. Thus, having a child can have a large and long-lasting negative effect on female labor supply,9 and the within-couple wage gap between husband and wife often expands substantially after becoming parents.10 Thereby, relatively high fertility rates in Norway may be associated with the persistence in gender wage gaps, despite their positive effects e.g. on pension sustainability.
32. Gendered regional migration patterns could also have some effect. Compared to other Nordics, there is an especially strong tendency in Norway for female university graduates to cluster in cities, reportedly in part to escape certain social norms in smaller communities and lesser appeal of rural recreation options (Nordic Council, 2016). In Oslo, for instance, 60 percent of the population with university degrees are females. In contrast, men are more open to returning to outlying areas. Thereby they avail themselves to a wider range of job opportunities, which could increase the gender wage gap, but there would be an offsetting effect of urban areas featuring higher income levels.
C. Males: Strong Declines in Employment Rates
33. The employment rate for males in Norway declined by 5 percent during the financial crisis and did not recover thereafter. The male employment rate among the 15–74 year-old population stood at 70½ percent in 2015 after having declined from levels exceeding 75 percent before the crisis (Figure 7). Compared to the female employment rate, it was both hit harder by the crisis and continued to decline at a faster pace thereafter. Given that much of the fall in employment was induced by the crisis that suggests that much of it is involuntary, although some of it can be explained by population aging. Larger increases in male than female unemployment during and since the crisis point in the same direction, although, over the long term, a gradually declining trend in male participation rates has been observed, which is likely driven by preferences.
Norway: Developments in Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Developments in Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Developments in Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
34. The Norwegian experience mirrors that of peer countries, in what some have termed a “mancession”. (Nordic Council, 2016). In most countries crisis-induced losses in male employment dwarfed those in female employment. Therefore, when the earlier simple regression analysis of changes in employment rates on initial employment rates is repeated for males, we find that Norway’s underperformance relative to peers was only 0.6 percentage points. This results because countries with high initial male employment rates generally suffered steep declines. After the crisis a rebound in male employment remained elusive in Norway, making it one of only a few European countries where male employment rates did not rebound after the crisis (the others are Austria, Belgium, Netherlands), with the oil sector downturn and exerting a Norway-specific effects during 2014–16.
35. Analysis by age cohort shows that young males were most affected. Male employment rates dropped by 11 percent among 15–24 year-olds, relative to a predicted 8½ percent drop based on peer experiences. The remaining relative underperformance accumulated throughout the pre-and post-crisis period, pointing toward a longer-standing structural problem in integrating young males into the labor market. The impact on the youngest cohorts largely mirrors the results for females, but the shock reverberated further into prime working age cohorts for males. For male cohorts through 39 years of age, drops were on the order of 4 percent. However, among males aged 55 and above, Norway performed very well in extending their working careers with the 2011 private sector pension reform showing the expected results.
36. The sectoral distribution of employment is important in explaining large male employment declines. Males are concentrated in more cyclically-sensitive industries such as construction and manufacturing industries while females more often work in services sectors less affected by the crisis, as Elborgh-Woytek et al (2013) highlight. Although this concentration is less pronounced in Norway than in most peers, it is nonetheless strong enough for crises to have a more marked impact on male workers. Our analysis shows that employment only grew by 3½ percent in male-dominated sectors in total during 2008–15, while it grew almost 13 percent in female-dominated sectors (Figure 8). Meanwhile, layoffs in the Norwegian oil sector since start of the oil price slump in 2014 are not very large in comparison to longer-standing declines in male employment rates.11 Hvinden and Nordbø (2016) analyze the Norwegian labor market from an oil sector viewpoint; they encouragingly conclude that the slump did not cause labor market mismatches larger than in typical downturns and that labor mobility is high.
Norway: Sectoral Composition of Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sectoral Composition of Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sectoral Composition of Male Employment
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
37. Crises tend to hit immigrants particularly hard and often have permanent effects. Immigrants from Eastern Europe and outside Europe tend to cluster in cyclically sensitive industries. When laid off during a crisis, a considerable share of lower-skill immigrants find it hard to reintegrate into the labor market and often become long-term unemployed or claim disability benefits (Bratsberg and Roed, 2015). With immigrant employment much higher for males than females, such patterns can partly explain that absence of a rebound in male employment rates after the crisis.
