The Fall in Oil Prices and the Labour Market

Abstract

The fall in oil prices since summer 2014 has dampened economic growth and led to higher unemployment in Norway. There are strong indications that the current decline experienced by oil-related firms in Norway will not be a temporary setback, but part of a permanent adjustment to a lower level of activity. If so, many of the workers who were previously employed in the oil industry will have to move to other industries. Such a situation could lead to an increase in labour market mismatch. So far, however, there is no clear evidence that this has occurred in Norway. At the same time, as many countries have experienced, employment can fall permanently after economic downturns, with unemployment becoming entrenched at a higher level or with high rates of drop out from the labour force. Previous downturns in Norway have led to substantial labour force withdrawal.