NEWS ANALYSIS: Few countries are as financially fit to secure social welfare systems as Norway, which has spent the past 20 years stashing away its oil wealth for future generations. Most of that money, though, is meant to preserve pensions, so the government now needs to keep its social welfare state intact as well, amidst debate over how that can best be done.
“Norway is well-prepared to meet the future and we need to keep making good choices,” Prime Minister Erna Solberg declared when rolling out her government’s new Perspective report 2017 just before the weekend. “In order to succeed, this government wants active policies to take the country forward, so it will still be a good nation to live in for future generations.”
Solberg of the Conservative Party and Finance Minister Siv Jensen of the Progress Party are well aware that the past few decades have been what Jensen called “a golden period” for the Norwegian economy. Record high oil prices allowed Norway to build up not only the world’s largest sovereign wealth fund but also enjoy generally low unemployment and an overall increase in economic development and public affluence.
Good times won’t keep rolling
“We now face changes,” Jensen said. “The fall in oil prices has shown that in all clarity. We have to create new jobs, more people must be included in the job market and we have to restructure our economy to secure welfare.”
So she and Solberg are setting some clear goals, in order to avoid annual increases in public sector costs that are higher than increases in revenues. “There will be more elderly, we’re living longer, and that’s good news,” Jensen noted, “but the challenge is that the social welfare costs will rise faster than revenues in around 10 to 15 years. Oil revenues won’t offset that. On the contrary, they will have less impact.”
Neither she nor Solberg think that simply raising taxes is the answer. The gap, according to Jensen, “means we need to do things differently in the future,” and that includes reforms, much higher public participation in the workforce and a more efficient public sector.
“Having more people working (and thus paying taxes) is the key to financing welfare programs,” said Jensen, referring to everything from schools to health care and elder care programs. “We need more jobs, more people working longer and more people working full time. We have to make sure that health problems, language difficulties or a lack of competence don’t keep folks from working. If we also succeed in getting more out of the money that’s used by the public sector, we’ll get more welfare.”
Pressing for reforms
That’s why Solberg and the rest of her government continue to push for reforms and consolidation of everything from the police to local governments, agriculture and hospitals. They’re meeting harsh criticism for what political opponents like the Center Party bash as “centralization” that can come at the expense of outlying areas. Not true, insist Solberg and Jensen. They present their reform programs as “modern” and “future oriented,” while resisting reform is “old-fashioned” and, they believe, prohibitively expensive.
The main message of their Perspective Report, which they presented before young people at a high school in Oslo on Friday, is to develop a secure job market with low unemployment and high employment levels per capita, welfare programs that can expand and reach everyone, and efforts “to get more for our efforts,” both in the private and public sectors. Norway’s economy has arguably weathered the storm stirred up by the collapse in oil prices but dark clouds persist, not least given job losses and low wage hikes but also the prospect that the next generation won’t do as well financially as their parents did.
It’s all a matter of the “perspective” used in the report’s title, though, since it’s almost hard to imagine how overall lifestyles of many affluent Norwegian families can become much better. Norway was recently dubbed the “happiest” country in the world. The goal is to keep it that way, and for Norwegians not to become complacent.
It’s an election year, after all, and while both the Center Party and the Labour Party (the latter of which also has supported reforms) are advocating tax hikes to preserve welfare programs, the conservative government parties promote more productivity and business-friendly regulations and support to boost job creation. It’s ultimately up to voters to decide what’s the best way to also boost productivity and make sure state coffers can afford the public health and other welfare programs in place now.