A critical readjustment : Analyzing the regional employment composition in Norway during times of change

Abstract

The dramatic fall in the oil price, which started in June 2014, introduced a national debate concerning the future of the petroleum sector in Norway. This thesis examines the sectoral employment composition in Norway, and expands the country-level analysis by looking at regional differences. The main focus is on Rogaland, which is clearly dependent on the petroleum sector. Rogaland’s development is compared to three counties that are presumed to be less petroleum dependent, namely Akershus, Oslo and Sør-Trøndelag. The theoretical foundation is two-sector theory, which aims to explain how different sectors develop as a response to increased resource wealth. The sectoral employment composition in Norway has followed trends in line with the presented theory. The petroleum sector and the non-tradable sector have both increased at the expense of the tradable sector, which has gradually decreased in the period 2000 to 2014. Labour migration to Norway increased considerably in 2004 and has remained high since then. Rogaland experienced a shortage of labour and the highest average wage growth in the country before the oil price fell. This led to Rogaland having the highest share of labour immigration and the highest total employment growth. Rogaland now faces the highest unemployment rate in the country. The excess of labour now leads to labour emigration rather than immigration, which may dampen the unemployment growth. Contrary to initial assumptions, the decrease in the tradable sector was less prominent in Rogaland than the national average. Spillover effects from the petroleum sector and a strong total employment growth can contribute to explain this. Furthermore, the non-tradable sector in Rogaland stood out as the smallest among the analyzed counties. This indicates that workers have reallocated from the non-tradable sector to the petroleum sector. The petroleum sector in Rogaland has increased considerably during the analyzed time period. The reasons and possible explanations for these findings are analyzed in detail, highlighting the considerable regional variations in Norway. The thesis concludes that the sectoral employment in Norway, and particularly in Rogaland, is affected by the petroleum wealth. Finally, we conclude that the petroleum sector will be a part of the Norwegian economy for many years to come, yet its relative importance for Norwegian employment will decline.