The future of the welfare state is at stake

This article was first published in Dagens Perspektiv

The public sector accounts for more than 60 per cent of value generation in Norway, but we too rarely evaluate the effects of this massive investment.

In the private sector individual companies quickly feel the consequences if they cannot keep up with their funding requirements, or when large investments fail. When it comes to the public sector, it is the welfare state itself and our security that will be at stake if we fail in restructuring it.

The welfare state is under significant pressure. This was clearly outlined in the 2021 Announcement of Perspective. Development trends such as flattening growth, climate challenges, shifting international conditions, and an increasingly older population will escalate in the future. There will be tighter budgets, new costs, increased protectionism and less cooperation between countries. And the numbers in the Norwegian workforce will be reduced.  

One of the biggest challenges for the public sector is access to skilled labour. Figures from Statistics Norway show that although the number of employees in Norway in the period 2008-2019 has increased by 189,000, the number of Norwegian employees in the same period has decreased by 33,000. After a period of increased unemployment due to Covid, almost half a million positions were vacant according to the Norwegian Labour and Welfare Administration (NAV). Companies now face major problems in acquiring the right expertise, especially within the health care sector.

Funding, but no leadership

How can society stimulate the radical changes required? Adaptability is an important characteristic, and this has been researched by PA Consulting in collaboration with the Global Government Forum. The "Responsive Government Survey" compares public enterprises' assessment of their own responsiveness across nine western countries, including Scandinavia. Characteristics that we know from experience enhance their ability to change and change performance, have been assessed.

Scandinavia comes out in the top-tier, Sweden is best in class while Norway mostly scores average or slightly below. The answers show that Norway has the tools and resources, and (thus) the ability to keep up. However, the Norwegian public sector is below average in terms of leadership, vision and common goals. In addition, we stick to traditional problem solving rather than testing new solutions when compared to our neighbours.

New government, new approach?

The new government wants to decentralise power, to enhance the public sector and reduce the role of central government. The People must "go back to work". The public sector trust-based reforms will give first-line employees time and confidence to provide better services. Recently integrated municipalities and counties can reverse the merger and go back to managing their full range of tasks alone. 

By building up internal resources and competencies, and reducing the use of consulting services, modernisation is to be the stimulated internally. The automatic cuts in the productivity dividend will be phased out .

Where are the initiatives that will provide efficiency, digitalisation, and innovation in the public sector in the long term? A high employment rate is positive, but that is not enough to solve the problem. Trust-based reform and increased local self-government should enable the public sector to deliver more with fewer resources in the future.To achieve this, we need to create incentives and facilitate improvement, over time. This requires a set of demands and rewards, learning, and interaction.

Enable innovation

The renewal required for a sustainable Norwegian public sector goes far beyond individual measures, and requires long-term management. We need to invest, cultivate, learn, and adjust over time. Visionary, clear leadership is not in opposition to agility and local autonomy. To ensure we achieve the gains and economies of scale across sectors and levels, we need rooted initiatives, coherent priorities, and clear goals and incentives from the decision makers.

Local support and energy create innovation create innovation, but we should not encourage further displacement of employees from private to public enterprises. In the long run, this will reduce Norwegian value generation and increase an already significant tax burden, as employees are needed in the private sector to contribute to create value and innovation. 

The government wants a strong and efficient public sector. To maintain this in the long term, needs a holistic approach and to use all available skills. The future welfare state requires clear leadership and cooperation. And real determination.