Nordic Growth Sectors How can working life policies contribute to improving the framework conditions?

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1 Nordic Growth Sectors How can working life policies contribute to improving the framework conditions?

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3 Nordic Growth Sectors 1

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5 Nordic Growth Sectors How can working life policies contribute to improving the framework conditions? Key findings and policy recommendations of the Nordic Council of Ministers Globalisation Project Lars Foldspang, DAMVAD (red.) Peter Lange, DAMVAD Kristian Mørk Puggaard, DAMVAD Erik Magnus Sæther, Oslo Economics Line Bakken, Oslo Economics Per Kongshøj Madsen, Aalborg Universitet Gunnel Hensing, Göteborgs Universitet Benedicte Brøgger, Arbeidsforskningsinstituttet Berit Sundby Avset, SINTEF Nord 2013:006 Nordic Growth Sectors 3

6 Nordic Growth Sectors How can working life policies contribute to improving the framework conditions? Key findings and policy recommendations of the Nordic Council of Ministers Globalisation Project Lars Foldspang, DAMVAD (red.), Peter Lange, DAMVAD, Kristian Mørk Puggaard, DAMVAD, Erik Magnus Sæther, Oslo Economics, Line Bakken, Oslo Economics, Per Kongshøj Madsen, Aalborg Universitet, Gunnel Hensing, Göteborgs Universitet, Benedicte Brøgger, Arbeidsforskningsinstituttet and Berit Sundby Avset, SINTEF Nord 2013:006 ISBN Nordic Council of Ministers 2013 Layout: Hanne Lebech Coverphoto: ImageSelect Photo: ImageSelect Print: Rosendahls-Schultz Grafisk Copies: 216 Printed in Denmark This publication has been published with financial support by the Nordic Council of Ministers. However, the contents of this publication do not necessarily reflect the views, policies or recommendations of the Nordic Council of Ministers. Nordic co-operation Nordic co-operation is one of the world s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an important role in European and international collaboration, and aims at creating a strong Nordic community in a strong Europe. Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world s most innovative and competitive. Nordic Council of Ministers Ved Stranden 18 DK-1061 Copenhagen K Phone (+45) Nordic Growth Sectors

7 Contents Preface... 7 Introduction Summary of the analyses Megatrends in the Nordic labour markets Ageing Globalisation Gender balance Education - demand for qualifications The state of work well-being in the Nordic countries Case study: Nanotechnology Policy recommendations Introduction Methodology Labour market policy recommendations Work well-being recommendations Sammenfatning Nordic Growth Sectors 5

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9 Preface This report is the final result of one of the large scale projects initiated by the Nordic Council of Ministers in 2010 as part of the globalisation initiative Health and welfare focusing on the challenges of globalisation faced by the Nordic countries within this area. This present project has analysed how working life policies can contribute to improving the framework conditions of Nordic growth sectors. To carry out the analysis, the Nordic Council of Labour and Employment Ministers entered into a contract with a Nordic consortium headed by DAMVAD. The consortium has produced five working papers investigating key issues related to this question. The working papers are published at damvad. com/nordic-growth and address an identification of the competitive job creators and their drivers of growth, the demand for and the match of competences among the competitive job creators, as well as their work environment. The working papers are based upon an extensive empirical analysis of interviews, survey data, and register-based data from several thousand Nordic growth companies. This final report presents a summary of the five working papers and a number of evidence-based policy recommendtions based on the working papers as well as on two rounds of discussions among key stakeholders in a Nordic Policy Forum established for the occasion. These recommendations address the company level, the government level, and the Nordic level within the areas of labour market and work well-being/work environment. As to the labour market area, it is recommended to increase incentives to remain in the labour force, diminish administrative burdens related to international recruitment and improve possibilities for international students to work in all the Nordic countries after graduation as well as better prepare recently graduated people to enter the workforce. As to the area of work well-being, it is recommended to systematically gather and publish data on key performance indicators of psychosocial well-being at company level, gather and share best Nordic practices of methods and measures for handling and improvement of this area at national level, and to Nordic Growth Sectors 7

10 initiate cross-nordic initiatives with the aim to coordinate better efforts and cooperation within this area. It is also recommended to improve measures regarding the balance of family and work life, including flexible working hours and flexible opening hours in kindergartens, and to carry out cost-benefit analyses to illustrate the added value of a high level of work well-being. It is my hope that in particular Nordic governments and the Nordic Council of Ministers will make full use of these important results and ensure a thorough follow-up of the recommendations contributing to the best possible framework conditions for our Nordic competitive job creators. Dagfinn Høybråten Secretary General Nordic Council of Ministers 8 Nordic Growth Sectors

