Unlike most millennials, Norway's are rich

Young Norwegians have enjoyed a 13% rise in disposable household income, bucking a downward trend in other strong economies. Will this golden age last?

Young people across the western world are on track to become the first generation to grow up poorer than their parents. So how are millennials in just one country bucking this trend?

It’s old news that university debts and rocketing housing costs are common concerns for people born between the early 1980s and the early 2000s, living in the US, the UK and many other countries. Multiple studies suggest this group will be the first in recorded history to end up poorer than those which came before.

But perhaps this doesn’t have to be a foregone conclusion.

In Europe’s northernmost country, things are decidedly different.

Best known for its Viking history, snow sports and jaw-dropping fjords, Norway is making a new name for itself as the only major economy in Europe where young people are getting markedly richer.

People in their early thirties in Norway have an average annual disposable household income of around 460,000 kroner (around $56,200).

Young Norwegians have enjoyed a 13% rise in disposable household income in real terms compared to Generation X (those born between 1966 and 1980) when they were the same age. These startling figures come from the largest comparative wealth data set in the world, the Luxembourg Income Database, and were analysed in a recent report on generational incomes for the UK Think Tank The Resolution Foundation.

Compare this with young people in other strong economies: US millennials have experienced a 5% dip, in Germany it’s a 9% drop. For those living in southern Europe (the southern Eurozone suffered the brunt of the global economic crisis in 2008), disposable incomes have plunged by as much as 30%.

Norway’s youth unemployment rate (among 15- to 29-year-olds) is also relatively low at 9.4% compared to an OECD average of 13.9%.

‘A lucky situation’

On a rare scorching day in the Norwegian capital Oslo, it’s not difficult to find young locals who embody the country’s good fortunes.

“I don’t really think about how I spend my money,” says Aleksander Aarnes, a 25-year-old graduate.

“I go to the theatre about once a month, go to the cinema once a month. I can go out and eat and drink with friends... I go on vacation (holiday).”

Aarnes is pursuing a career writing for musical theatre, but is yet to earn anything for his efforts, so he funds his lifestyle by working just one or two shifts a week in a supermarket in Korsvoll, a sleepy suburb dotted with large detached pastel-coloured wooden houses. He shares an apartment with a friend in another suburb about a 20-minute bus ride from the city centre.

“I’m really aware of the lucky situation I am in... I don’t have to sacrifice too much to pursue the career I want,” he says.

Aarnes’ hourly pay starts at 164 Norwegian kroner (around $20), increasing for weekend and evening shifts. After taxes (which are comparatively high in Scandinavia) he’s left with around 14,000 kroner ($1700) a month, of which he sets aside half for rent, travel and bills and uses the rest for “whatever else” he likes.

Further down the road in Korsvoll, a 31-year-old business analyst called Øystein is packing his BMW with supplies for a barbecue. He doesn’t want to share his full name, arguing that “even though Norway is rich, people don’t really want to talk about how rich they are personally.” But he admits he earnt enough to buy a two-bedroom apartment on the waterfront when he was 27 and regularly goes on holiday to the US and Asia.

What’s Norway doing differently?

A huge part of young Norwegians’ fantastic lifestyle is down to the country’s rapid economic growth. After seeing the biggest increase in average earnings of any large high-income economy between 1980 and 2013, it now leads multiple global rankings for wealth and wellbeing. It weathered the global recession well.

Last year it came top of the 2017 Legatum Prosperity Index, which analyses 110 countries around the world.

Norway’s huge oil and gas sector is the clear driving factor behind the nation’s economic boom over the last three decades, following major discoveries in the North Sea (although falling energy prices in recent years have had an impact).

But as Hilde Bjørnland, an economics professor based at BI Norwegian Business school in Oslo explains, it is not just how much money Norway makes that’s significant, but what it does with it.

“It has managed the oil [money] well in that it is saving, and using a portion of that to put back into society,” she says. “So rather than a few getting a lot, many people have access to this wealth.”

Norway has done this by storing its money in the world’s largest sovereign wealth fund. In simple terms, this is a giant savings pot which makes money by investing in more than 9000 companies. It is currently worth around $1 trillion.

In spite of this savings pot, taxes are kept high and the country has a compressed wage structure, which means minimum salaries are negotiated by unions.

“Young people and people in lower-paid industries have [experienced] the growth rates in their wages each year... and the differences between those who earn a little and those who earn a lot are not so large as in other countries,” says Bjørnland.

The Resolution Foundation’s report on generational income concludes that rising inequality has been a core factor in driving down disposable incomes for millennials in other strong economies such as the US, UK and Germany. In these countries, where there are wider wage bands, young people bear the brunt of a lack of pay growth and job mobility.

By contrast, Bjørnland argues that an egalitarian approach – distributing wealth between generations – has contributed to strong life satisfaction and a lack of social unrest in Norway.

High welfare payments and heavily subsidised health care also help when it comes to pitting Norwegian millennials' prospects against those elsewhere in Europe. Unemployment benefits are generous: allowing many people to claim around 60% of their previous salary for two years, while they are looking for new work. As in all the Nordic countries, low childcare costs and a general parental leave system also ensure a high participation of women in the workforce.

Free education at most schools and public universities and easy access to loans (which borrowers don’t pay interest on while they are studying) alongside high employment rates for students are also part of the jigsaw.

