Cost of living: What do workers in Norway spend their salaries on?
What do workers in Norway spend their hard-earned cash on and is there anything left over for leisure? Financial expert Ingvild Aagre goes through the numbers.
According to Statistics Norway (SSB), the average gross earnings in Norway is 48,750 NOK per month or 585,000 NOK per year. For elementary occupations, the monthly average is 34,640 NOK, whereas managing directors and chief executives earn 83,030 NOK before tax.
Norway operates with progressive taxes, meaning lower tax rates are imposed on low-income earners than those with high earnings. For most full-time employees, the tax rate will range between 23-33 percent.
For example, someone earning 48,750 NOK per month can expect to pay about 27 percent in taxes, resulting in a net monthly income of 36,250 NOK.
These numbers give Norway a place among the top 10 countries with the highest monthly net income.
Cost of living
While the income levels might be high, so is the cost of living. According to Business Insider, Norway is the world's 3rd most expensive country to live in.
But exactly how high are the expected expenditures for someone living in Norway? Let's break it down by looking at both essential costs and average consumption expenditures.
First of all - let's have a look at the absolute essential costs such as housing, food, basic utilities and transportation. In this section, we also need to include minimum loan payments.
According to statistics from SSB, people living in Norway spend 22 percent of their net monthly income on housing, 15 percent on transportation, 11 percent on food and alcohol-free beverages, and 3 percent on health-related expenditures. Together this amounts to 51 percent of total income.
Consumption Research Norway (SIFO) breaks some of these costs down even further in their Reference Budget for Consumer Expenditures. For instance, they estimate that someone aged 31-50 years will spend between 3,100 - 3,660 NOK monthly on food and beverages, about 880 NOK on personal health and 310 NOK on other groceries.
According to the financial institution Lån for deg, people living in Norway owe a total of 143,4 billion NOK in unsecured debt, which includes consumer loans and credit card debt. Based on these numbers, it can be estimated that an average Norwegian spends between 5-10 percent of their total net salary on repaying their unsecured debt.
For those with children, there are some extra monthly costs to be considered. According to SIFO's calculations, an average-income couple would pay 3,230 NOK for a kindergarten spot and 3,212 NOK for a 100 percent after-school activity spot. Covering the costs for these services for two children would amount to about 9 percent of their total net income.
Considering these numbers, it is fair to assume that people living in Norway spend an average of 60-70 percent of their income on essential outgoings.
According to SSB's report, there has been a considerable increase in consumption expenditure in Norway over the last years. Adjusting nominal values to real values, we spent as much as 64 percent more on consumption in 2017 than 2000. Consumption expenditure refers to non-essential spending.
The statistics reveal that we spend an average of 11 percent of our incomes on culture and leisure activities, 9 percent on travels and trips abroad, and 5 percent on clothes and shoes.
Let's break this all down into a budget of concrete numbers.
The calculations are based on a person living alone with an average net salary of 36,250 NOK.
Essential costs: 21,734 NOK (60 percent)
- Housing (rent/mortgage repayment): 7,975 NOK
- Transportation: 5,438 NOK
- Food, beverages and other groceries: 3,970 NOK
- Health: 1,088 NOK
- Unsecured debt repayment: 3,263 NOK (9 percent)
Consumption expenditure: 9,064 NOK (25 percent)
- Culture and leisure activities: 3,988 NOK
- Travels and stays abroad: 3,263 NOK
- Clothes and shoes: 1,813 NOK
- Other: 5,452 NOK (15 percent)
In this example, our reference person is left with 15 percent of the net salary after covering essential costs and consumption expenditures. This means it would be possible to stash away some money every month for savings, for instance, by creating a buffer for unexpected expenses.
Of course, our individual realities are rarely average, and the budget breakdown will look different in each household, depending on our income level, life situation and standard of living.
Our budget breakdown of an average Norwegian salary reveals that about 60-70 percent is spent on covering the essential costs, 25 percent is spent on consumption, and between 5-15 percent is left for savings or other projects.
Overall, it is fair to say that, in one of the most expensive countries in the world, the average income and the costs of living are, thankfully, rather proportionate.
Ingvild Aagre is Web Editor at the financial institution lanfordeg.no and has seven years of experience in teaching, professional counselling and text production. She holds an MSc in Anthropology with a specialisation in Economic Anthropology from the University of Bergen. She has also studied history, language and sociology at other universities in Norway and abroad. For a full bio, please visit her web page.