Competing against lower cost producers would require either wages having to fall to the levels of the least-cost producers or some substitution of higher-cost labour with capital. Both effects would have adverse consequences for euro area workers. This is not to say that cost containment is not a necessary condition for competitiveness. Rather it is saying that cost considerations should not be the only element on which we should aim to rebuild our economy in the aftermath of a severe crisis. All this raises many questions for policy makers: what kinds of investments do we need for future growth? What are the implications for workforce skills? How can we increase the degree of entrepreneurship to realise innovative activity? At the same time, policymakers cannot lose sight of the social consequences of such changes. A world where jobs are being created and destroyed with ever greater speed, and where people are expected to move regularly between them, is a world of greater insecurity. So we need also to consider the readiness of our societies to cope with these changes, and ask what type of new social models we will need to adapt to them. And crucially, so as not to lose more time, we need to start today. Conclusion We are experiencing a period a transition. Economically, we haven’t recovered fully from the after-pains of the crisis. Technologically, the jury is still out on whether the IT-driven transformation of work has ended or will continue, and what this means in terms of productivity.
In the public sector, there are no absolute requirements as to profitability and efficiency. Public enterprises do not go bankrupt, and in many cases the authorities cannot allow a public enterprise to discontinue operations. This is a demanding starting point for a shift to more locally determined wages. The possibility of granting local pay increases might, however, increase efficiency if there are binding nominal budget limits for these entities and clear production requirements. When a higher share of wages is determined at the local level and coordination is reduced, it will be even more important to promote flexibility in the labour market and the labour supply. Otherwise, an increasing number of workers may be excluded from working life and unemployment may rise on a permanent basis, while the foundation for production is weakened. Effective labour market programmes, supported by a sound system for education and infrastructure, can facilitate these adjustments. It is also important to assess working environment and labour market legislation with a view to fostering greater flexibility. Hiring costs may be reduced and flexibility enhanced through greater scope for temporary employment and labour contracting. The throughput in universities and colleges can be improved. The financial incentives and entitlement thresholds in our social security system are also of substantial importance to employment. Pensions  In Norway, the employment rate is among the highest in the OECD area. This reflects both high labour force participation and low unemployment.