Oslo - Unemployment may be hovering below 3 percent, but the oil
crisis that has hammered Scandinavia’s richest nation could be leaving a
permanent mark.
More than a fifth of its working age population relied on
unemployment or sick-leave benefits throughout 2016, according to a study by
the Norwegian Labour and Welfare Administration, or NAV.
With welfare payments up 3 percent in 2016, the growing
dependence will likely make it harder for Norway to wean itself off oil and gas
production. While the discovery of petroleum 50 years ago has turned the
country into a modern-day Croesus and has helped make the
world’s most generous welfare system possible declining resources and a shift
to greener energy means that the country will need to find other legs to stand on
to keep up its standard of living.
Read also: Experiment turns Canada's farmers Into cooking oil kings
That's something that the stewards of the system
readily admit. The agency’s acronym has even become a verb, to NAV, which means
`being on benefits.’ “To uphold the Norwegian welfare system we need more
people at work and not on passive benefits," said Sigrun Vageng, the head
of NAV, in an emailed answered to questions.
The economic distress is to a large extent found in the
usual areas: rural communities hit hard by the closing of mines and other key
businesses. In the Arctic municipality of Ballangen, unemployment first
took hold in the 1960s as a sulphur and copper mine shuttered. Now almost 40
percent of its dwindling population receive monthly benefits from the state,
the country’s highest proportion.
undefined"It’s historical,” said Knut Einar Hanssen, a
local councillor, in an interview. "Those with competency and mobility are
the ones who can most easily find a job and move.”
Ballangen is
now working hard to attract businesses, including a potential data storage
site, according to Hanssen. Another change that should help it lose top
spot in the welfare-dependency list is that in 2020 it will cease to exist
after a merger with some of its neighbouring municipalities.
Similar scenes are being played out around the world in
places such as the US state of West Virginia and northern France. And like in
the US and France, growing distress in communities such as Ballangen is also
having a political impact.
The Center Party is surging in the
polls ahead of elections in September amid calls for a devolution of power
from Oslo and claims that the Conservative-led government has forgotten rural
Norwegians.
But dependency on state handouts now runs deeper. It also
spread to the nation’s richest regions after the plunge in oil prices caused an
estimated 50 000 job cuts in the petroleum industry, which before the crisis
accounted for more than 20 percent of economic output.
Welfare payments in
Rogaland, the regional center of the oil industry and home to Statoil ASA, rose
a whopping 13 percent last year.
Some 19 percent received benefits on average each month in
Rogaland. In Oslo, it was 15 percent, while the lowest proportion was in
Baerum, a wealthy suburb of the capital, where 12 percent collected benefits.
Conservative Prime Minister Erna Solberg, fighting for re-election
against the Labour Party and Centre Party this year, has said that
transitioning the economy away from a dependence of oil will be the key
challenge in the years ahead.
But with an increasing share of its working age population
on welfare benefits instead of paying taxes, the desired changes could prove a
difficult task for whoever is in power. And many are also pulling out of the
workforce altogether. The percentage of people of working age in
employment fell to 70.6 percent in 2016, a 21-year low, according to Statistics
Norway.
"This comes as a big cost for the society, both through
lost tax revenues and the direct expenses from social benefit payments,"
said Jeanette Strom Fjaere, an economist at DNB.
For now though, the costs are something that Norway can
take. It has over the past 20 years built up a sovereign wealth fund that is
fast approaching $1 trillion -- or almost $200 000 per Norwegian even as
the government last year started withdrawing cash for the first time.
The welfare agency paid out 174 billion kroner [$21 billion]
last year in welfare benefits, but that means the system is working as
intended. It "shows that the welfare system manages to secure those
in a challenging situation," said Vageng, the welfare agency head.