“It’s a significant factor that while young people are studying, they’re able to have a job on the side,” says Bjørnland, who adds that this kind of casual work can often bring in a higher income for young people in Norway than those in other western countries.

Her sentiment is shared by many of the throngs of students cooling off in the Åkerselva river just a few metres from the shiny glass buildings that dominate the business school’s campus.

“It’s not that difficult to find a job here and they’re always really well-paid. So it helps a lot, to cover your leisure life and your studies,” says Gabriella Sanzana, a 27-year-old from Chile, who’s doing a master’s in human rights while working part-time as a waitress.

“I have to pay a lot of taxes, but I don’t really care, because I know that [the state] gives you so many things at the same time.”

A secure future?

Despite Norway’s glowing CV, there are concerns about sustaining its success.

High youth employment is declining, according to Investing in Youth: Norway, a recent OECD report, which states that the number of job opportunities for 15 to 29-year-olds doesn’t match up with the amount needed for a swelling youth population, which rose by 18% between 2007 and 2016.

Immigration accounted for over four-fifths of this increase and unemployment among Norway’s foreign-born population is currently around 10%.

Kristian Heggebø, a senior researcher at the Centre for Labour and Welfare Research at Oslo Metropolitan University, argues that while well-educated international students and labour migrants from elsewhere in Europe “tend to do well on the jobs market,” there are persistently high levels of “labour market discrimination against ethnic minorities.”

“To some extent it could be [because of] a lack of qualifications, but there is no doubt in my mind that the issue is on the demand side and not the supply side,” he says.

Heggebø argues that there is “firm empirical evidence” which demonstrates that despite rising immigration over the past two decades, many Norwegian employers are still “sceptical towards hiring someone with a non-Norwegian background.” Even second generation immigrants born and educated in a Nordic country can end up struggling to gain access to the labour market, he says, suggesting that anonymous CVs in the first stages of recruitment could be a crucial part of the solution.

Fragmented society

Preparing to catch the train home after a day in the sweltering city centre, Ove George, who’s from Nigeria and is currently unemployed, says he believes networking is often the key to getting work in Norway, something that can be tricky for foreigners without Norwegian connections.

“The last job I got was through a Norwegian friend I had, and after that I haven’t really got a good job,” he explains.

Also at the station is 19-year-old Djibouti-born Kayad Mahammed, who currently works for a media company. He says he’s “not struggling” and personally found it “easy” to get a job. But he adds that he believes “it’s hard to get rich” for many immigrants, who can wind up clinging onto entry-level jobs for fear of ending up unemployed again.

Meanwhile, despite the Scandinavian country’s pride over its egalitarianism, there are signs inequality is rising within the wider population, too.

OECD figures suggest that the share of Norwegians earning less than half the national average income was 8.1% in 2015, up from 6.9% in 2004, with young people more at risk than any other group. (Although, put this into context, this is still low by global standards – the proportion in the US is 16.8% and 10.9% in the UK.)

Those who end up outside of employment, training or education altogether can often feel more vulnerable in Norway than they might in other countries, argues Sebastian Königs, one of the authors of the OECD’s Investing in Youth: Norway report.

“For the young Norwegians who are disadvantaged and have social issues, finding their spot in society can be much harder,” he says. “Because generally speaking everyone is doing so well in society, this becomes a stigma.”

This cohort is six times more likely to feel depressed than other young Norwegians, nine times as likely to suffer from poor health and more at risk of remaining outside the labour market for the long term, according to OECD figures.

The price of success

According to Bjørnland, even the wealthiest Norwegians should be wary of its fragility moving forward.

“You’re used to having a good time, you’re used to taking long weekends... if you’ve had it like this for a long time you take it for granted,” she says. “But things which have happened in the past might not happen again.”

She argues that Norway needs to work harder to diversify its industries in order to remain competitive in future. This might include expanding its technology, raw material and renewable energy sectors, all alongside an emerging start-up scene. It has grown quickly in recent years but still lags behind its Nordic neighbours.

Employers will also have to be more open to attracting international talent to fill the jobs created outside its oil and gas sector, she suggests. On the other hand, young Norwegians “used to being able to work wherever they like” may need to become increasingly “focused on where the skills are needed” in order to maintain the same standard of living as millennials entering the workforce today.

Solutions?

Despite Norway’s current challenges, many experts believe that there is still a huge amount that other nations can learn.

At the OECD, Sebastian Königs cites much closer links between education, employment and social services than in most other countries as an effective way of supporting young people in the early stages of their careers. Every Norwegian school leaver gets a personal follow-up phone call to discuss their options if they don’t enter the employment market or pursue further studies, for example.

He argues that while Norway’s population is just 5.1 million, larger nations could still replicate these policies if they wanted to.

“This isn’t about the size of the country, this is about how much resources you’re willing to invest in it... Norway perceives this to be a central priority, and it should be.”

Meanwhile, Kristian Heggebø says he believes that even if oil is taken “totally out of the equation” and Norway is forced to reshape its economy in the future, it will continue to prosper as a result of its egalitarian approach and safety net for young people.

“If we keep these components in place then I’m willing to bet everything that I own that we will still be performing at a very, very high level compared to other European countries, simply because we have a way [to deal with] difficulties that is more humane.”