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The following OECD assessment and recommendations summarise Chapter 4 of the Economic survey of Norway published on 30 January 2007.
How can labour market performance be improved?
The labour market is functioning well, with strong participation rates at all ages. Yet, labour utilisation is not as high as it looks, in part because of the short duration of working time. Annual working time is already one of the shortest among OECD countries. Hence, the authorities should avoid making steps toward a general shortening of working time, which has led in other countries to lower labour utilisation, without obvious benefits for the workers. In addition, labour utilisation is depressed by high entry into sickness and disability benefit schemes, which are poorly monitored and therefore popular. Attempts to reform the sickness and disability benefit schemes, including the tripartite agreement, have so far been unsuccessful. In order to curb sickness absences, the government proposed to introduce an employer co payment of benefits, but this was rejected on the grounds that it might have encouraged employers to screen applicants and discriminate against the less healthy. Likewise, an experiment to provide wage subsidies for the employment of disabled workers was not successful. New measures will be implemented in 2007 to curb the rise of sickness absences and a commission report on disability pensions will soon be released. Indeed, Norway needs an ambitious rescaling of its sickness and disability assessment process, with a parallel reduction in these schemes’ financial generosity and a tightening in eligibility criteria. Better control of sickness absences as carried out in most OECD countries is needed in Norway. Also, disability entitlements should be initially assessed and thereafter regularly reviewed by NIS doctors. Thus, to have a real impact, the reform of the old age pension and early retirement scheme should be complemented by reforms of the health care system, as well as of the sickness and disability benefit schemes. With well designed reforms in place, the welfare system would move onto a sustainable footing. It is therefore crucial that Norway resists the temptation of finding in higher than expected oil revenues a cause for delaying the necessary reforms.
Hours worked and working weeks due to sick leave
Source: OECD, Going for Growth Database.
Norway has developed a very strong activation strategy for people with low labour market attachment. However, the process of vocational rehabilitation seems particularly long and outflows may be judged disappointing for specific groups. These programmes should be aimed at speeding up the return of long term sickness recipients back to work. In addition, in order to curb possible abuse, controls and sanctions to actively participate in job search should be enforced. The recent merger of the Public Employment Services with the National Insurance Administration should help fill this objective, provided that the culture of placing people into jobs takes precedence over the culture of distributing a multiplicity of assistance benefits. In the medium term, such labour market reforms would halt the deteriorating trend in labour market participation, thereby helping safeguard the Norwegian welfare state itself.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations but not all of the charts included on the above pages.
The complete edition of the Economic survey of Norway 2007 is available from:
For further information please contact the Norway Desk at the OECD Economics Department at email@example.com. The OECD Secretariat's report was prepared by Alexandra Bibbee and Benoît Bellone under the supervision of Patrick Lenain.