38. Reinvigorating male employment could have notable macroeconomic impacts, but will be challenging. The calculations in Table 3 suggest that returning male unemployment to female levels by integrating these males into employment could increase earnings by 1¼ percent. Increasing male employment rates by some 5 percentage points to return them to their pre-crisis levels would triple this effect. However, it will necessitate higher growth—The Ministry of Labor estimates suggest that mainland GDP needs to expand by more than 2¼ percent for employment gains to be realized. Achieving increases in employment rates will be challenging, because crises in Norway result in disproportionate labor market withdrawals, including through sickness and disability (Section E), and some immigrant groups are hard to reemploy across sectors, partly as a result of insufficient language skills.
Scenarios Illustrating Macroeconomic Impacts of Increasing Male Employment
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Assumes that the male unemployment rate would be lowered by 1.4 percentage points.
Scenarios Illustrating Macroeconomic Impacts of Increasing Male Employment
| Gain in Earnings (percent) | Gain in mainland GDP (percent) 1/ | |
|---|---|---|
| Sc. 6: Reduce male unemployment rate to that of females 2/ | 1.2 | 0.7 |
| Sc. 7: Increase male employment rate to its 2000–08 average | 3.7 | 2.1 |
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Assumes that the male unemployment rate would be lowered by 1.4 percentage points.
Scenarios Illustrating Macroeconomic Impacts of Increasing Male Employment
| Gain in Earnings (percent) | Gain in mainland GDP (percent) 1/ | |
|---|---|---|
| Sc. 6: Reduce male unemployment rate to that of females 2/ | 1.2 | 0.7 |
| Sc. 7: Increase male employment rate to its 2000–08 average | 3.7 | 2.1 |
Assumes a constant labor share in mainland GDP at the 2015 level of 57 percent.
Assumes that the male unemployment rate would be lowered by 1.4 percentage points.
D. The Young: Some are at Risk of Exclusion
39. The young have been faring worse in the labor market across the board. (Figure 4). Youth unemployment rates are considerably higher than those in the 15–74 year-old population. Among 15–24 year-old males, the unemployment rate in 2016 was 12½ percent (versus 5.4 percent in the overall population). For females, it was 9.3 percent (versus 4 percent overall).12 Moreover, among both sexes another 5–6 percent of young people have dropped out of the labor force although they would be willing and able to take a job.
Young Adults Not in Employment, Education or Training
(Thousands of Persons)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Statistics Norway.Young Adults Not in Employment, Education or Training
(Thousands of Persons)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Statistics Norway.Young Adults Not in Employment, Education or Training
(Thousands of Persons)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Statistics Norway.40. This could have permanently damaging effects. Nilsen and Reiso (2014) find for Norway that early-career unemployment leaves permanent scars in working careers, leading to higher probability later in life of being unemployed or dropping out of the labor force. Rosholm and Svarer (2015) document that long-term unemployment at early age leads to loss of cognitive human capital skills as well as non-cognitive skills such as work motivation, discipline, and self-control. Therefore, there is a risk that worse labor market outcomes propagate forward as cohorts age.
Norway: Labor Market Integration of Youth
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Labor Market Integration of Youth
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Labor Market Integration of Youth
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
41. Integrating low-skill youth represents a special challenge. Youth unemployment is particularly high among those not having completed upper secondary education, especially boys. The problem is aggravated by high dropout rates from formal education. Although they have been declining in recent years, given the focus on education reform (Section E), they remain high in international comparison. Finally, some scholars (e.g., Rosholm and Svarer, 2015) are concerned that a subgroup of youth could become permanently socially excluded. In that at-risk group, lack of education and work experience often interacts with physical and psychological health problems, drug abuse, and debt issues, so that achieving employability requires progress in several dimensions. The authors study two Danish schemes which achieved some success through intense in-person mentoring. Although their cost is high, the authors argue that such interventions can be cost effective from a fiscal point of view, given that over youths’ long remaining working lives high amounts of social transfers can be saved.
E. Policies for Promoting Gender Equality and Participation
42. This section explores policies, which could leverage labor force participation and advance gender equality. Previous research focusing on female labor force participation has found it is affected much more by policies than women’s individual characteristics (Christiansen et al, 2016a). This research focused on evaluating tax policies, family and parental leave benefits, as well as access to child care. This chapter in addition touches upon education and lifelong learning, labor market flexibility, and disability and sickness benefits. These are also important in the case of Norway, including for participation of males and youth. While Norway’s labor market policies are already quite favorable overall, this section identifies a series of reform possibilities. On some of these reforms are already ongoing.
