Nordic labour market models facing pandemic crisis: A comparative study of policy responses, actor adjustments, and social outcomes

The COVID-19 pandemic severely impacted the labour market. Many were furloughed or lost their jobs. The authorities introduced measures to counter the negative effects of the pandemic. The crisis is likely to leave lasting marks on the labour market, particularly on its governance and regulation. In collaboration with researchers at the universities of Gothenburg and Aalborg, Fafo is conducting studies across Scandinavia on the crisis’s impact on the labour market, its institutions, and workers’ attitudes towards the measures implemented. Several questions are addressed in the project: Which groups lost their jobs and shouldered the burdens? We observe a clear hierarchy in how the lockdown affected people in 2020. Individuals with weak ties to the labour market were at the greatest risk of falling out of paid employment, low-wage earners had somewhat lower risk, and high-wage earners faced the lowest risk. Analyses show that wage inequality has increased in Norway in recent years. This is partly due to weaker wage growth at the lower end of the wage distribution compared to the rest of the distribution. A contributing factor to why low-wage earners experience lower wage growth may be their greater vulnerability to downturns and economic crises. What influenced which measures were implemented? In a book chapter from 2024, we examine how the furlough scheme was altered in Norway, finding that a number of familiar and innovative changes were made to the existing furlough scheme. New solutions were developed because of the pandemic itself, and as a consequence of the government’s COVID-19 lockdown. In a paper from 2022, we compare how furlough schemes, short-time work schemes, and wage compensation schemes were changed and introduced across Scandinavia. There were developments of the existing system, and new solutions tailored for the specific national context. The systems in Scandinavia did not become significantly more similar. In an article, we explore whether and how unemployment benefits and sickness insurance were altered in Scandinavia during and after the pandemic. While Denmark and Norway implemented temporary changes, many of the changes introduced in Sweden became permanent. In Sweden, the pandemic helped push through reforms that had been debated for some time. A paper from 2023 examines whether and how income protection for the self-employed was changed during the pandemic in the Scandinavian countries. Changes were made under time pressure, in close cooperation between authorities, worker and employer organisations, in all three countries. Path-dependent temporary changes were made to income protection schemes in Denmark and Sweden. In Denmark, in addition to adjustments to the existing system, a temporary wage compensation system was introduced. In Sweden, the rules within the difficult-to-access existing system were made more flexible and accessible, and the adjustments made have had lasting effects: the income protection scheme for the self-employed, has now been made available to more people. In Norway, the government and Parliament, together with the social partners, introduced a temporary income protection system. In the 1990s, authorities, employer and worker organisations collaborated on joint solutions that ensured coordination between various policy areas, an example being the solidarity alternative. Did the parties in Scandinavia, despite differences in the degree of cooperation before the pandemic, manage to create effective solutions under pandemic pressure? We do not find examples of tripartite cooperation solutions where coordination between different policy areas took place. However, several changes and new measures were implemented through close cooperation between employer organisations, worker organisations, and the state. For example, in one study, we show that both adjustments to the furlough scheme and new solutions were strongly shaped by collaboration between the parties. The study of changes to unemployment benefits and sickness insurance in Scandinavia also shows that the social partners were involved. Finally, we examine how the crisis affects different groups’ attitudes towards furlough schemes, unemployment benefits etc. We have studied individuals’ attitudes towards changes made to the unemployment benefits system in Norway during the pandemic. Were there gender differences? Do self-interest or more general ideological values shape perceptions of the changes? For example, are those with insecure jobs more likely to support the changes that were introduced? We find no gender differences, but the paper suggests that attitudes towards these changes are largely shaped by individuals’ experiences in the labour market during the pandemic. This appears to be more important than job security.

Cooperating with researchers at the universities of Gothenburg and Aalborg, we will compare how the Danish, Norwegian and Swedish labour markets and their governance models tackle and adjust to the consequences of the corona epidemic. Applying a multi-level, multi-method approach, we compare the crisis’ impact, and the policy responses and adjustments to it as it unfolds in time. Scandinavian labour market institutions and actors share many similarities, but regulations differ in important ways as do the national responses to the epidemic. Combining register and survey data, document analyses and qualitative interviews, the project builds on five work packages (WP). The core questions in WP1 and WP2 are how the economic shock affects the pattern of labour mobility, wage sensitivities, and the distribution of employment and earnings. WP3 examines to what extent the Scandinavian capacity for crisis management through coordination of economic policies, wage setting and social policies remains intact, and the role of social dialogue in shaping eventual reforms in labour market policies and institutions. WP4 analyses changes in specific policy instruments and institutions, such as temporary lay-off schemes and employment regulation, and how the adjustment paths are influenced by national differences in the depth of the crisis or the extent of policy concertation. Finally, WP5 studies attitudes and preferences of individuals in different labour market positions, their support for or disapproval of different policy schemes and changes. A research challenge could be the access to central representatives of governments and organized actors in WP3-4, but the research team has longstanding experience in research cooperation with such actors. WP5 requires information from surveys that, provided national funding in Denmark and Sweden, require coordination across countries, but researchers involved in this project have extensive experience with this type of data collections.