The corona pandemic is hitting the working life hard. Many are temporary laid-off or have lost their jobs. Businesses are struggling financially. Authorities have undertaken measures to counteract these negative effects, but the crisis may have a lasting impact on the labor market, and the consequent policy response. Within 2025, Fafo, in collaboration with leading researchers from the University of Gothenburg and the University of Aalborg, will conduct interdisciplinary and comparative studies across Scandinavia on the labour market impact of the crisis.
Several questions will be investigated: Which groups lose their jobs and bear the brunt, and will they find stable employment and good income in following years? Are wages equally sensitive to crises and to upturns? Are wage cuts in bad times just as common for both collectively and individually negotiated wages?
Our analyses show that wage inequality has increased in Norway in recent years. This is reflected in weaker wage growth in the lower end of the wage distribution than the rest. Several factors contribute to different wage profiles along the wage distribution, and one of them may be the degree of exposure to recessions and economic crises.
When we analyze how persistent low-wage status is, we find that around 180,000 people aged 24-66 were permanently low-paid in 2019. That is 1/3 of the low-wage workers in 2019. Some characteristics are typical of the permanently low-paid. Most are women, have immigrant background, have shorter education, to a greater extent work part-time, and to a greater extent work in the private sector and in firms without collective wage agreement.
The shutdown in 2020 did not hit workers randomly. Workers with weak labour market attachment showed the greatest risk of falling out of paid employment. Permanently low-wage workers had a lower (but still significant) risk, and permanently higher-wage workers had the lowest risk. In other words, the economic repercussions of the corona pandemic, like those from more traditional and demand-driven economic crises, did not materialize randomly in the labor market. Those without a solid foothold in the labor market and those who over time linger at the lower end of the wage ladder are also more vulnerable in crises. This shows that periods with frequent recessions and/or lasting recessions can be more detrimental to the wage growth and the labor market activity of low-wage workers, and economic crisis can therefore exacerbate existing inequality.
We investigate how the labor market is restructured? Authorities, employer and employee organizations have in previous crises jointly found solutions that ensured coordination between different policy areas–wage negotiations, fiscal policy, income security, labor market measures, and competence policy- have been handled in a unified context. Are institutional actors, despite varying degrees of cooperation before the crisis, able to create sound solutions under great pressure?
We will also study how the crisis affects institutions and regulations in the labour market. Will current regulation of dismissal protection, unemployment benefits and temporary lay-offs change, and if so, why and how? Will new rules and benefits appear? How will social partners adjust to a new and changed regulative landscape when the acute crisis subsides?
In a paper presented at ILERA 2022, we compared how so-called job retention schemes - layoff schemes - short-time work schemes and wage compensation schemes - have been changed and introduced in Norway, and to what extent the changes in Norway have common features with the changes made in Denmark and Sweden .
The preliminary analyzes show that a number of innovative changes were implemented in the existing institutional job retention schemes in Norway. The lay-off arrangements were changed in familiar ways, but also in new ways. In addition, new mechanisms were developed, new solutions due to the pandemic itself, and the state's closure of businesses. The changes were brought forward in close cooperation between the social partners, employer organizations, main trade unions and the state, and were strongly characterized by cooperation to solve common challenges. The changes and the new innovative solutions were mainly path-dependent; they were primarily based on the existing furlough scheme. The institutional changes in job retention schemes in Norway led, to a small extent, to the Norwegian schemes becoming more similar to what exists in Sweden and Denmark.
Finally, we will study how the crisis affects individuals’ attitudes towards employment protection, temporary lay-off schemes, and unemployment benefits. How attitudes and institutions interact, possibly influencing whether new measures and instruments become permanent, will also be studied.
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.