Tax Policies for Second-Earners in Families
43. Norway’s tax policies for second earners in the family encourage female participation, but may also incentivize part-time work. Previous research has found that tax policy for the second earner in the family, oftentimes the wife, strongly shapes work incentives (Christiansen et al, 2016b; IMF 2012). Tax policy should therefore be carefully designed. As in other Scandinavian countries, partners in married couples are taxed separately in Norway. This reduces the relative tax rate faced by the second earner and encourages participation (Figure 10). However, this relative tax rate rises relatively quickly with earnings driven by the progressiveness of the tax system, and this creates incentives for part-time work for the second earner. Incentives for part-time work in Norway are lower than in continental European countries, some of which rely on joint taxation of married couples, but they are higher than in most Anglo-Saxon countries.
Norway: Taxation for Second-Earners in the Family
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Taxation for Second-Earners in the Family
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Taxation for Second-Earners in the Family
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Marginal Effects of Individual Characteristics and Policies on Female Employment
(Percentage points)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Christiansen and others (2016a).Note: Impact per one-standard-deviation increase (during 2002–12 across countries) in the given variables. Coefficient on ‘Married’ is insignificant.Marginal Effects of Individual Characteristics and Policies on Female Employment
(Percentage points)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Christiansen and others (2016a).Note: Impact per one-standard-deviation increase (during 2002–12 across countries) in the given variables. Coefficient on ‘Married’ is insignificant.Marginal Effects of Individual Characteristics and Policies on Female Employment
(Percentage points)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Source: Christiansen and others (2016a).Note: Impact per one-standard-deviation increase (during 2002–12 across countries) in the given variables. Coefficient on ‘Married’ is insignificant.44. Efforts to reduce the reliance of the tax system on direct taxes could help increase incentives to work full time. The tax system in Norway relies relatively heavily on direct taxes. Direct taxes have the advantage that their progressiveness can underpin equality, but the tradeoff is that there are lower work incentives. There have been efforts in recent years to reduce the flat-rate component of the personal income tax (alongside the corporate income tax) from 28 percent to 25 percent in 2016 and further cuts to 23 percent by 2018 are envisaged. (The previous chapter on Tax Reform in Norway provides further analysis.) While this reduces personal income taxes, it does not explicitly lower its progressiveness, which could help expand hours worked by women. Space to further reduce labor taxation could be created by improving cost-efficiency in public spending, for which there is substantial scope (OECD, 2016). While the main VAT rate is high at 25 percent, there are lower preferred rates for certain items. There is scope to increase those, a process that was already started in 2016 by increasing the VAT from 8 to 10 percent on passenger transport, and accommodation and entertainment services.
Parental Leave, Family Benefits, and Child Care
45. Parental leave policies need to strike an appropriate balance between supporting families and maintaining labor market ties. Long periods outside the labor market risk reducing skills and earnings (Elborgh-Woytek et al, 2013). Overly generous leave policies can also affect the employment opportunities of not just mothers but also all women of child-bearing age. This could decrease women’s chances of landing a first job or being promoted, especially in certain occupations or managerial positions where it is more difficult to replace a person temporarily (Johnsen and Loken, 2015). On the other hand, the absence of appropriate parental leave can dent overall well-being as well as fertility rates, with negative effects on pension systems.
46. Norway’s leave policies for mothers are generous, but maintain some incentives for a relatively swift return to work. Norway’s public spending on parental leave is among the highest in the world, trailing only Luxembourg (Figure 11). Mothers can choose to take up to 39 weeks of parental leave with a 100 percent replacement rate or 49 weeks at 80 percent replacement rate. Of this, 13 weeks can exclusively be taken by the mother, while parents can agree to split the remainder as desired. The high replacement rates serve as encouragement to take the full duration of the leave.
Norway: Parental Leave Policies
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Parental Leave Policies
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Parental Leave Policies
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
47. Parental leave does not seem to hurt maternal employment rates, but extended home care leave has an impact, especially among the low skilled. When considering the entire female labor force, the economic literature has not been able to find a causal effect of parental leave duration on maternal labor supply. Carneiro et al (2015) and Dahl et al. (2015) confirm this result for Norway.13 This could be because the take-up rates of parental leave are close to 100 percent for Nordic mothers, a sign that there is little stigma against women taking long parental leaves. The home care allowance for 1-year-olds of NOK 7,500/month kicks in after parental leaves expire if parents choose to care for the child at home, instead of using child care. This cash-for-care allowance does seem to decrease labor supply in the short and long run, among mothers with low education, whose employment rates dip during child-bearing age. The negative earnings effect persists after the allowance has run out driven partly by affected mothers working part time instead of full time (Drange and Rege, 2013) and is much larger among non-Western immigrant mothers (Naz, 2010).
