1 Introduction
The peculiarities of Greenland's economy and labour markets and the driving forces of change
Laust Høgedahl
Greenland is a self-governing part of the Kingdom of Denmark, and while its government decides on most domestic matters, foreign and security policies are handled by the Danish Government in Copenhagen. However, a World War II defence treaty between Denmark and the United States gives the US military virtually unlimited rights in Greenland at America's northernmost base, Thule Air Base. Yet, global warming and contracting ice have opened up access to the Northwest Passage for commercial shipping, exposed new potential offshore oil mining sites in the Artic Sea, and eased the logistics of accessing precious minerals. Hence, not only American but also Russian and especially Chinese companies have tried to gain economic footholds in Greenland and the surrounding seas (Sejersen, 2015).
The growing political and economic interests in Greenland have also sparked a strong domestic desire for more independence from Denmark. As an old colony, Greenland relies on 3.9 billion DKK in annual subsidies from Denmark, which make up about 55% of its annual budget. A stronger degree of independence is closely tied to a more self-sustaining economy based on private sector growth. However, Greenland is a vast country, spanning 2,166,086 km2 with a small population of only 55,000 inhabitants mostly concentrated along the west coast. The capital, Nuuk, is the largest city, holding around 18,300 people. The geography and the size of the country make mobility and transportation challenging.
The economic development has been very positive in recent years; however, public and especially private employers in Greenland are experiencing a labour shortage in spite of a rather high unemployment level of around 6%; a relatively large share of the population is not part of the workforce. The private economy is also heavily dependent on fishing and its downstream industries, making the Greenlandic economy vulnerable to fluctuation in fish prices and stock. Therefore, new areas of business are being pursued, such as minerals, adventure tourism, renewable energy, and pure water exports, combined with policy reforms aimed at increasing the labour supply and easing access to foreign labour (Government of Greenland, 2020).
In this introductory chapter, we present the peculiarities of Greenland's economy and labour markets. In many ways, conventional theories of economics, labour market regulations, and working life fit poorly with the Greenlandic reality. This is due to a mix of structural, institutional, cultural, and political circumstances that have shaped Greenland into a unique case over the course of time, sharing traits with both Nordic countries (especially Denmark) and Inuit communities in North America.
First, this opening chapter introduces a number of key concepts and terms relevant to studying any labour market, with a focus on Greenlandic conditions and peculiarities: structural and institutional conditions, demand, and supply of labour. We explore these key concepts in the following chapters. Second, this chapter involves a number of structural and institutional “driving forces of change” that will continue to shape the Greenlandic economy and labour market substantially. In particular, we address the consequences of climate changes and internationalisation. It is important to stress that these driving forces of change are not all deterministic but rather create new possibilities and challenges for the Greenlandic economy and labour market. Primarily, change follows when policymakers regulate or de-regulate.
This introductory chapter ends with a brief overview of the following chapters and by summarising the most important overall conclusions.
1.1 Structural and institutional conditions for Greenland's economy and labour markets
The structural conditions of any country are obviously important in terms of its labour market and overall economy. In economic and political economic theory, structural conditions include a variety of predetermined factors given to any national economy (Stiglitz, 2010). Some countries benefit from vast pools of raw material – some renewable, such as fish, and others limited, such as oil, gas, or minerals. Other countries are landlocked, limiting their means of importing and exporting goods. Still other countries, such as Greenland, are not connected with the mainland. Hence, structural conditions are important in terms of shaping industries and businesses for any national economy (e.g., shaping employment in the primary, secondary, and tertiary sectors). Structural conditions are not static but continuously transform, bringing structural change to an economy and related labour markets.
