Although unemployment is just under 3 percent in Norway, the oil crisis that the country has been experiencing has taken its toll. A study conducted by the Norwegian Labor and Welfare Administration (NAV) revealed that more than a fifth of the working age population in Scandinavia’s richest nation relied on unemployment or sick-leave benefits throughout 2016.
Welfare payments were up 3 percent in 2016, a burgeoning dependency that is likely to make it more difficult for Norway to ease off of oil and gas production. The discovery of petroleum 50 years ago has enriched Norway, and fomented the world’s most generous welfare system. Declining resources and a focus on greener energy means that the country will need to find other means of generating income in order to maintain its current system.
Those who run the NAV are acutely aware of the issue, considering that the agency’s acronym has become a common verb. To NAV means “to be on benefits.”
“To uphold the Norwegian welfare system we need more people at work and not on passive benefits,” said the head of NAV, Sigrun Vageng.
The increase in welfare recipients is due in large part to the closing of mines and other key businesses in rural communities. The municipality of Ballangen has seen its population dwindle, yet 40 percent of its remaining residents receive monthly benefits from the state.
“It’s historical,” said Knut Einar Hanssen, a local councilor. “Those with competency and mobility are the ones who can most easily find a job and move.”
Similar scenarios can be found throughout the world in places such as northern France and the state of West Virginia in the U.S.
“This comes as a big cost for the society, both through lost tax revenues and the direct expenses from social benefit payments,” said Jeanette Strom Fjaere, an economist at DNB.
For now though, Norway is able to afford the increased welfare costs thanks to a sovereign wealth fund amassed over the last 20 years that is approaching $1 trillion—or nearly $200,000 per Norwegian. The government began withdrawing from the fund in 2016.
Last year, the NAV paid 174 billion kroner ($21 billion) in welfare benefits. According to Vageng, that indicates that the system is working, and “shows that the welfare system manages to secure those in a challenging situation.”
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