48. But lengthy leave allowances can have an adverse effect on female career progression. It has been found that countries with more generous family policies have larger gender wage gaps at the higher end of the income distribution (Arulampalam et al, 2007), which mirrors the situation in Norway. Evidence from the U.S. and Sweden suggests that career progression does become more difficult for those women taking extended parental leaves (Bertrand et al, 2010; Albrecht et al, 2015), particularly if they are highly educated and working in the private sector (Datta Gupta et al, 2008).
49. But lengthy leave allowances can have an adverse effect on female career progression. It has been found that countries with more generous family policies have larger gender wage gaps at the higher end of the income distribution (Arulampalam et al, 2007), which mirrors the situation in Norway. Evidence from the U.S. and Sweden suggests that career progression does become more difficult for those women taking extended parental leaves (Bertrand et al, 2010; Albrecht et al, 2015), particularly if they are highly educated and working in the private sector (Datta Gupta et al, 2008).
50. Setting aside a share of parental leave for exclusive use of fathers—as Norway does— can promote equality by lessening disincentives for hiring women.14 Exclusively reserving a share of parental leave for the father has been found to induce take-up by fathers, while just replacing maternity leave with paternity leave available to either parent does not change the gendered take-up (Datta Gupta et al, 2008). Norway has a 10-week long quota for fathers, among the highest in the Nordic countries, but shorter than in some other European and East Asian countries. Also, the quota has been recently shortened (OECD, 2016), just as take-up has been rising with 70 percent of Norwegian fathers now taking the full 10 weeks or more.15 Few men, however, take more than those 10 weeks, and as a result Norway continues to lag Sweden and Iceland in the total share of parental leave taken by males, despite some recent catchup.
51. Child care provision is among the best in the world and further increasing, but somewhat less readily available for the youngest children. Norway devotes slightly more than 3 percent of its GDP to family benefits; these are relatively focused toward services provision (1.8 percent of GDP), chiefly child care (Figure 12). Johnsen and Loken (2015) argue that child care provision is a key determinant behind the high employment rates in the Nordics. Indeed, increases in child care provision and decreases in its costs in Norway over the past decade have been associated with higher female full-time work incidence. In Norway, pre-school enrollment for children aged 3–5 is high at above 90 percent and has been rising considerably in recent years. Likewise formal child care for younger children has been rising strongly., Its coverage still remains lower, and although Norway places second among peers, further catchup to Denmark (77 percent coverage) may yield labor market benefits. Informal child care is hardly available any more, which may be a concern in remote rural areas where formal child care with easy accessibility is harder to provide.
Norway: Child Care and Family Benefits
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Child Care and Family Benefits
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Child Care and Family Benefits
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
52. There are strong economic arguments to further deepen child care provision. Andresen and Havnes (2014) have found that the 2000s expansion of subsidized child care for 1 to 2 year-olds in Norway increased employment among affected mothers. It may also help lower the pay gap, which has been found to be higher among parents than non-parents, suggesting that the former that some specialization of the parents between home and outside production remains common (Østbakken, 2014; Cools and Strøm, 2016). Disincentives for employers to hire women would also decrease, because increased use of child care instead of home care will shorten leave periods after childbirth. Johnsen and Loken (2015) further argue that, over the long run, child care and family policies can pay for themselves through higher fertility rates. Indeed, Norway is already reaping the benefits at present in form of a more benign aging profile than most advanced countries. Finally, early childhood interventions in nurseries, kindergartens and schools may improve long-term labor market outcomes by preventing social exclusion (Rosholm and Svarer, 2015). Further reorienting family spending away from cash allowances toward child care financing could also increase labor supply of the lower skilled, as highlighted in the Norwegian Government’s (2017) report on support for families with children.
53. There may be scope to increase both child care provision for children younger than 2 years and the flexibility in child care provision across all ages. Currently, a child care spot is guaranteed at the beginning of the school year after children turn 1 year old. This still leaves a gap for mothers of 1 year-olds after parental leave is used up, which can be relatively long for those with children born late in the calendar year. A first step in expanding the system could be to accept new children twice per year instead of only once, which would already shorten the gap for many women.
