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What Norway's weak krone means for wages

Frazer Norwell
Frazer Norwell - [email protected]
What Norway's weak krone means for wages
Here's how a weak krone can affect wages. Pictured is various foreign currencies. Photo by Ibrahim Boran on Unsplash

Norway's krone is down significantly compared to other major currencies over the past year. The effects of the weak currency are felt from the property market to interest rates. Here's what the struggling krone means for wages.

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A weak krone has dominated headlines in Norway recently, with the currency down significantly against important currencies such as the dollar, the pound and the euro. The krone is also down compared to the Swedish krona and the Danish krone.

Several factors are contributing to the currency's struggles. Some of these are Norway having lower interest rates than the US or the Eurozone and the fact that the central bank has a floating exchange rate policy.

A floating exchange policy means Norges Bank doesn't try to intervene in the market to support the currency. Other contributors include economic uncertainty.

Recently, several readers told The Local that Norway's weak krone amounted to a pay cut for them. This is because they worked in Norway and were paid in kroner while living in the UK.

"I work offshore on the NCS (Norwegian continental shelf) and live in the UK. I have lost over 50 per cent in salary in 10 years due to the krone getting weaker and weaker. Norway will lose a lot of its workforce if it continues. They don't have enough local people to fill these positions," one reader said.

Norway's weak krone can also impact the wages of workers in the country. One benefit of the weak krone is that it makes Norwegian exports more attractive. According to Kjersti Haugland, chief economist at DNB Markets, this should lead to wage increases for the sector.

"This is good news for the export industry. They will have better competitiveness and profitability. It provides a basis for the employees to have their wages increased," she told FriFagbevegelse, the online portal for trade union group LO's magazines.

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This is because the export industry prefers to base wage negotiations on profitability. The bad news for workers missing out now is that the wage settlement for 2023 has been finalised for most industries.

It also sheds little light on what happens to the workers in every other sector in Norway. Therefore, a weak krone is instead likely to affect things more indirectly.

Over a period of time, a weak krone can cause higher inflation as imported products become more expensive. Inflation is used as the basis for wage negotiations by trade unions. However, trade union umbrellas cannot always secure a real wage increase (where wages rise higher than inflation) for workers.

Recent figures show that real wage growth in Norway is at its lowest level since the 1980s. Figures from national data agency Statistics Norway show that real wages in Norway have only grown by eight per cent between 2015 and 2023.

Therefore, it is unlikely that a weak kroner will be compensated for by wage settlements for most industries, as any increases will be to cover inflation rather than a weak krone itself.

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