Economic Renewal and Demographic Change An evaluation of local labour market performance in the Nordic countries Editor Lars Olof Persson With contributions from Ingi Rúnar Eðvarðsson, University of Akureyri, Iceland Elli Heikkilä, Institute of Migration, Finland Mats Johansson, Swedish Institute for Growth Policy Studies Sari Korkalainen, Institute of Migration, Finland Torben Dall Schmidt, Institute for Border Studies, Denmark, Lasse Sigbjørn Stamböl, Statistics Norway (SSB) Nordregio 2004 First published in 2004 by Nordregio. PO Box 1658, SE-111 86 Stockholm, Sweden Tel. +46 8 463 54 00, fax: +46 8 463 54 01 e-mail: [email protected] website: www.nordregio.se Economic Renewal and Demographic Change: An evaluation of local labour market performance in the Nordic countries. Editor Lars Olof Persson .Stockholm: Nordregio 2004 (Nordregio Report 2004:8) ISSN 1403-2503 ISBN 91-89332-46-6 Nordic co-operation takes place among the countries of Denmark, Finland, Iceland, Norway and Sweden, as well as the autonomous territories of the Faroe Islands, Greenland and Åland. The Nordic Council is a forum for co-operation between the Nordic parliaments and governments. The Council consists of 87 parliamentarians from the Nordic countries. The Nordic Council takes policy initiatives and monitors Nordic co-operation. Founded in 1952. The Nordic Council of Ministers is a forum for co-operation between the Nordic governments. The Nordic Council of Ministers implements Nordic co-operation. The prime ministers have the overall responsibility. Its activities are co-ordinated by the Nordic ministers for co-operation, the Nordic Committee for co-operation and portfolio ministers. Founded in 1971. Stockholm, Sweden 2004 Preface This report is a comparative study of economic renewal and demographic change on local labour markets in Nordic countries. Senior research fellow Lars Olof Persson at Nordregio has coordinated the project team consisting of researchers from Institute of Migration (Turku, Finland), Swedish Institute for Growth Policy Studies (Stockholm), University of Akureyri (Iceland), Institute for Border Studies (Aabenraa, Denmark) and Statistics Norway (Oslo). At Nordregio, research fellow Tomas Hanell, research fellow Jörg Neubauer and research assistants Moa Tunström and Fredrik Nyman have contributed to data collection, processing and map- making. The project is part of the second phase of the Nordic research programme Future Challenges and Institutional Preconditions for Regional Development Policy. The programme was commissioned by the Nordic Council of Ministers / Nordic Senior Officials Committee for Regional Policy (NERP). The pilot phase of the project was reported in 2000. The first phase of the programme (2000-2002) was reported through eight published studies in 2002. The reports from six separate projects in the second phase (2003-2004) of the programme will be published successively through the autumn of 2004 together with a summary of the programme. Nordregio wishes to thank the project team as well as the members of the Programme Steering Committee: Bue Nielsen (Denmark), Janne Antikainen (Finland), Kristin Nakken (Norway), Nicklas Liss-Larsson (Sweden), Kjartan Kristiansen (Faroe Islands), Bjarne Lindström (Åland Islands) and Hallgeir Aalbu (Nordregio). Stockholm, January 2005 3 4 Contents 1. Introduction......................................................................................... 7 Sustainable local labour markets ....................................................... 7 Emerging challenges to labour market efficiency ............................. 8 A career approach............................................................................ 10 2. Nordic employment policy................................................................ 14 3. The spatial characteristics of demographic change within the Nordic countries.............................................................................. 20 National labour market performance............................................... 20 Differing levels of employment and unemployment....................... 21 The regional distribution of employment and non-employment ..... 24 Employment and population ageing................................................ 28 Working population related to the non-working ............................. 30 Matching economic and demographic change across the common Nordic market.................................................................................. 34 Northern landscapes of demographic change.................................. 38 A typology with regard to natural population change and migration................................................................................... 39 Country differences......................................................................... 41 Migration explains 2/3 of the variation in population change......... 43 4. Performance across the common Nordic market........................... 48 LLM structural context – a typology of Nordic local labour markets ............................................................................................ 48 Basic indicators used ....................................................................... 48 Criteria for ‘typologisation’............................................................. 50 Local matching of employment and demographic change across the Nordic labour market................................................................. 54 5. Local vs. national labour market performance – the case of Norway ................................................................................ 57 Several renewal modes.................................................................... 57 Modernizing by changing age structure .......................................... 57 Modernizing by inflow of labour with ‘fresh’ education ................ 60 The spatial pattern of economic renewal by sector ......................... 61 Modernization of old and new sectors by entries of higher educated labour................................................................................ 62 Regional patterns of multidimensional mobility ............................. 67 Spatial dimensions of the complex transitional labour market in Norway – a summary .................................................................. 72 5 A diagnosis of the best and worst performing regions within one typology........................................................................................... 78 6. The performance of Nordic labour markets – a comparative analysis.......................................................................... 82 Gross transition rates ....................................................................... 82 Activating of young labour force..................................................... 85 Net inflow of education groups ....................................................... 88 Activating of labour directly from school ....................................... 92 Attracting in-migrants to employment ............................................ 93 7. Conclusions and policy recommendations ...................................... 95 The diversified structure of the Nordic labour market .................... 95 Four macro arenas in Norden with differing matching of supply and demand .......................................................................... 96 The transitional characteristics of local labour markets .................. 97 Renewal driven by demographic change....................................... 100 Renewal by human capital investment .......................................... 101 Industrial and innovation-driven economic renewal ..................... 101 Better ‘flow management’ for stronger labour markets – a few final comments .............................................................................. 102 References ............................................................................................ 104 Appendix 1: Methodology: A ‘vacancy-account’ for gross-stream analyses in regional labour markets................................. 106 Appendix 2: Labour market performance at the turn of the millennium in Finland ........................................................................... 112 Appendix 3: The spatial structure of the Icelandic labour market.................................................................................................... 123 Appendix 4: Labour mobility and regional economic change in Sweden.................................................................................. 128 Appendix 5: The anatomy of labour market flexibility in Denmark.... 137 6 1. Introduction Regional imbalances caused by and effecting demographic change are unevenly spread across the Nordic countries. A common emergent problem here is that of a future labour shortage, something which has already been experienced in certain sectors and in particular regions, and something that is forecast on a much broader scale in future. Moreover, the common characteristics of an ageing labour force, such as increasing rates of sickness leave, have important side effects, from a social and economic perspective, on the communities they blight. The differences in fertility rates between in particular Sweden, Finland and Denmark on the one hand, and Iceland and Norway on the other are complexly interrelated to differing economic performance levels and to national institutional structures. The sustainability, in economic and social