54. Increasing flexibility in child care could lift women’s upward mobility. This would be important given that the analysis above showed remaining gender gaps in the labor market to be concentrated at the top of the career ladder. At present, formal child care functions only during standard weekly work hours, but many higher-level jobs require regular overtime or work at irregular hours. Johnsen (2015) finds that grandparents’ retirement increases adult daughters’ labor supply in Norway, likely due to grandparents’ provision of child care during irregular hours.
55. To boost upward mobility of career-oriented women, increasing the availability of child care is likely more important than lowering its cost. Although the evidence on the effect of the cost of child care on labor supply is mixed, most studies for Nordic countries find it to be small (Black et al, 2014; Lundin et al, 2008). Even if more flexible care could only be provided at higher prices, it would probably nonetheless succeed in increasing the labor supply of those women most likely to reach leadership positions during their careers, as their opportunity cost of absence from work is highest. Costs to parents would, however, start to matter in boosting labor supply of less skilled women, as evidence from Denmark suggests (Simonsen, 2010). Another option could be to subsidize informal child care at irregular hours (nannies at home, pick-up-services at day care), or other domestic services. Evidence from Sweden, which instituted a 50 percent tax deduction on domestic services, suggests that labor supply of married women increased subsequently (Halldén and Stenberg, 2013).
Education and Lifelong Learning
56. Education is vital in Norway to enhance non-cost competitiveness, adapt to technological change, and integrate vulnerable groups. Education and skill enhancement are important to address labor market challenges brought on by technological advances in automation and use of artificial intelligence. Importance of education is well recognized by the Norwegian authorities. Norway has been the first OECD country to undertake a national skills strategy project in 2013–14, informing the ongoing education reforms (Norwegian Ministry of Finance, 2017). Their success is essential also to ensure that less advantaged individuals are integrated into society (Rosholm and Svarer, 2015).
57. Norway’s spending on education is high and, thanks to ongoing reform efforts, results have been improving. Norway is one of the countries worldwide that has been spending most on education, upwards of 4½ percent of its GDP (Figure 13). For many years, results have been lackluster, but a steady rise in PISA scores across its three disciplines (math, reading, science) for both males and females confirms that they are now improving in primary and secondary education. Broad reforms since the early 2000s, including a redesign of national curricula, are paying off. Ongoing efforts comprise increasing teacher quality through their continued education and a master’s degree requirement for new teachers. To ensure that people remain employable throughout their lives, lifelong learning initiatives can play an important role in updating skills of those older than 25. Their participation in education and training has been moderately high in Norway, but lower than in other Nordic countries. Finally, boys continue to lag girls in PISA scores driven by underperformance in reading and across all subjects in national 10th grade exams; the authorities’ current focus lies on research to assess which interventions would be the most fruitful.
Norway: Education and Lifelong Learning
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Education and Lifelong Learning
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Education and Lifelong Learning
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
58. Dropout rates have declined in the past few years in Norway, but remain high, especially for males. Given the healthy labor market, they are partly result of job opportunities, including in the oil and construction industries, and some dropouts return to finish their education after some years. But high dropout rates also reflect issues including in vocational secondary education (OECD 2014, 2016), where reforms are also underway. Literature suggests that when boys leave for vocational education around age 16 they can be challenged by long commuting distances and having to stay in school boarding houses, placing a premium on regional provision as well as long-distance education options, where Norway has been proactive (Nordic Council, 2016).16 Effective January 2017, the government introduced a mandatory activity requirement for all social assistance recipients younger than 30 years. It is hoped that it will also reduce dropout rates, given that such effects have been observed in municipalities featuring such requirements previously (Hernæs et al, 2015).
