Why real wages in Norway are likely to continue falling

Frazer Norwell
Frazer Norwell - [email protected] • 12 Dec, 2022 Updated Mon 12 Dec 2022 10:04 CEST
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Real-term wages in Norway are likely to shrink next year. Pictured is a jar full of coins.

Workers will likely see salary raises next year. However, households will probably be worse off in real terms, according to economic forecasts.

Statistics Norway recently released its latest economic forecast for Norway, which warned of a slowdown in the Norwegian economy.

The report outlined that while annual wage growth is expected to pick up from next year, workers would likely be worse off in real terms. Real term wages are salaries when inflation is accounted for. Inflation in Norway is currently at 6.5 percent. 

The reason for this is that inflation will likely continue rising throughout 2023 while the key policy interest rate also has room to increase, according to Statistics Norway researchers Thomas Van Brasch.

These factors will therefore eat into any potential wage increases the majority of workers see next year.

The researcher explained to the business and financial publication Dagens Næringsliv that things would probably worsen for consumers before they started to improve.

“For many, it will probably get a little worse before it gets better. It is about the fact that the interest rate peak has not yet been reached, the key interest rate is 2.5 per cent - it should rise to three per cent. Inflation will remain high also towards next year,” he explained.

READ ALSO: How much money do you need to earn for a good life in Norway?

Later this week, Norway’s central bank, Norges Bank, will announce whether interest rates will be raised in December this week. Statistics Norway has predicted that interest rates offered by banks on mortgages could rise to 4.5 percent next year.

By 2024, interest rates will begin to decrease again, and real-term wages will start to pick up as economic conditions generally normalise.

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Frazer Norwell 2022/12/12 10:04

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