The structural conditions framing Greenland's economy and labour market are unique. First, the sheer size of the country in relation to the size of the population is stunning. Greenland spans 2,166,086 km2 – more than the states of Alaska and California combined. The country ranges from Cap Morris Jesup in the north, just 740 km from the North Pole, to Cap Farewell in the south, situated on the same latitude as the capital of Norway, Oslo. The widest point from west to east is 1,050 km, and more than 410,000 km2 (around 19%) is covered by inland ice. Greenland is situated northeast of Canada and is therefore, geographically, a part of North America in spite of its historical, political, and economic ties to Denmark and the rest of Europe.
Greenland holds 55,000 inhabitants, mostly concentrated along the west coast. The largest city and capital, Nuuk, holds around 18,300 people. The vast distances and impassable geography of mountain ranges, fjords, and ice make transportation challenging, especially considering the changeable weather. Even though Greenland technically is an island (the world's largest), it is in fact more precise to describe the country as an archipelago due to the logistic challenges posed by the geography (see Chapters 6 and 7). Labour mobility is a challenge for most countries; however, the Greenlandic labour market is extremely segmented in this regard. It is therefore more precise to describe the Greenlandic labour market as multiple – and very isolated – labour markets with extremely different structural conditions. The seasons in Greenland also strongly affect the economy and labour market, as fishing and other activities, such as construction, are dependent on the weather.
The country's diverse geography also shapes the nature of various industries. The unique geography and geology of Greenland produce a number of natural resources in terms of fish (including shellfish, mainly prawns), oil, gas, and minerals. Fishing as a renewable, natural resource takes place throughout the country, though the west coast is home to most of the inshore commercial fishing. Farming and agriculture have long been present in southern Greenland, producing both meat (mainly sheep) and vegetables. In the north, the sun does not rise from late October to mid-February, setting limitations for outdoor activities. There are two active mines in Greenland – one ruby mine in Qeqertarsuatsiaat and a newly opened mine at Kangerlussuaq that produces anorthosite. Commercial extraction of minerals is still rather limited, yet new mining sites are seen as important areas of income and employment for the future, as the Danish granted competence in this policy area to the Greenlandic government in 2010.
Oil and gas are also found underground in the seas surrounding Greenland (Skjervedal, 2018). Hence, the Greenlandic government has actively been pursuing an offensive strategy to attract foreign investments in commercial extraction by offering tax cuts to so-called “first movers” willing to invest in developing new oilfields (Government of Greenland, 2020).
The public sector is the biggest sector and main employer in Greenland, employing around 40% of the workforce. Due to Greenland's colonial history, many companies remain state-owned. Fishing is the dominant industry besides public employment, with the state-owned Royal Greenland as the biggest employer in Greenland.
In terms of institutions, Greenland gained rights as an independent territory (amt) of the Kingdom of Denmark in 1953 and therefore not just a colony. A number of incremental reforms have since given Greenland more self-governance from Denmark, albeit foreign and security policy are still handled by the Danish Government in Copenhagen. In terms of economy, Greenland is dependent on annual subsidies from Denmark to make up half of its annual budget.
Regarding labour market regulation and institutions, Greenland can be seen as part of the Nordic model of industrial relations (Høgedahl, 2019). Wages are primarily negotiated by strong labour market (social) partners. On the employers’ side, Grønlands Erhverv (GE) represents small and large companies within all sectors (apart from the public). On the employees’ side, a number of trade unions are present in the labour market, with SIK as the biggest organisation of unskilled and skilled blue-collar workers. The labour market partners conclude collective agreements that regulate wages and other working conditions in all sectors. Strikes and lockouts are only allowed when collective agreements are concluded or renegotiated. When a collective agreement is in force, labour disputes must be solved by means of negotiation or mediation. This industrial “peace obligation” is also known in the rest of the Nordic countries. However, Greenland has a national statutory minimum wage set by national law, which is not the case in other Nordic countries. In Greenland, no wage coordination mechanism exists to ensure that the exporting industry dictates wage developments. Another important difference between the Nordic countries and Greenland is that no independent, private labour court exists in Greenland. Here, labour disputes are solved in the public court system or by private arbitration. It is also important to note that foreign labour is also regulated through law (see Chapter 5).