59. Tertiary education has also been facing challenges and undergoing reforms. The OECD Survey of Adult Skills has shown that 10 percent of tertiary graduates only attain low literacy levels and a national student survey has revealed low levels of satisfaction in some critical areas of learning outcomes, such as experience with research and development work and innovative thinking. A major reorganization has been ongoing to address through institutional mergers the overly small size of institutions, which has also been holding back research activity. Follow-up policy initiatives are expected to be discussed this year. OECD (2016) recommends close monitoring given mixed cross-country experiences with institutional mergers. It also suggests further strengthening incentives for students to complete their courses on time and to move into shortage occupations. These include STEM fields important for driving innovation, where more progress is needed building on recent success to expand the number of graduates in these fields.17
60. To better integrate struggling youth into the labor market, Norway is prioritizing them in active labor market policies and refocusing education toward skills in demand by employers. The 2016 reforms included strengthening of apprenticeships and are being broadened to guarantee anyone under the age of 30 that has been unemployed for eight weeks a place in a labor market program to enhance employment chances. Regions hit hardest by the oil downturn have been prioritized in the rollout, but this ‘Youth Guarantee’ program should be operational in the entire country by end 2017. A government strategy, currently under preparation, to increase focus on math, science, and technology throughout the education system may prove helpful. Finally, a national skills strategy has recently been agreed between social partners and the government. It aims to foster development of skills in demand by employers throughout the education system and could have a positive impact, if translated into concrete actions.
Labor Market Flexibility
61. High implicit minimum wages can make entry of lower skilled persons into the labor market difficult. Wage compression, with relatively high wages for low wage earners and relatively low wages for high wage earners, is a typical feature of Nordic labor markets resulting from collective bargaining (Figure 14). This reduces labor demand for low skill workers, hurting disproportionately immigrants, youth, and those unemployed in the process of switching occupations and looking to rebuild their skills. High wage levels represent an obstacle and wage compression in Norway is higher than in continental European or Anglo-Saxon countries, although less pronounced than in other Nordics.
Wages and Employment Rates by Skill Level, 2013
(PPP-adjusted USD and Percent of population)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Sources: OECD Skills Outlook (2013) and Fund Staff calculations.Wages and Employment Rates by Skill Level, 2013
(PPP-adjusted USD and Percent of population)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Sources: OECD Skills Outlook (2013) and Fund Staff calculations.Wages and Employment Rates by Skill Level, 2013
(PPP-adjusted USD and Percent of population)
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Sources: OECD Skills Outlook (2013) and Fund Staff calculations.
Norway: Labor Market Flexibility
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Labor Market Flexibility
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Labor Market Flexibility
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
62. Making effective wages more downwardly flexible could help these lower-skilled groups, but caution needs to be taken to how this flexibility is achieved. Ideally, it would be achieved within collective bargaining processes by allowing for lower wages, at least temporarily, for new hires within well-defined vulnerable groups. Well-targeted, temporary wage subsidies could be another option, but close monitoring would be important because they may incentivize employers to convert regular into subsidized jobs or lay off workers when the subsidy expires and rehire them later. Reducing payroll taxes for specific groups could be another avenue, but again design and monitoring are important. Sweden implemented a payroll tax reform targeted at young workers, but job-creation impacts were so small that each new job created was associated with a cost exceeding USD 150,000 (Egebark and Kaunitz, 2013; Skedinger, 2014). Finally, high implicit minimum wages may indirectly protect the welfare state by disincentivizing large low-skill migration.18 While these options should be carefully studied, the conclusion may be that further action on the labor supply side (e.g., enhancing ALMPs and job counseling, tightening eligibility to unemployment and disability benefits) may be more cost effective.
63. Employment protection legislation can make firms more reluctant to hire and diminish openings for the more vulnerable to find footholds in the labor market. This will disadvantage particularly mothers, the low-skilled, and immigrants, who spend longer times outside employment for various reasons (e.g. family time; more frequent layoffs, e.g. due to automization; difficulties in finding a job matching skills).
64. Norway’s regulations on temporary employment are especially stringent. With the intention of safeguarding protection of permanent employees, restrictions cover the number of temporary work assignments, the use of fixed term contracts and temporary work agency employment (OECD, 2016). The government has taken some steps, to liberalize temporary work and lightening of working-time regulation.19 Nonetheless, the remaining restrictions disproportionately limit chances youth and the less educated, for whom informal recruitment channels are the most significantly associated with finding employment (Hensvik and Nordström Skans, 2014; Rosholm and Svarer, 2015). Incidence of temporary employment in Norway is among the lowest in Europe as a result. Among, the young, where it is most common, 25 percent hold temporary jobs and this fraction has declined slightly since 2000.
