An endogenous relationship between wages, job opportunity, and skilled labor shortage in Norway

Abstract

Norway's economy has gone through unprecedented growth in the past decade. The strong growth in GDP, employment, labor productivity, real wage, and labor immigration combines with increasing outflows from the labor force, such as early retirement scheme, sickness and disability, and old age retirement implies that Norway's labor market is tight. We hypothesize demographic changes and skilled and unskilled job composition affects tertiary education participation through wage premium and job opportunities. Motivation to pursue tertiary education is determined by perceived wage premium, expected foregone earnings, expected relative lifetime earnings, and ease of finding jobs. Among the four elements, expected foregone earnings have the most weight when individuals decide whether to pursue tertiary education or not. Thus, we propose policies to minimize individuals' expected foregone earnings, such as voluntary-base internship to tertiary students and online tertiary education for the mature students in age group 30-35. On the other hand, we propose the government to establish agencies in countries that have high skilled labor reserve with lower living stand than Norway. These agencies will disseminate information labor market and regulatory issues of Norway and to market the attractiveness of Norway as a migration destination. Lastly, we propose the government to further entice foreign students to come to the country. These students can be a potential skilled labor supply after they graduate.