The Future of Work in the Nordic Countries

The impact of making workplaces greener and more digitalized will be unequal and affect social cohesion.

Summary: In the future, work across all sectors in the Nordic countries will become greener and more digitalized, and this will have far-reaching consequences on society. For less fortunate communities, these changes will come on top of earlier, detrimental transformations, including robotisation and the closure of manufacturing industries. For others, they will provide new opportunities for retraining and the development of different jobs. While Nordic workers are relatively well protected by the welfare state, key challenges remain, including retraining being biased towards certain groups, unequal distribution of new jobs across the region, and an ageing workforce.

Societal change transforming workplaces

The Nordic countries are currently facing a confluence of transformations which will have an impact on how people work in both the immediate and long-term future. These transformations are similar to most other Western countries, and most notably include digitalization and the green transition. Digitalization is perhaps best represented by advances in technologies like generative artificial intelligence e.g. ChatGPT. According to the Finnish Ministry of the Environment, the green transition means ”a shift towards economically sustainable growth and an economy that is not based on fossil fuels and overconsumption of natural resources. A sustainable economy relies on low-carbon solutions that promote the circular economy and biodiversity.”

Both of these important changes are occurring against the backdrop of other longstanding transformations which are continuing to take place. Like in other advanced economies, automation in the workplace persists with the introduction of industrial robots but also increasingly cobots. This often compounds existing inequalities resulting from previous rounds of workplace changes, such as the move of manufacturing from Western European countries (including the Nordic region) to the global south. Concurrently, demographic ageing means that the size of the labour force in the Nordic countries will shrink even further in the near future.

There will be a growth in the number of jobs that are complementary to digitalization and automation, and those that are relevant to the growing green economy. Conversely, jobs that are easy to substitute by digitalization and automation face an elevated risk of disappearing. Additionally, jobs that contribute heavily to carbon emissions and are not in demand in the coming greener economy (e.g. coal mining) will also fade away.

All these types of changes and pressures – and no doubt others – will collectively shape the future of work in Nordic countries.

What is the ”just transition”?

”Just transition is the term used to describe the transition to a climate-neutral economy while securing the future and livelihoods of workers and their communities. A just transition to a climate-neutral economy provides and guarantees better and decent jobs, social protection, more training opportunities and greater job security for all workers affected by global warming and climate change policies.”

(Definition from Eurofound, which is an European Union agency providing knowledge to assist in the development of better social, employment and work-related policies.)

Demand for new skills and the Nordic countries

Effective training programmes will be essential for retraining workers so they are equipped with new skills demanded by a different, greener economy. In principle, the Nordic welfare states are arguably more equipped to address these labour market challenges than other countries, also those with welfare states. Comparatively generous unemployment benefits, despite increasingly stringent conditions, should support unemployed workers to retrain and attain new skills. Comparatively strong (albeit fraying) collective bargaining practices should also support in-work training which may help restrict the extent of unemployment in the first place. Even if unemployment does occur, the comparatively well-off Nordic welfare states ought to be able to insulate unemployed workers against some of its more deleterious effects. For example, the robust training programmes in Denmark are likely to support unemployed workers to learn new skills.

Research demonstrates, however, that some groups of workers are less likely to receive training during unemployment. This includes groups who are less well educated and older workers – despite them arguably needing the training the most in order to secure long-term, labour market attachment. Put another way, there is a need to ensure that training programmes are assigned to the workers who need them the most. It is also imperative that workers receive training that updates their skills rather than being ‘parked’ in programmes that do little to improve them. Otherwise, access biases in unemployment training schemes may in fact entrench and exacerbate unequal socioeconomic divides rather than improve them.

Additionally, changes to the Nordic welfare states may impinge upon their effectiveness in diminishing the extent of structural unemployment from these transformations. Cutbacks to unemployment benefits due to fiscal austerity may lower the reservation wage of unemployed workers. On the one hand, this may actually reduce the duration of their unemployment by incentivising them towards regaining employment. On the other hand, it may also increase the risk of mismatch between workers’ skills and experience, and their eventual job.

The transition to a greener economy may also spur growth of different types of industrial jobs, those required to satisfy new demands, especially if recent trends to relocate parts of production back into advanced economies take hold. Although this will not cancel out the entire number of industrial jobs that have been lost, it does suggest that industrial and extractive jobs will at least feature in the economies of the future. For example, recent conversations around mining critical rare earth metals in the north of the Nordic countries (e.g. Kiruna in Swedish Lapland) - despite their controversies - already indicate this possibility. However, whether employers will be able to fill these industrial and extractive jobs remains to be seen. Nordic firms have decried the lack of skilled labour as, despite demand, there is a mismatch between the skills required and the skillsets of existing and incoming workers. Unemployed workers may thus be unable to benefit from these job opportunities if they do not have the requisite skills. For example, there is a critical shortage of electrical engineers and welders afflicting many advanced economies, not just in the Nordic region.

In summary, there are employment opportunities in these sectors, but whether they will be taken up by unemployed workers is - as yet - unclear.

Variation across the region, in and outside individual countries

The extent of unemployment from these transformations will vary extensively across the Nordic countries. The benefits and costs from transitioning to a greener economy will be distributed unequally based on the natural endowments of particular regions. Research shows that the economic benefits and costs derived from the green economy can be geographically concentrated. For example, wind turbines are most efficient in their energy production in areas where wind is reliably consistent, and, in turn, jobs that service the maintenance of wind turbines will be similarly concentrated.

At the same time, the Nordic countries are experiencing depopulation in a substantial number of regions which are distant from core urban centres. These regions often consequently suffer from a shortage of skilled labour, something that firms take into consideration when deciding where to invest. Hence there are likely to be fewer opportunities in these regions than in metropolitan areas to move from uncompetitive brown sector jobs (jobs in sectors that produce substantial carbon emissions) to more competitive green jobs (jobs in sectors that produce low or minimal carbon emissions).

Why should we care about inequalities from the future of work?

Challenges in finding and keeping appropriate employment have an impact on individuals as well as the economy, but research has also shown that they can also have a wider impact on society. Inequalities resulting from working life in the future may worsen social cohesion, which is already fraying today. Even in Nordic societies, which are often characterised by high social and political trust, political polarisation has taken root. Regions and people who have been left behind by previous structural transformations will probably feel even more alienated and cut adrift from the rest of society if they are further buffeted by incoming transformations. Consequently, it is essential for policymakers to pay attention to potential inequalities that may arise from the organization of work in the future beyond paying lip service to the notion of a “Just Transition” to avoid harmful sociopolitical consequences that are difficult to rectify further down the road.

Research on the connection between labour market changes and welfare sheds light on societal challenges.

This article is published in response to readers' interest in the future of work.

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