Moderate wage growth has reduced labour costs’ share of mainland business-sector income, particularly in tradable goods sectors. In manufacturing, the wage share has shown a trend fall since the mid-1990s and the level has been the lowest since 1970 in the past few years. BIS Review 28/2007  5  The wage share has fallen also in many other OECD countries. Emerging economies’ entry into global trade has resulted in a sharp increase in the supply of labour. The result has been a fall in the global price of labour relative to the return on capital. The wage share equilibrium may therefore have been reduced. Increased possibilities for relocating production abroad may have weakened labour’s bargaining power and moderated pay demands. During the current upturn, we have also seen that the rise in prices for domestically produced goods and services has been lower than implied by historical relationships between inflation and wage and productivity growth. Increased competition in product markets may have dampened the rise in prices. In a survey from Norges Bank’s regional network 58 per cent of the companies responded that competition has increased in the past 2-3 years, while only 15 per cent reported that competition has decreased. In retail trade and services, almost 70 per cent responded that competition has intensified. Many of the companies that experience increased competition attribute this to the entry of more operators, including foreign operators, into the market. 6  BIS Review 28/2007  The Norwegian business sector has been quick to integrate information technology.
The Fund is approaching the nominal value of one year’s GDP and may reach two in the course of the next decade. This is based on the assumption that oil prices remain high over the next few years and then fall to about USD 30 per barrel. The government bases its withdrawals from the Fund on an average real return of 4 per cent for financing current expenditure. Given this spending rule, the return may come to finance more than 15 per cent of government expenditure in 10 years, which clearly shows that sound management of our petroleum wealth generates considerable benefits. The return represents future income that we forego if we draw on this wealth today. But even with this source of income, more than 80 per cent of  BIS Review 28/2007  13  expenditure must be covered by other sources. Financing the large pension payments that will have to be disbursed in the coming decades will be very demanding in any event. I have talked about some of the supply-side shocks that have had a positive effect on the Norwegian economy. Norway is now reaping the benefits of globalisation through increased international trade and freer labour flows across national borders. Globalisation also has its challenges and although I have not delved into these in my speech today, I would be delighted to discuss these and other issues with you in the question and answer session. Thank you for your attention! 14  BIS Review 28/2007