Unemployment. Labour Market Programmes and Wages in Norway

Abstract

The Norwegian authorities pursue active labour market policies to fight unemployment by qualifying the unemployed in a wide range of programmes. We discuss theoretically and investigate empirically the effects such policies might have on the wage curve using a panel of more than 5400 Norwegian firms and regional unemployment figures. Total unemployment is a better predictor of wage pressure than open unemployment. The wage flexibility is reduced when we control for labour market programmes. The results support the view that labour market programmes shift the wage curve downwards and hence increase the equilibrium employment.