In the 2015 Prosperity Index, released by the Legatum Institute on Monday, the Nordic nation was again in first place, followed by Switzerland in second, and Denmark in third.
However, the report's authors said that Norway's hold on the top position in the index masked an underlying decline in its performance on the economy -- one of eight factors used to rank the world's countries.
“The Prosperity Index shows that the Nordics are prosperous places, however, prosperity cannot be taken for granted and without robust job growth the Nordics will struggle to remain at the top of the pile,” the report's authors wrote.
Norway ranked first on the economy in 2013, as countries without the benefit of its oil-derived income struggled with the after-effects of the global financial crisis. But it was down to fourth place in this year's ranking.
“While many other advanced economies have made progress on the Economy sub-index since 2009, the Nordics have been going backwards,” the institute wrote in its report. “Data from the Prosperity Index can pinpoint the primary source of the Nordic malaise. The countries are being let down by their poor labour market performance.”
The Legatum report includes an essay by Swedish free market economist Nima Sanandaji, who accuses Norway of concealing a high unemployment rate by putting the long-term unemployment on sickness benefit or early retirement.
“Early retirement is one of the main, but not the sole, tactics used in the Nordic welfare systems to hide true unemployment,” Sanandaji writes. “Another example is that unemployed individuals participate in labour market programmes with limited prospects of gaining employment, or are excluded from the labour force for various reasons.”
The institute argues that the ‘Anglo-Saxon' labour market model seen in the UK and US seemed to be doing a better job of creating jobs after the crisis.
The Legatum Institute, backed by the reclusive billionaire New Zealander Christopher Chandler, ranks the world's countries according to economy, entrepreneurship, governance, education, personal freedom, health, security and social capital.