What’s caused a drop in disposable income in Norway?
Households in Norway no longer have the highest disposable income in Europe, and several factors have been pointed to as the reason for the drop.
Norway is the European country with the sixth highest disposable household income, figures obtained by the Norwegian newspaper Aftenposten from the European data agency Eurostat show.
This is a significant fall for the Nordic country, which was top of the table as recently as the beginning of 2022. Disposable income in Norway has actually fallen from 8,337 euros per month to 7,475 euros between the start of 2022 and the end of 2023.
This decline has seen Norway overtaken by Belgium, Denmark, Germany, the Netherlands and Austria.
READ ALSO: How much money do you need to earn in Norway for a good life in 2024?
Several factors have been pointed to as reasons why Norway has seen a drop in disposable income. Roger Bjørnstad, chief economist for the Norwegian Confederation of Trade Unions (LO), said the drop was due to rising interest rates.
“Norwegian households have record debt in a housing market that has been under pressure for decades. No other country has experienced such a sharp decline in household incomes,” he told Aftenposten.
For the purpose of the figures, disposable income was defined as gross income minus tax and interest expenses.
Norway’s central bank has implemented 14 interest rate hikes since 2021 to try and curb inflation. The higher interest rates had made loan and mortgage repayments much more costly, especially for those who borrowed when rates were set to the historically low value of zero per cent.
However, Øystein Dørum, the chief economist at the Confederation of Norwegian Enterprise (NHO), pointed to the exchange rate as the reason for the drop.
As the krone has become weaker against the euro, then those paid in euros see a boost to their disposable income, while those paid in euros lose out even if their wages increase.
Norway’s krone slumped against almost all other major currencies in 2023, reaching near-historic lows against the euro, pound and the dollar.
In addition to skewing measurements between Norway and countries that use euros, the weak exchange rate was seen as one of the key drivers of inflation in Norway due to it pushing up the cost of imported goods.
As Denmark’s krone is pegged to the euro, it has also increased significantly in value against its Norwegian counterpart – playing a factor in Norway being leapfrogged by its neighbour.
The weak krone was a reason the central bank in Norway continued to hike interest rates even as inflation slowed.
Norwegian wages could also be a factor in disposable income in the country slipping. Real wages, which account for how much salaries rise in line with inflation, fell slightly in Norway last year.
Despite average wage increases of 5.3 percent, real wages fell by 0.2 percent due to high inflation.
A previous study from Norway’s national data agency, Statistics Norway (SSB), predicted that by the end of last year, workers in Norway would only be marginally better off than they were in 2015.
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Norway is the European country with the sixth highest disposable household income, figures obtained by the Norwegian newspaper Aftenposten from the European data agency Eurostat show.
This is a significant fall for the Nordic country, which was top of the table as recently as the beginning of 2022. Disposable income in Norway has actually fallen from 8,337 euros per month to 7,475 euros between the start of 2022 and the end of 2023.
This decline has seen Norway overtaken by Belgium, Denmark, Germany, the Netherlands and Austria.
READ ALSO: How much money do you need to earn in Norway for a good life in 2024?
Several factors have been pointed to as reasons why Norway has seen a drop in disposable income. Roger Bjørnstad, chief economist for the Norwegian Confederation of Trade Unions (LO), said the drop was due to rising interest rates.
“Norwegian households have record debt in a housing market that has been under pressure for decades. No other country has experienced such a sharp decline in household incomes,” he told Aftenposten.
For the purpose of the figures, disposable income was defined as gross income minus tax and interest expenses.
Norway’s central bank has implemented 14 interest rate hikes since 2021 to try and curb inflation. The higher interest rates had made loan and mortgage repayments much more costly, especially for those who borrowed when rates were set to the historically low value of zero per cent.
However, Øystein Dørum, the chief economist at the Confederation of Norwegian Enterprise (NHO), pointed to the exchange rate as the reason for the drop.
As the krone has become weaker against the euro, then those paid in euros see a boost to their disposable income, while those paid in euros lose out even if their wages increase.
Norway’s krone slumped against almost all other major currencies in 2023, reaching near-historic lows against the euro, pound and the dollar.
In addition to skewing measurements between Norway and countries that use euros, the weak exchange rate was seen as one of the key drivers of inflation in Norway due to it pushing up the cost of imported goods.
As Denmark’s krone is pegged to the euro, it has also increased significantly in value against its Norwegian counterpart – playing a factor in Norway being leapfrogged by its neighbour.
The weak krone was a reason the central bank in Norway continued to hike interest rates even as inflation slowed.
Norwegian wages could also be a factor in disposable income in the country slipping. Real wages, which account for how much salaries rise in line with inflation, fell slightly in Norway last year.
Despite average wage increases of 5.3 percent, real wages fell by 0.2 percent due to high inflation.
A previous study from Norway’s national data agency, Statistics Norway (SSB), predicted that by the end of last year, workers in Norway would only be marginally better off than they were in 2015.
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