Utfordringer for lønnsdannelsen og norsk økonomi (Challenges for wage formation and the Norwegian economy)
Abstract
On 30 March 2023 Statistics Norway was assigned by the Wage Leader Model Committee to use modelling to analyse the consequences for wage formation and the Norwegian economy of changes in macroeconomic conditions. The changes relate to international prices and interest rate levels, developments in the petroleum sector, supply and demand for different types of labour, productivity growth, demand for health and care services, and climate-related adjustments. In the wage leader model, industries exposed to international competition (the exposed sector) negotiate first, and wage growth in this sector sets the norm for the wage settlements in the rest of the economy (the sheltered sector). The wage leader model contributes to the evolution of the so-called «main course» for wage formation. The main course is defined as the long-term wage trend that assures the owners of wage leader enterprises of a normal return on capital. Economic disturbances lead in practice to both changes in and departures from the main course, which may make it more difficult for the parties to reach agreement in the wage negotiations. In this report we identify some of these departures and changes in the period up to 2050. In the scenario with global high inflation and higher interest rate levels, real wages are reduced, but monetary and fiscal policy can counter the impacts on the Norwegian economy. These impacts are also strongly influenced by the response in the krone exchange rate, and assumptions regarding exchange rate movements will therefore play a central part. Although the interaction between economic policy and the wage leader model may contribute over time to stable inflation and employment, support for the model may be weakened if employees experience a fall in real wages as a consequence of transitory higher inflation and interest rates abroad. In the reverse globalisation scenario with higher import prices, the labour-cost share will fall in the non-wage leader industries. Such a development will apply pressure to wage setting in the exposed sector if the sheltered sector unions demand wage growth that keeps the labour-cost share in the sheltered sector constant. In the scenario with temporarily lower productivity in the sheltered sector, it may be difficult to bring about a lowering of the nominal wage level, particularly in a situation with high labour market pressures. In the scenario with more rapid phasing out of the petroleum industry, unemployment will be higher and real wages lower, which may be difficult for the social partners to manage. In the scenario with higher demand for health and care services, labour market pressures will increase. However, the incidence effect of sharply increasing taxes dominates, which brings about lower real wage growth and less profitability for the wage leader sector than in the baseline scenario. This scenario also analyses the effect of healthcare workers receiving relatively higher wages, which in practice may be difficult to achieve within the framework of the wage leader model. In the scenario with climate-related adjustments due to national and global climate policy, the wage leader sector increases its competitiveness in relation to other countries because it is based on emission-free, renewable electricity. However, this alone is not sufficient for the wage leader sector to expand enough to replace the loss of petroleum exports. Real wages in the wage leader sector must also decrease for competitiveness to improve sufficiently. A reallocation of this nature is a consequence of lower petroleum revenue reducing national income and consumer options. The report also presents projections for developments in the Norwegian economy and in supply and demand for various educational groups in the period up to 2050. We have assumed in the projections that the more moderate productivity growth of recent years will continue, and that growth in real wages will therefore also be more moderate, averaging just over 1 per cent annually. The same applies to mainland economic growth. Our projections also show a deficit of persons with vocational training at upper secondary level that focuses on manufacturing, construction and healthcare subjects. The more difficult it is for labour with different types of training to replace one another, the greater the problems associated with these imbalances will be. The models we use in this report represent a simplified description of reality and do not capture all factors in the Norwegian economy. Our projections are shrouded in uncertainty. The scenarios have different time horizons and designs. The uncertainty in the projections probably increases in pace with the length of the period analysed and the magnitude of the economic disturbances.