1.2 Supply and demand for labour
Any industrialised labour market has a demand and a supply side. The demand side comes from employers (public and private) that need labour to produce goods and services. The supply side is the labour available. The demand and supply for labour are also obviously pivotal in terms of unemployment and wage levels, although affected by labour market policies as well as employment and industrial relation systems.
Traditionally and historically, most Greenlandic families have been self-sufficient (self-employed) by fishing, hunting (including sealing and whaling), and trading. After World War II, the Greenlandic economy slowly transformed to a production-based economy, with a supply and demand for labour as a consequence (Thorleifsen, 2005). The first workers were predominantly employed at KGH Royal Greenland Trading (Den Kongelige Grønlandske Handel), a Danish state-owned company trading provisions and goods from settlements around Greenland (Marquardt, 2005). Since the 1950s, the Greenlandic labour supply has grown exponentially. The rather late industrialisation of the Greenlandic economy, compared to other western European countries, came with new challenges in terms of matching the supply and demand of labour. Education and labour market policies were needed to supplement the industrial policy (Thorleifsen, 2005), and the need for education policies is still very present today (see Chapter 8). The structural condition described above is also influencing education and training, as many young Greenlanders have to leave home at around 15 years old because their higher education takes place in another city; many small towns and settlements are often too small to hold larger schools. In 1953, Greenland adopted an educational system similar to the Danish system. Changes during recent decades within the country's primary sectors – fishing and hunting – mean that necessary changes have to take place to compete on a global level. Urbanisation (and thus, housing) is another specific example of Greenland's difficulty in keeping up with demand. Education is seen as a means to achieve better welfare, improvement of health, and global (political) power. However, many young Greenlanders must go abroad (for the most part, to Denmark) to get an education. Many do not return, creating a “brain drain” in terms of many much-needed professions (see Chapter 2).
In recent years, fish prices have been very favourable, creating a strong economic upturn in Greenland. This upturn has created more activities in other sectors, such as construction and private services, creating an even faster-growing demand for more labour. Greenlandic employers have therefore requested easier access to foreign workers, especially from Asia (China, Thailand, and the Philippines). The high demand for labour is also evident when looking at unemployment levels. Formally educated workers are in high demand, and even unskilled workers are very much needed, especially in the fish processing industry. Yet, a number of people in Greenland are still not part of the workforce due to a number of complicated issues (see Chapters 5, 7, and 9). These can be identified as social and psychological issues in combination with a lack of skills and education. However, research also indicates that Greenlandic employers, in many cases, wish to bypass native workers in favour of foreign workers (see Chapter 4).
Due to Greenland's history with Denmark as a colonial power, a close tie to the Danish labour market still exists today. Many workers with managerial responsibilities and higher education are native Danes working in Greenland (Government of Greenland, 2018). In this sense, the labour market is not only fragmented and segmented due to challenging geography, as discussed above, but also in terms of the need for foreign labour creating ties to Danish, Nordic, European, and Asian labour markets in various ways.
Another important element in terms of supply and demand for labour is the notion of work. In the world of work, the term is pretty well understood as an action by which a worker sells their labour to an employer for a given price to obtain a certain living standard. Other themes are, of course, relevant in relation to work, including a sociological emphasis on work as a way of forging identity. Yet, as Poppel (2005) notes, work as an activity or concept is different in an arctic setting. Due to cultural traditions, work as an activity has historically been seen in Greenland as something for those unable to provide for themselves in a hunter-gatherer society; since women were not considered hunters, they were compelled to work (see Chapter 8). Hence, some studies have found that men are very hesitant (even reluctant) to engage in certain types of paid work (e.g., the fish-process industry), seeing it as women's work (Poppel, 2005). When the notion of work is different from the general understanding, the concept of being unemployed becomes equally different, as Hansen and Tejsner (2016) showed in a study of north-west Greenland. We point out that being unemployed in a Greenlandic con...
