National Budget 2003

National Budget 2003

Structural Policy - Labour Market Issues

Despite high labour force participation rates, the supply of labour has become a key constraint on growth, as evidenced by an extended period of low unemployment and real wage increases in excess of productivity growth. Consequently, a key priority for the Government is to prevent further reductions in participation rates related to early retirement and disability pension schemes as well to increases in sick leave. At least half a million people, equivalent to one sixth of the population of working age, are currently on various transfer schemes, cf. chart 3.1.

The Government proposes a number of measures designed to increase the supply of labour:

  • A reform of the disability pension scheme was proposed by the Government in June 2002. A key element of this reform is the introduction of a temporary disability benefit. The benefit will be granted for a period of one to four years and can be extended thereafter whereas permanent disability pension will only be granted to individuals evaluated as having no potential work capacity. In order to stimulate participation in rehabilitation programmes, the temporary disability pension will be 10 per cent lower than the support received while participating in such programmes.
  • A tripartite agreement was concluded in October 2001 among the social partners and the previous government aiming at reducing sick leave, increasing employment among disabled persons, and raising the effective retirement age. The measures include voluntary company-level agreements between the employers and the National Insurance Authority. The Government will follow developments closely, in particular with regard to sick leave. A tightening of the sick leave benefit scheme will need to be considered if the rising trend in sick leave persists.
  • As of 2002, the Immigration Act has been liberalised to attract highly skilled jobseekers from outside the EEA. The Government is considering ways to further liberalise the Immigration Act with respect to unskilled labour from outside the EEA.
  • In June 2002, the Government proposed replacing the current cap on overtime per week and per four consecutive weeks by a less restrictive cap of 48 hours per week as an average over a period of four months.

Chart 3.1 Persons of working age on transfer schemes

Source: The National Insurance Authority, Statistics Norway and Ministry of Finance

Labour market policy will be geared to ensuring a quick return to employment for the unemployed and in such a way that it meets changing labour market conditions. Accordingly, in the fiscal budget for 2003, the Government proposes to reform the unemployment benefit scheme with a view to enhance the incentives for recipients to seek employment. As part of the reform, the maximum period for which an unemployed person can receive unemployment benefit is reduced from three to two years. Furthermore, the period in which the employer is liable to pay unemployment benefit for a temporarily laid-off worker is increased from three to 20 days. This is to ensure that temporary lay-offs are confined to situations where changes in output are the result of genuinely unexpected factors.