Sickness and Disability
65. A considerable share of persons in Norway are outside the labor force due to sickness or disability and public expenditure on related benefits remains high. Individuals are able to transition from paid sick leave (which replaces 100 percent of income for up to one year), to a rehabilitation-type benefit (replacing two thirds of income and whose duration is envisaged to be reduced from four to three years) and then to the disability benefit, which often serves among older recipients as a pathway to retirement. Norway continues to spend around 4 percent of its GDP on benefits related to incapacity. This remains one of the highest worldwide, but it has been slightly falling in recent years and is now somewhat lower than in other Nordics, as efforts for tightening eligibility and activity requirements—though incremental—seem to be bearing some fruit.
66. Sickness absence is high, but has been falling gradually. In 2016, 4 percent of working days were lost to sickness for males and 7 percent for females. These figures have been gradually declining in recent years and prolonged sickness absences have been falling more strongly (Figure 15). The more recent decline in sickness absence may partly be result of renewed efforts to implement a more rigorous enforcement of activity requirements for sick-listed workers (NAV, 2017). Other recent reforms in this area include the introduction of a decision support tool aimed at doctors issuing sickness certificates, although this system awaits full implementation and evaluation.20 However, further reforms could yield further gains and should include tightening eligibility further by relying more on third-party assessments, rather than the beneficiary’s general practitioner. Extending the initial employer-financed phase of sick leave benefits and reducing the generosity of benefits could also help.
Norway: Sickness and Disability
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sickness and Disability
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Sickness and Disability
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
67. Disability incidence remains among the highest worldwide. About 10 percent of working age persons receive disability benefits, far outstripping the number on unemployment benefits. Research has found that many disability claims are triggered by job loss, suggesting that disability serves as a substitute to unemployment benefits (e.g. Bratsberg et al, 2010). However, in recent years, also more young individuals have come to rely on disability benefits and withdrawn from the labor market. Some reforms have been implemented in 2015 to strengthen work incentives for the disabled. However, eligibility checks should be tightened considerably further to reduce new flows into disability and more could be done to reintegrate those beneficiaries with considerable remaining work capacity. In this sense, the awarding of permanent and full benefits to most applicants and the limited incentives for partial benefit recipients to increase their working hours should be addressed (OECD, 2010).
Improving Attitudes
68. Attitudes toward women working are favorable in Norway, but some room for improvement remains. The gap between women’s and men’s attitudes seems to be higher in Norway than in other Nordics, suggesting that further improvement in male attitudes could be helpful. This could eventually also lead to more equal sharing of domestic work, freeing up women to expand work outside the home (Figure 16). Anecdotal evidence suggests that the rural-urban divide is relatively stark in Norway, with women perceiving attitudes to be considerably more patriarchic in the country and that they have less of a voice in the community there (Nordic Council, 2016). As a result, highly-educated women cluster in cities, which may have detrimental effects on job creation in rural areas.
Norway: Attitudes and Domestic Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Attitudes and Domestic Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
Norway: Attitudes and Domestic Work
Citation: IMF Staff Country Reports 2017, 181; 10.5089/9781484306659.002.A003
69. Changes in attitudes could also help reduce sectoral and occupational gender segregation. Softening perceptions of “female jobs” and “male jobs” is important, including for women as female employment is the most sectorally segregated. This can be advanced by displaying positive role models in non-traditional professions. For boys, McDowell (2003) highlights that they can absorb an outdated idea of “melancholic masculinity”, especially when growing up in rural areas, leading them to pursue career choices that do not lead to job security. Male teachers can make a significant impact; therefore the authorities’ objective to raise the number of male childhood educators to 20 percent is well taken (Nordic Council 2015). Another noteworthy project is “Men in Health” which retrains men from traditional male jobs for jobs in health care. The project has been considered effective in changing perceptions of health sector jobs with its participants being successful in finding employment in the sector (Nordic Council, 2016).
F. Conclusion
70. Norway’s employment rates are high, but challenges to maintaining high-quality labor supply have risen in recent years. This chapter has documented four challenges. For females, part-time employment remains high and wage gaps are persistent given limited upward mobility. Taken together, they reduce female earnings to only two thirds those of males. Norway’s proactive policies to advance gender equality, including through quotas on female participation on boards of private companies, have not yet trickled down strongly into female representation at the top of career ladders and stronger female dispersion into more traditionally male sectors. Among males, employment rates have decreased after the global crisis and not recovered. With men are more concentrated in sectors affected by the crisis, this suggests a third challenge in facilitating their mobility. The fourth challenge relates to integrating youth into the labor market, among which especially a low-skilled subgroup has become more marginalized amid high dropout rates from education and limited downward wage flexibility.
