Long-term Perspectives on the Norwegian Economy – 2017:

Safeguarding Norway for the future

– Norway stands well equipped to face its future challenges. As a country, we have been lucky, and we have made wise decisions. The choices we make in the coming years must help to preserve Norway as a good country to live in for future generations, says Minister of Finance Siv Jensen.

– We must carry with us the strong aspects of Norwegian society. We have high employment, and benefit from abundant natural resources and a strong fiscal position. Our education system contributes to a well-educated work force. Income and welfare are more evenly distributed than in most countries, continues Minister of Finance Siv Jensen.

In the years ahead Norway will nevertheless face significant challenges. In the White Paper on the Long-term Perspectives on the Norwegian Economy 2017 presented today, the Government describes these challenges and lays out its strategy for meeting them. The main message from the White Paper is that our ability to tackle these challenges requires that we are successful in three main areas:

 

  1. An inclusive labour market with high participation rates
    A corner stone of Norwegian society is its high employment rate. For the individual, having a job means a stable income, personal development, and an arena for social inclusiveness.  At the same time, a sustainable welfare state is dependent on maintaining a balance between the number of people contributing to the system and the number receiving benefits.

    In the coming years, an ageing population means that a smaller share of the population will carry the burden of supporting the welfare state unless the retirement age increases. If many people are kept outside the workforce because of a lack of relevant skills, this burden will increase further. Higher immigration can amplify these challenges unless immigrants are well integrated in the labour market.

    Our society is impacted by rapid technological change. Broader and more efficient use of technology is critical for raising productivity in the private sector. Automation and artificial intelligence renders some jobs superfluous, but at the same time creates enormous opportunities for the creation of new jobs, new investments, and innovation.

    Education and skill enhancement is the key to successfully confronting these challenges. We need to ensure that more people have access to strong vocational training programs and to higher education.

    At the same time, increasing life expectancy means we have to work longer. We need to ensure that we have a tax and welfare benefit system that makes it more beneficial to work than is the case today. We have to avoid that health problems, language difficulties, or a lack of a relevant and updated skillset prevent people from participating in the labor market. This will contribute to a society that creates opportunities for all.


  2. Rising living standards must benefit everyone in society
    In many countries, economic growth has only to a limited extent benefitted the majority of the population. This is seen most clearly in the United States where the typical worker has seen decades of stagnant income growth. The situation in Norway is different. We are a country characterized by low levels of income inequality, both along social and regional dimensions. The vast majority of the population has benefitted from rising incomes over the past decades. In addition, the income of the next generation is less dependent on that of their parents than what is the case in many other countries.

  3. Improved performance in the private and public sectors
    To safeguard our system of welfare benefits we need to use the resources of the public sector efficiently. The Government Pension Fund Global is expected to grow more slowly than in the past. Investment returns are anticipated to moderate, and the oil price is not expected to return to previous highs. At the same time, an ageing population will increase spending on pensions, health, and social services. Moving forward, the room for maneuver in the budget will be far less than what we have become accustomed to.

    Norway has a good system of social welfare benefits and a well-functioning public sector. However, we must continuously ask ourselves if there are things we can do better. Clear priorities, and an active, systematic, and continuous process for improving efficiency in the public sector is necessary.

    Improving living standards will require raising productivity growth in the private sector. Over the last decade, productivity has grown more slowly than in the past. This trend is amplified by the fact that the oil and gas sector will contribute less to economic growth than in the past.  Greater emphasis on protecting the environment creates a new operating environment for the private sector both in Norway and abroad. Rising protectionism and policies aimed at reversing the tide of globalization will hurt us.

    Managing these transitions requires that we clear the way for the creation of jobs in the private non-oil sector. Income must be created before it can be shared.

    More, and more efficient use of, technology is a prerequisite for raising productivity in the private sector. Technological breakthroughs will be necessary to confront climate change. New technological solutions are also a precondition for better and more sustainable social services in the future. Welfare technology may make public health care more efficient and better placed to manage the challenges associated with an aging population.

    Sustaining our high level of welfare requires a commitment, and ability, to change. With a productive private sector, high employment, and strong public finances, Norway is well equipped to face the future. Our ability to create good jobs, further increase employment rates, and develop and make use of new technological solutions will have a decisive impact on our future standard of living and the level of social services we can afford.


– These challenges can only be solved by continuously making smart choices. We are starting already now to safeguard the welfare of future generations, says Minister of Finance Siv Jensen.