Jon Erik Dølvik: Stored demand could help create jobs

Jon Erik Dølvik and Kristin Alsos from the Norwegian research foundation Fafo have coordinated the 30 researchers from a range of Nordic research institutes and universities. Dølvik will also open the concluding Future of Work conference on 26 November, which will be hosted by the Council of Ministers’ Danish Presidency. 

Dølvik will be in Oslo because the event will, not surprisingly, be online. The Danish hosts might be somewhat distracted by the political crisis surrounding the Minister for Agriculture’s decision to order the culling of all Denmark’s minks – without having the mandate to do so. Around 15 million animals must be killed, and 6,000 Danes will lose their job. 

This is just one example of how the Corona crisis hits in ways that are nearly impossible to predict. 

“That is why we have also been granted an extended deadline for the final report. But it will be done in time for the planned employment ministers’ meeting in March 2021,” says Jon Erik Dølvik.

“I am happy for this extra time, as it allows us to take a better look at the second Corona wave's impact on employment and the economy.”

Four main areas:

The research project aims to analyse the consequences of societal change for the Nordic model across four main areas:

• What impact will ageing populations across the Nordic Region (and elsewhere in Europe) have on the labour market?
• How will growing globalisation influence labour markets – or will globalisation slow down?
• How will new technology and new ways of organising work impact on jobs, the demand for skills and employment?
• What will climate and environmental change mean for future decision-making?

The researchers have also studied two horizontal issues: How do work environments develop across different sectors? And what will that mean for reforms of Nordic labour legislation? Finally, the report will describe what all this will mean for the Nordic model.

“The future is open, but it is in no way a blanc canvass. Our options are constrained and shaped by inherited means and conditions – economically, socially and environmentally,” says Jon Erik Dølvik.

What has changed?

This will not be the first time Dølvik presents the Future of Work project, and it is also not the first time he talks to the Nordic Labour Journal. This time the interview focuses on how the Corona crisis is different from other crises.

“We know from earlier crises, like the 2008 financial crisis, that it takes a long time before a country gets back to pre-crisis employment levels. After the financial crisis, it took nearly ten years for Denmark and Finland to get back to pre-crisis employment levels. After the economic crisis in the 1990s, it took even longer for Sweden and Finland. 

“We risk even stronger effects this time. More people will be competing for fewer jobs in the parts of the labour market where wages are lowest and jobs most precarious. 

“How will those entering the jobs market during the crisis do? Will we see a Corona generation displayed as a peak in future unemployment graphs?”

The Corona crisis differs from former crises because services have been the hardest hit – and not so much the production of goods.

“The sectors that have the lowest threshold for those who struggle to join the labour marked – retail, hospitality and tourism – have been the ones particularly hard hit by the Corona crisis.”

Other parts of the economy have improved, like digital communication, others have not had to put people on furlough or shut down. Public sector employees have been able to carry on working as before, many of them on the frontline in the fight against the pandemic. 

Dramatic effects

The effects of the first wave were dramatic. Unemployment rapidly rose to record levels across the Nordic region.  

Meanwhile, state measures to support businesses, jobs and incomes were introduced on an unprecedented scale as a result of tripartite agreements. 

“The result was that the fall in spring was followed by a nearly equally rapid recovery after the summer – yet with much lower activity and employment levels than pre-crisis. The question is whether we will see the same development during and after the second wave of the pandemic and whether we risk even deeper and more long-lasting effects on the labour market,” says Jon Erik Dølvik.

In an earlier interview, he talked a lot about how wealth is divided ever more unevenly, leaving the biggest companies with a greater share of the winnings and incomes. This is partly due to the consequences of technology, according to Dølvik.

Companies like Google, Amazon and Facebook have established near-monopoly conditions for some services, where the extra cost of servicing one more customer is minuscule since everything is digitalised. If these giant players are not taxed, or invest in job-creating activities, we could end up with a lack of demand for labour. 

Money saved

“The Corona crisis has made it more difficult to travel, go to the pub and to do many other things we are used to – like going to the gym. This means people have spent less money. If we look at the normal spend on foreign travel, we are talking some 100 billion Norwegian kroner (€10.7bn) a year.

Where does the money saved on foreign travel end up? The graph above shows Norwegians' expenditures during Q2 from 2002 to 2020. The black line is foreign holiday expenditure, which has plummeted. The green is business trips which also have plummeted. The blue line is expenditures for holiday travel in Norway. Despite much media attention, the expenditure here has not increased.

“There is a ‘stored demand’ which we need to consume or invest in a way that creates jobs.”

If not, the risk is that people’s savings will be used to outbid each other to buy things like housing or holiday homes, which will make property more expensive but in the end is a zero-sum exercise which will not lead to increased welfare or new jobs for those hit by Corona. 

So this “stored demand”, argues Jon Erik Dølvik, must somehow be channelled so that it leads to investments in new businesses and activities that create jobs. He is not opposed to the idea of introducing a Corona tax to fund activity measures or funds in the Nordic countries which can be invested in more environmentally friendly technology, new green jobs and skills development for those who have been hit by the Corona crisis.

How important are demographic changes? 

“However, one of the greatest challenges facing the Nordic welfare states are the demographic changes, with more old people and fewer people to look after them.

“After 60 years of strong workforce expansion, this implies a radical shift in the basis for expanding activity, employment, and welfare funding. This will probably be accentuated by intensified trans-border competition for labour due to declining workforces in Eastern & Continental Europe, making labour migrants more expensive and harder to attract.  

“A key task for the Nordic countries will therefore be to improve employment rates, skill and inclusion among those who are struggling to enter the labour market – in particular young people and others with low education, which include many with minority backgrounds. To make that happen we need to create enough economic growth and an increase in the demand for labour,” says Jon Erik Dølvik.

Productivity growth

Therefore, whether the Nordic societies will find ways to share and apply the fruits of techno-driven productivity growth to resolve the unmet needs that fuel national labour demands, depends ultimately on how we organise – or reorganise – our political economies. 

“In short, are we – in the face of global megatrends and the current upheavals – able to preserve and renew the Nordic tools for the redistribution of income and wealth in ways that can strengthen our economies’ capacity to meet the rising need for renewable goods and services, as well as mobilising the labour and skills needed to deliver them?” asks Jon Erik Dølvik.