Norway’s Labor Market Is Shrinking Jobs While Raising Wages — and the World Should Take Notes

A software engineer in Oslo shows up for work at 8:30 on a Tuesday morning, takes a full lunch break, and leaves at 4:00 without anyone noticing. The same hours are worked by her manager. Most likely, the CEO gets home before five o’clock. This is just the way work is done in Norway, where a 37.5-hour workweek is the legal standard, hierarchy tends to be flat enough to feel almost invisible, and the idea of working through your vacation is met with something between confusion and mild concern. It’s not a startup with unusual perks or a company trying to attract talent with a lifestyle pitch. In that sense, it sounds almost utopian. Additionally, it has one of the highest employment rates on the planet.

The labor market in Norway is doing something that most economic models indicate shouldn’t coexist peacefully: employment is extraordinarily high, wages continue to rise, and the nation is simultaneously dealing with a worsening labor shortage. 77.4% of people of working age were employed in 2023, which is seven percentage points higher than the EU27 average.

Norway — Labor Market Profile 2024–2025

The employment rates for women and young people are 75.3% and 58.5%, respectively, which most developed countries would consider aspirational rather than realistic. The unemployment rate is approximately 3.6%, continuously falling more than two percentage points short of the EU average. However, businesses in every industry, including technology, healthcare, and construction, are having trouble filling open positions with qualified candidates. In the strictest sense of the word, the labor market is running out of workers at higher wages.

The wage component is significant and frequently overlooked. In the traditional sense, Norway does not have a federal minimum wage. Rather, wages are determined through yearly national collective bargaining negotiations, usually between the largest trade union federation and the main employers’ federation. As a result, real wages are debated, contested, and modified annually in accordance with inflation, oil prices, and the overall cost of living, with actual union power supporting the process. This is more than a technicality. It implies that workers have a systematic way to regain purchasing power in the event of a spike in oil prices and an increase in living expenses, as opposed to relying on the goodwill of politicians or the whims of individual employers. It’s a slow, unglamorous system that yields remarkably reliable results.

The issue that Norway hasn’t completely resolved is the lack of talent, and it’s important to be open about it. Over 22% of Norway’s working population is foreign-born, with about 9% coming from other EU members and 13% from outside the EU. For many years, the nation has recruited workers from all over Europe and beyond to fill its skill gaps in the engineering, healthcare, IT, and maritime sectors.

The fact that Norway has not done enough to integrate the talent already present within its borders—people who came as refugees or family migrants and have been underemployed or ignored despite their qualifications—is becoming more widely acknowledged in the country’s public discourse. The conflict was succinctly expressed in a LinkedIn post by a recruitment expert in the field: Norway’s labor shortage could be greatly alleviated if the nation made better use of its current population. That observation, which is clear when expressed, hasn’t yet been sufficiently quickly or ambitiously translated into policy.

All of this has a historical undertone that merits recognition. Oil is essential to Norway’s prosperity. The Norwegian economy was severely impacted by the 2014 drop in oil prices, which reduced employment in the petroleum industry and had a knock-on effect on the building and service industries. The full recovery took almost five years. No other nation in the world has a financial cushion as large as the government’s sovereign wealth fund, which was created from decades of oil revenue and is currently valued at over a trillion dollars.

It would be intellectually dishonest to compare Norway’s labor results to those of Germany, France, or the US without taking that cushion into consideration. In addition to stabilizing the budget, the oil fund gives employers and employees more flexibility by lessening the pressure on the labor market to absorb economic shocks in real time.

However, some aspects of Norway’s strategy are entirely related to institutional design and have nothing to do with oil. The Norwegian Working Environment Act provides workers with robust protections against arbitrary dismissal by enshrining permanent employment as the default. Both sides of the employment relationship are shaped by the cultural expectation of lifetime employment, which is when businesses genuinely try to hire someone for the long term rather than for a project cycle.

Because they anticipate a long-term employee, employers spend more on training. Because they anticipate stability in return, employees give their all. Despite working fewer hours than most of their European counterparts, Norwegian workers may be more productive per hour due to this dynamic rather than any financial advantage. Looking at the data from the outside, it seems as though Norway has been quietly conducting a long-term experiment to see what labor markets can look like when trust is intentionally built into the system rather than left up to chance.