Any country’s main asset is its workforce, and Norway, with its oil wealth, is no exception. Sustainable policies for low unemployment and high participation rates for women, men and young people are predominant and the burden sharing of the cost of the welfare state is carried on the back of the labour force.
In the last 50 years, there has been a tremendous change in women’s participation in paid work in most OECD countries. Labour market participation has been a key to economic independence for women. It has given women the possibility to develop and use their professional skills. Employment among women is also crucial for economic performance. This may prove especially important in the years to come, as an ageing population will place an increasingly severe burden on public finances. Old age pension expenditure will increase, as will government outlays for health care. Low birth rates will add to the problem, and a shrinking working-age population will have to provide for an increasing number of pensioners. Higher labour force participation and longer careers are important parts of the solution. In addition to reforming pension schemes, many countries now see a need to make use of the large unused work potential among women.
These countries face a double challenge: to increase women’s labour participation and to raise birth rates. To encourage women with children to go out to work, Norway and the other Nordic countries have implemented policies that make it easier to combine work and family life.
The ideal of the housewife was strong in Norway in the 1950s and early 1960s. However, since the beginning of the 1970s, the labour participation rate has risen from 44% to 76% for women between the ages of 15 and 64. Some 83% of mothers with small children are employed. Fertility rates have risen along with the rise in labour participation, from 1.75 children per woman at the end of the 1970s to 1.9 children per woman today–one of the highest fertility rates in Europe.
There are several drivers behind this development. First of all, the increase in female employment in Norway took place at a time when there was a rise in demand for labour, and alongside a remarkable boost in educational attainment among women. Secondly, employment among women was stimulated by comprehensive parental provisions and subsidised day-care for children. In 1970 only 13,000 Norwegian children were enrolled in day-care centres. Today the number is about 280,000 with coverage of almost 90% of all 1-5 year olds. Parental leave for employed mothers and fathers is paid from public budgets and has been extended from 12 weeks 30 years ago to 47 weeks today. Other measures are a statutory right to paid leave to stay at home with sick children and a right to work part-time until the youngest child turns 12.
The welfare state has in many respects made women’s labour participation possible, but women’s own work effort has in turn been a precondition of the development of the welfare state. A higher labour supply means higher income from tax, which in part can be utilised to offer more comprehensive public services. At the same time a higher labour supply is also needed to perform these services. Many of these services in turn allow for a higher female labour supply, for instance, by moving the care of children and the elderly out of the family and under public responsibility instead.
I strongly believe that female employment has brought about large economic benefits for Norway. Firstly, choosing workers from a pool of male and female workers, as opposed to choosing from a pool where half of the potential talent is excluded, leads to productivity gains. Secondly, higher female labour participation has led to productivity gains through a higher degree of specialisation. And finally, female employment has added more workers to the work force at a time when average work hours per employed person have been declining. Decreasing work hours for the employed has in part been a natural consequence of higher prosperity–people’s priorities have changed as they no longer need to work as hard to make a living. But with women entering the workforce, the contribution to growth from the work effort can be maintained. This contributes significantly to raising the national income.
In fact, if the level of female participation in Norway were to be reduced to the OECD average, Norway’s net national wealth would, all other factors being equal, fall by a value equivalent to our total petroleum wealth, including the value of assets held in the Government Pension Fund-Global (GPG, formerly the petroleum fund). This calculation assumes that the share of females in part-time employment remains unchanged.
Labour force participation in Norway is among the highest in the OECD. However, average yearly work hours per person between the ages of 15 and 64 are now relatively low and substantially lower than, say, in Korea. But as we have seen, this picture has two sides. Without our relatively short business hours and the option of working part-time, the barriers into work for women would have been much higher. The next step for Norway will be to find ways to encourage people to move from part-time work to full-time work. With family provisions and childcare already in place, we believe this is within reach.
The Norwegian experience may not be easily transposed to other countries. However, the challenges of more fully utilising the workforce’s potential are the same in most OECD countries.
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©OECD Observer No 293 Q4 November 2012