OECD: Norway trumps sick leave costs of all industrial countries

When the OECD presents its Economic Survey of Norway it is similar to when the teacher points out that the star pupil has got a B rather than an A in a few subjects:

‘Norway continues to benefit from its well-managed petroleum wealth and sound macroeconomic policies, achieving levels of well-being and social cohesion that have remained high by international standards,’ reads the report’s introduction. 

The OECD does identify some areas for improvement, yet Paul O’Brien, the economist who wrote the chapter on the labour market, told the Nordic Labour Journal:

“There is no rush to introduce changes. The economy is healthy, unemployment is low and the income distribution is more egalitarian than in most countries.”

But when it comes to how Norway has followed up the OECD’s earlier recommendations, the report shows not much has happened on the working life arena:

• When the OECD encourages Norwegian politicians to ‘increase flexibility in wage setting’, the result has been the opposite. The use of a mandatory extension of wage contracts to the construction and cleaning industries has put a dampener on wage differentiation.
• When the organisation points out the need to tighten Norway’s sick pay system, the OECD can only note a few technical changes. The integration of national social insurance offices (the ‘NAV’ reform) has “not led to any visible efficiency gains,” according to the organisation.

Not following advice

“It looks like Norwegian politicians are not following your advice?”

“I wouldn’t say they’re not listening, but they are not acting on the advice,” says Paul O’Brien.

“So who would benefit if the OECD’s advice were followed up with actions?”

“Those who pay for today’s welfare society. Providing our advice gave the desired results and fewer people claimed sickness benefit and fewer took early retirement, you would either be able to lower taxes or increase public spending.”

Paul O’Brien says Norwegians enjoy high salaries compared to other countries as well as a high average age. The general health indicators are also high. 

“People in Norway are generally healthy and happy,” says Paul O’Brien, who also was a co-author on the Economic Survey of Italy.

“Another comparison we could make is Norway’s use of money on sickness benefits and early retirement payments, which is double the average of other OECD countries, and more than any other country in that group.”

Double spending

Norway spends 4.8 percent of its GDP on these public expenses, compared to the OECD average of 1.9 percent.

Norway does this despite the fact that the problems it is tackling - ill health and handicaps - are considerably less pressing than in other countries.

The key to reducing these costs lie in increased spending control. There needs to be tighter control on doctors who agree to sick leave or early retirement, and those who are too lax should loose their right to do so.

“We’re not advocating a reform where no-one will take the brunt, but hopefully those who had no right to state support in the first place will be the ones who are targeted. It is not so much about cheating the system either, but rather the presence of incentives which lead people to make choices which do not benefit society as a whole,” says Paul O’Brien.