SGI 2022 | Norway | Key Challenges

Key Challenges

Recent Governments Experts

SGI experts on Norway

Kåre Hagen

Kåre Hagen is director at The Centre for Welfare and Labour Research at Oslo Metropolitan University. He is a political scientist, and his fields of research are comparative welfare state policies, public sector reform and implications of European integration on EU member states. He has had positions at the Department for Political Science at the University of Oslo and at the Norwegian School of Management (BI). Hagen if frequently used by Norwegian Governments to prepare reports on public sector reform.

Jonas Lund-Tønnesen

Jonas Lund-Tønnesen is a Researcher at the Department of Government, University of Bergen. He obtained his PhD in Political Science from the University of Oslo. He was previously University Lecturer at the Norwegian University of Science and Technology, and was a visiting researcher at the University of Potsdam, Germany. His main research areas include digitalization of the public sector (particularly issues concerning surveillance and privacy), crisis management, and learning in public administration.

Mi Ah Schøyen (Coordinator)

Mi Ah Schoyen is Senior Researcher at NOVA Norwegian Social Research. She holds a PhD in political and social sciences from the European University Institute and works mainly in the field of comparative welfare state research. Her interests include the welfare mix, the politics and social consequences of welfare state reforms, intergenerational solidarity and the interplay between climate and social policy. She has published on topics such as the Nordic welfare state model, the eco-social agenda in Europe and cross-national comparisons of consequences of early job insecurity. She has experience from several large collaborative international research projects.

Norwegian politics faces three medium- to long-term challenges. The first is phasing out the petroleum extraction industries, which are the largest emitters of CO2, and developing new industries based on sustainable energy sources. Norway has committed to becoming a climate-neutral, low-emission economy by 2050. The second challenge is ensuring that the comprehensive welfare state remains demographically and economically viable. The third is securing growth in green and sustainable industries to create both jobs and income to replace those currently provided by the petroleum sector. To address these challenges effectively, it is imperative to overcome fragmentation and coordination issues within the political system, thereby enhancing the central state’s capacity for reform.

Phasing out dependency on petroleum presents a strategic choice: either politically enforce downsizing of the sector, ultimately ending all production as demanded by environmentalist groups, or implement a broader set of policy measures to reduce Norway’s CO2 emissions while continuing oil and gas extraction.

Key elements of the latter strategy include large-scale carbon capture and storage solutions, the purchase of emission quotas, and the electrification of extraction using hydro and wind energy. Developing new activities and employment opportunities in the green sector requires significant investments in research and innovation, along with the inherent economic and financial risks. This may also necessitate the introduction of more taxes and subsidies designed to promote the transition. Upgrading the skills and competencies of the workforce is essential, making lifelong learning more than just a slogan.

A significant increase in state support for research and innovation in new industries is necessary unless a more venture capital-friendly approach is adopted. However, this approach does not align well with established political traditions and is unlikely. There are comprehensive plans for constructing wind farms offshore in the North Sea, and factories for producing batteries are being built.

State interventions of this magnitude will inevitably raise fundamental questions about the role of the state versus market mechanisms as key drivers of economic development. This issue is becoming more salient as geopolitical tensions rise and states increasingly support domestic industries.

The second challenge is to sustain the generous welfare state, particularly the high levels of health and social services. Government ministers consistently assert that “Norway will run out of personnel before we run out of money.” The proposed solution includes three measures.

First, labor market participation must be raised relative to the number of economically inactive cash benefit recipients. The labor market needs to be more inclusive for younger cohorts, temporary absenteeism must be reduced, and the elderly must postpone retirement. Strong economic incentives are already in place in the pension system, but more is needed to adapt jobs to the preferences and capabilities of the elderly population.

Second, new technologies must be developed and implemented in health and welfare services. Significant efficiency gains are possible if the technological potential for user involvement in the co-production of services is realized, and routine operations may be replaced by technology.

The third challenge is to increase the capacity to implement national decisions in sectors requiring coordination between different actors. The fragmented political system, with strong local grounding and significant responsibility for policy implementation resting with municipalities, has been instrumental in maintaining high legitimacy of policies and sustaining trust levels in both national and local policymaking. However, this fragmentation often presents a significant obstacle to coordinated approaches for greening the economy. This issue spans both vertical and horizontal coordination.

This challenge becomes particularly evident in land use. Effectively communicating the nature crisis to the public requires a drastic rethink and new practices in area conservation, posing a direct challenge to the principle of local self-determination. Similarly, in welfare policies, maintaining service quality and controlling expenditures necessitates structural rationalizations in both responsibilities and service production. Digital technology may address some of these challenges by facilitating improved information exchange and automatic decision-making systems between public organizations (ministries and agencies) and in collaboration with private actors.