Technological changes, increased demands for stable supplies and intensified international competition have made enterprises in many industries  ever more vulnerable to even short operational disruptions. The employers’ ability and willingness to take on open labour conflicts have therefore diminished. On the other hand, corporate boards and management are responsible for decisions on expansions, closures, rationalisation, location and workforce increases. Unions have little direct influence on these matters. If company costs increase, either productivity must be improved, production closed or relocated to another country. This is the companies’ arena. Their decisions concerning operations, investment and location are in turn determined by the required rate of return that owners set to keep their capital in the company. Under these operating parameters, developments in labour costs essentially reflect employees’ and their organisations’ assessment of the trade-off between real wage growth and employment. These organisations cannot assume that others can safeguard their members’ jobs when they determine how high pay increases should be. The pay increases for white-collar workers in the business and financial sector and academics in the public sector have been particularly high. For a long period, this mirrored the high wage growth for liberal professions, consultancy firms, law firms and the IT industry. However, wage growth for whitecollar workers and academics appears to be holding up even with weaker labour market conditions for these groups. In many places in our country, public sector wages are higher than the level that can be sustained by local businesses in a less favourable economic environment.
Market participants weigh the interest rate differential between Norway and other countries against the likelihood of a depreciation of the krone in the future. Cyclical divergence can cause the krone to overshoot its future level in the short term. However, in the long term, the krone cannot remain this strong. This would require a substantial improvement in our capacity to generate income. What are the factors behind the wide interest rate differential? With the krone exchange rate prevailing at end-January, competitiveness had weakened by a little less than 25 per cent since 1996. The krone had appreciated by almost 10 per cent. Chart 8. Relative labour costs 120  120  31 January 2003 110  110  Local currency  100  100  90  90  Common currency 80  80 1990  1992  1994  1996  1998  2000  2002  Sources: TRCIS/IMF, Ministry of Finance and Norges Bank  In the same period, wages in Norwegian manufacturing increased by close to 15 per cent more than wages among trading partners. In the years around the millennium, the depreciation of the krone veiled the underlying deterioration in competitiveness. In May 2000, the krone hit its lowest level in six 1 years . The krone has since appreciated, and the effect of high wage growth has gradually come into evidence in company accounts. In the ten years that have passed since the banking and currency crisis in 1992, the economy featured a long period of balanced growth.