OECD Economic Surveys: Norway 2018

OECD

• Publisher: OECD
• Year: 2017
• Topic: Social Sciences
• eBook ISBN:
  9789264286443
• Subtopic: Sociology
• Index: Social Sciences

Thematic chapters

Chapter 1. Maintaining a successful business sector in a changing world

Norway’s success in maintaining high living standards, low inequality and good progress in gender balance owes much to its business sector. High-productivity business-sector jobs support high wages and profits, providing capacity to fund comprehensive public services and inclusive employment practices. Ensuring that the business sector thrives as globalisation and technologies evolve further and as the oil and gas sector enters long-term decline requires maintaining business-friendly conditions. This chapter examines framework conditions, notably competition legislation and policy affecting firm entry and exit (“firm dynamics”). It evaluates how best to encourage new business models, as well the growing issue of labour supply among older cohorts. Education policy’s role in providing skills conducive to good lifetime earnings is also discussed.

Maintaining Norway’s well-performing socio-economic model requires a strong business sector with capacity for exploiting opportunities in globalised markets, and for delivering goods and services domestically, in an environment of comparatively high wages and high taxes. Furthermore, capacity to shift the focus of economic activity is important to help Norway diversify away from oil- and gas-related activity over the longer term. This chapter first examines the composition of Norway’s business sector and the challenges ahead. The subsequent sections consider key areas of policy.

Key features of Norway’s business sector

Petroleum-related activity extends beyond offshore production; state stakes remain substantial

• Activities related to oil and gas (together, “petroleum”) sector remain an important segment of the mainland business sector. Mainland businesses provide exploration and production services and investment goods not only in Norwegian offshore fields but also elsewhere in the North Sea, and beyond. Mainland petroleum activities are estimated to account for nearly 9% of total economic activity. Adding offshore activity to this, means total petroleum-related activity accounts for a little under one quarter of value added (Figure 1.1, Panels A and B). In employment terms the share is substantially smaller, reflecting high capital intensity in the petroleum sector.
• State ownership in businesses remains substantial. According to recent estimates, about 15% of business-sector employment is in companies with partial or complete state ownership. Stakes are held in a wide range of sectors, the most significant economically being a 67% in the oil and gas producer, Statoil.

Figure 1.1. The composition of Norway’s economic activity

Notes: Panel A and B, Public sector comprises categories: Education, Health and Social Work, Public Administration and defence. The mainland Oil&Gas related business sector are estimates:

1. “Value added” share is a Ministry of Finance estimate of the value of demand from the petroleum sector. As such it includes imports, which do not contribute to value added in the Norwegian economy.

2. Oil-related employment reported by Statistics Norway (Økonomiske analyser 1/2017) as of 2016 around 185 000 jobs, or 6.7% of employment were directly or indirectly linked to the oil and gas sector.

Source: Statistics Norway; Statistics Norway; Ministry of Finance.

StatLink http://dx.doi.org/10.1787/888933638904

Familiar sectoral shifts are underway in the mainland economy

• Manufacturing’s share of output has shrunk further. The “machinery” and “other manufacturing” categories combined currently generate about 5.5% of mainland value added compared with 10.5% in the mid-1980s (Figure 1.1, Panel C). According to one input-output analysis (Prestmo et al, 2015), about 14% of manufacturing is linked to the petroleum sector.
• Service activities occupy an increasing share of economic activity. Businesses classified as “other services” today accounts for about 25% of value added (Figure 1.1, Panel C). In addition, Education, Health and social work have expanded significantly, which in Norway implies mainly an expansion of public-sector activity as private enterprise plays a comparatively small role in these sectors.
• Norway’s “traditional” sectors, farming and capture fishing, today account for only around 2% of output and employment. For farming in particular, economic protection remains substantial reflecting longstanding priority in Norwegian policy to preserving rural and remote communities. Meanwhile, capital-intensive aquaculture (mainly salmon) has expanded rapidly. Exports now account for about 2% of GDP and the sector is second-largest export category after petroleum.

Business sector and employment practices are more inclusive than most

• Business-sector employment practices have contributed significantly to the narrow gender wage gap and high rate of female employment. Norway’s gender wage gap is now 7% and women account for nearly 48% of employment (Figure 1.2, Panels A and B). Norway was an early mover in bringing in statutory quotas for women on the boards of public limited companies. Nearly 45% of board members are now women among large listed companies. Furthermore, gender balance is a key factor in Norway’s narrow distribution of market income (Figure 1.2, Panel C) along with high educational attainment and a strongly centralised collective bargaining system.
• Businesses score reasonably on environment-social-governance (ESG) indicators but lag behind leading countries. Indicators based on Thomson Reuters data (Figure 1.3) score Norway above the United States on environment and social dimensions but not quite as well as its Nordic peers or the Euro Area. A comparison of oil-and-gas sector scores produces a similar story. Norway performs comparatively poorly on the governance component, possibly reflecting weak scores in state stakes in business.

Figure 1.2. Much of Norway’s inclusiveness derives from high employment rates and small gaps in earnings

1. The Gini coefficient ranges from zero to 1, zero indicating all individuals have the same income; 1 indicating one individual receives all income.

Source: OECD Employment and Labour Market Statistics; and OECD Income Distribution Database (IDD).

StatLink http://dx.doi.org/10.1787/888933638923

Figure 1.3. Norway scores reasonably in environment-social-governance (ES...

Table of contents

• Title page
• Legal and rights
• Introduction
• Executive summary
• Assessment and recommendations
• Annex Progress in structural reform
• Thematic chapters
• About the OECD