Statssekretær Erik Orskaug

Kommunal- og arbeidsdepartementet

Unemployment - A joint European responsibility

Åpningsforedrag på OPCEs kongress - Internasjonal konferanse om arbeidsledighet i Oslo rådhus 13. juni 1996

Ladies and gentlemen,

First of all I would like to thank you for the invitation to address this conference. My presentation will mainly deal with the Norwegian and the Nordic labour markets as I belive that exchange of experiences and learning from each others successes and failures is important. In that respect I very much welcome the work beeing done within the EU.

Unemployment has become the predominant economic and social challenge for Europe in the 1990's. This is a sad fact also in the Nordic region. The problem varies from country to country and from region to region also inside Europe, as economic conditions and institutions differ. There are, nevertheless, some common features between the Nordic countries, that I would like to share with you.

One reason is the common framework in these countries, often recognised in the so-called Nordic welfare model. Another reason is that Denmark, Finland, Sweden and Norway have enjoyed a common labour market since 1954, and thus have some experiences to a single labour market prior to the larger labour market integration process now taking place in Europe.

A first point to make about the Nordic labour markets is that they are small, for example when measured in terms of their labour forces. Being small and open economies mean that the Nordic countries are sensitive to outside changes. International business cycles have strong influence on the economic development. Secondly, comparisons between the small and homogenous Nordic countries and the larger European countries should be interpreted with caution. There can be large regional variations within individual big countries.

Even though, I will continue by making some comparisons. A discussion of the challenges in the Nordic countries should take the Nordic welfare model as a starting point. Compared to the rest of Europe, the Nordic welfare model can be recognised by (at least) the following six characteristics:

• First: Universal welfare rights. This means that the great majority of citizens in the Nordic countries are entitled to the same welfare benefits, regardless of their links to the labour market.
• Second; Taxes. The public welfare benefits in the Nordic countries are to a large extent financed through general taxes and duties.
• Third; Public production of welfare goods: The Scandinavian countries stand apart as having a large number of people employed in the public sector in relation to the total population. A considerable amount of national production - especially of welfare goods - takes place in the public sector and are financed through general taxes.
• Fourth; Public interventions: This may be illustrated by the degree of levelling out of income and correction of market mechanisms, in addition to the extent of public production.
• Fifth; The role of the social partners, through a high degree of labour market organisation and involvement of trade unions.
• Sixth: Determination of wages and conditions by collective bargaining.

We have to admit though, that the Nordic welfare model is under pressure. The pressure is partly internal, where questions have been raised about the sustainability of the Nordic welfare model in the long term, both economically, socially and politically. The increase in unemployment and the demographic trends are driving forces behind this pressure. But the pressure is also partly external, arising from globalisation of the Nordic economies, from European integration and from increased capital mobility between nations. This may involve difficulties in maintaining the special Nordic profile, for instance concerning relative high levels of certain kinds of taxation.

In the Nordic countries, as well as in most other countries in the OECD area, we face a demographic challenge early in the next century containing rapid growth in the number of people requiring pensions and care. This is why increased employment and a strengthening of the work force is not only needed for the medium term, but is also a key economic and social reform for the future.

In Norway we believe in consensus building and we have pursued this strategy through our "Solidarity alternative". In 1992, the Norwegian Employment Commission developed this strategy in order to increase employment in the short run and reducing obstacles to employment growth in the longer run. This strategy has since then been followed up in co-operation between the government, the major political parties and the social partners, and the strategy is outlined in the Government's recent Long Term Programme.

As a part of this strategy, we have been able to keep unemployment at a level which is among the lowest in Europe - although the rate is still too high. The unemployment level in Norway peaked in 1993 at 6 per cent of the labour force, was reduced down to 4,9 per cent last year, and will be further reduced this year. Howewer, a relatively high share of youth unemployment and long-term unemployment suggest a structural component in unemployment, which is given special attention. The objectives of the Government is to reduce unemployment further in coming years, and down towards 3 1/2 per cent within the end of the century.

Concerning the labour market policy and the treatment of the unemployed, top priorities are given to active measures, with focus on training and qualification measures, rather than passive income maintenance schemes. Estimates from OECD indicates that the active labour market policies in Norway may have led to a lowering of the unemployment rate by as much as 2,5 percentage points in the long term.

In this connection I would like to emphasise that strategies to increase employment should take working conditions and social aspects into account. The Conservatives are wrong, claiming that temporary employment and easier access to notice to leave are the only means to reduce unemployment. Such correlations do not exist. On the contrary, all analyses show that stable working conditions and job security are among the most important factors to create a well-functioning labour market.

The reason why Norway has such a low unempolyment rate is that the industrial partners have negotiated moderate wage settlements and thereby contributed to secure jobs in vulnerable sectors. This contribution from the industrial partners had not been possible if the government at the same time had provoked the trade union movement by reducing job security. My message is in short: Sound and safe working conditions will subsequently generate higher employment.

Unemloyment is a problem both for rural and urban areas. In last years White Paper to the Norwegian Parliament on living and housing conditions in the large cities, it is indicated a greater accumulation of problems among the inhabitants of certain districts and neighbourhoods in the large cities. Unemployment has traditionally been lower in the large cities, especially Oslo, than in the rest of the country. Howewer during the last recession, the unemployment problems also affected the large cities, both in terms of size and share of long-term unemployment. The Government has acted in this situation by a relative increase in the labour market measures in the large cities which is a stronger intervention than in previous recessions. The large cities, among them Oslo, have established their administrative system to help and thereby take greater responsibility for the unemploymed, espesially the long-term unemployed and youth.

Finally, I would like to say that there are no easy solutions to the challenges of unemployment which have become so large in many European countries and in their large cities. All policy areas have to be aimed at fighting unemployment. Strengthened cooperation and consensus building are urgently needed within countries and between countries and groups of countries. Cooperation and consensus building between authorities and the social partners are also crucial. Norwegian experiences tell us that a fair distribution policy and emphasis on job security are vital elements in a wage - and incomes policy and employment policy aimed at increased employment, low inflation, and improved competivness.

Thank you.