71. Norway’s policies have been successful in generating high employment rates, but reforms in several areas—some already ongoing—will be necessary to maintain these. To foster upward mobility and full-time work among women, child care provision can have a large impact. It should be made more flexible and be expanded to the youngest children. Shortening extended home care leave in return could provide financing; this may also indirectly aid lower-skilled mothers by nudging them to a faster return to the labor market. Fiscal space could also be created by enhancing efficiency in public sector service provision, and could in addition be used to continue ongoing reforms to lighten labor taxation. To boost male and youth employment, education is important as the low skilled are most affected. Education reform is ongoing and has already been yielding benefits; reinforcing retraining and lifelong learning initiatives is becoming ever more important to foster labor mobility and decrease high sectoral gender segregation. But, in addition, effective downward wage flexibility could be enhanced, restrictiveness on temporary work further loosened, and work incentives increased, including by tightening the disability and sickness benefit system. Such reforms would also underpin labor market integration of immigrants, on which previous work has centered (IMF, 2015). Fiscal costs of policies need to be weighed against benefits through future taxes, which can be substantial for individuals with long working lives ahead.
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Prepared by Christian Henn.
In addition, it has been found for developing countries that gender equality increases export and output diversification (Kazandjian et al, 2016).
These calculations are based on 2015 economy-wide employment and earnings data from Statistics Norway. While they are useful to obtain an order of magnitude, they could be refined by using more disaggregate data (e.g. by sector of employment) as the calculation basis. Also, given different definitions of part- and full-time employment between Statistics Norway and the OECD, some proportionality assumptions had to be made.
This would also lower overall part-time incidence by some 3½ percentage points.
Hungary also achieved a 10 percentage point reduction during 2000–14 to a 4 percent wage gap, but, according to OECD data, the gap based on median wages amplified again during 2015 to 9½ percent.
Similarly, Ahern and Dittmar (2012) similarly cast doubt on the positive effects of gender diversity on corporate boards in response to the legislative changes in Norway, finding that listed firms experienced a decline in their stock price at announcement, and their market value also declined in subsequent years. However, Campbell and Vera (2010) opposite results for Spain. For the U.S., Adams and Ferreira (2009) find that gender diversity in top management has an impact only on those firms lagging in quality of corporate governance.
High female dominance in the health sector plays a role also in high female part-time incidence, because lower total hours implied by shift work result in some 70 percent of jobs in the sector to be considered part time.
See Lundborg et al (2014) based on Danish data.
For Sweden, Angelov et al (2013) find that the wage gap more than doubles.
Job losses broadly attributable to oil activity are hard to pinpoint from official data and therefore often total employment in western Norwegian (oil) counties is analyzed instead (including by Hvinden and Nordbø, 2016). Falls in employment in western Norwegian (oil) counties represented a ¼ percentage point drag on national employment growth in each 2015 and 2016.
However, Labor Force Survey figures such as these may overstate youth unemployment somewhat, because some students may declare that they are unemployed. Therefore it is also useful to consider the figures on those young people not in employment, education, or training (NEET).
For Sweden, Liu and Skans (2010) find no effect on mothers’ earnings after an increase in parental leave and results for Austria and Germany are similar (Lalive et al, 2014; Schönberg and Ludsteck, 2014).
Evidence of whether such quotas also help women by changing intra-household specialization has been mixed with two studies for Norway finding opposite results (Cools et al., 2015; Rege and Solli, 2013).
Dahl et al (2014) find that the full effect such policy takes time to materialize as it is reinforced by peer effects.
The “Local education in cooperation with the labour market” (LOSA) program in Norway offers decentralized Internet-based education for young people in rural communities, but also includes occasional meetings in a classroom with a larger group (Nordic Council, 2016).
The number of graduates in STEM fields has increased by 35 percent between 2006 and 2016.
In Norway, there is a mandatory extension of minimum wage provisions of collective agreements in sectors with heavy immigrant concentrations (e.g. construction, cleaning services). Otherwise, the private sector could attract immigrants for very low wage positions with an implicit understanding that the true payoff to the worker comes at a later stage when he becomes eligible for social benefits.
A 2015 reform allowed temporary work up to one year, but retains a quota on the share of such contracts permitted within any firm.
A trial to require a renewed medical assessment after six months of sick leave has also been conducted, but the results are not yet available.