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13 Introduction The Nordic welfare states are facing new challenges in an increasingly globalised world. Fiercer competition has underlined the need for the Nordics to enhance competitiveness and to support and nurse growth in industry and businesses. This paper was written as a part of the project Nordic growth areas which is a project commissioned by the Nordic Council of Ministers. The project's purpose is to provide new knowledge on how the Nordic countries can support (and benefit from) new high-growth areas through improving framework conditions in the labour market, education/research and industrial policy. The project aims at stimulating knowledge sharing between the Nordic countries. In addition, the project covers the field of nano technology as a special case. The overarching purpose of the project is to develop recommendations concerning policies, which strengthen the conditions for growth and job creation in the Nordic countries. The objective, therefore, is to optimise framework conditions, allowing the Nordic countries to better benefit from these areas of growth and, ultimately, contribute to ensuring the Nordic welfare states. The analysis has been conducted by a consortium comprising experts from Nordic knowledge and research institutions, led by DAMVAD. The twoyear project has been conducted on firm methodological ground, making use of a register-based analysis, a survey, and qualitative interviews. Five working papers, a covernote and this final report are downloadable from the webpage The partners are: DAMVAD, Oslo Economics, Jari Kuusisto and Martin Meyer (University of Vaasa, SC-Research), The Norwegian Work Research Institute, Gunnel Hensing (prof., University of Gothenburg), Per Kongshøj Madsen (prof., Aalborg University) and SINTEF (The Foundation for Scientific and Industrial Research at the Norwegian Institute of Technology). Glossary In the following, the paper operates with two central definitions: Competitive job creators The competitive job creators are found through the statistical register-based analysis performed during this study (see appendix of working paper 2 for more information). They are identified by using two criteria. Firstly, the companies must have generated new employment, hence experienced growth in employment during a selected period from Secondly, only the companies among the 25% most productive in their Nordic Growth Sectors 11

14 own industry are selected. See working paper 2: The competitive job creators for a more detailed description. Growth companies It is not possible through the survey to precisely identify the competitive job creators as they are defined by very detailed criteria in the statistical register-based analysis as described above. Thus, the term growth companies is used when reporting results from the survey and interviews, and will serve as an approximation for the competitive job creators. The growth companies are found through the survey performed among companies in the Nordic countries, and segmented according to sector, size, and geography based on the registerbased analysis. This is done to be able to target the areas with a high number of growth companies. Companies having experienced growth in the number of employees in their country during the last three years are defined as growth companies. Furthermore, the interviewed companies are all selected on the basis of their growth, hence they are all growth companies. 12 Nordic Growth Sectors

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17 1. Summary of the analyses Our work and analysis has evolved around the following questions: Who are the Nordic growth companies? What characterises the growth companies demand for labour? How can framework conditions improve the match of supply and demand for labour in the growth companies? To answer these questions we have conducted a number of analyses based on different methodologies. The analysis combines insight from a series of interviews with companies, labour market organisations and policy makers in each of the five Nordic countries with two surveys one of companies and one of employees in growth sectors. Furthermore, a register-based analysis of the competitive job creators has been performed. Our analyses and findings are documented in five working papers. In the following, we will summarise the findings from these five papers. The working papers as well as a covernote and this final report are downloadable from the web page nordic-growth. Working Paper 1: Framework conditions for high-growth industries in the Nordic countries, surveys the existing literature on existing framework conditions within the realms of labour market policy, work well-being, and educational and industrial policy. There are a number of important megatrends in the labour market, which the competitive job creators must consider. Among these are the ageing of the workforce; the increasingly multiethnic character of the workforce; the increasing share of female employees with higher education; the forces of globalisation; a lesser need for workers to be present at their workplace; and a polarisation of the workforce when it comes to qualifications. These megatrends notably globalisation, ageing of the workforce and the increasing share of female workers with higher education lead to important changes in the framework conditions for the competitive job creators. Analyses focusing on work wellbeing in growth sectors are not common in the literature, making the present analysis rather new of its kind and existing literature is reviewed in this light. Important overall considerations in modern Nordic workplaces are psychosocial imbalances, and the dual earner society of the Nordics, leading to great challenges in combining work and family life. Compressed work hours, long hours and precarious employment are found to be important imbalance factors. With regards to educational and industrial policies, important differences are found among the Nordic Growth Sectors 15

18 Nordic countries. Firstly, Norway is a front runner when it comes to actually educating entrepreneurship. Secondly, to overcome the mismatch of supply and demand of qualifications, the Nordics have developed very different strategies with Finland being the most radical, as it forecasts the needs for different types of candidates on a very formal basis. Thirdly, whereas all of the Nordics have a strong focus on growth and competitiveness in their industrial policies, Denmark seems to be a frontrunner with regards to a start-upfriendly environment. Working Paper 2: Competitive job creation, identifies the areas of growth in the Nordic countries, and presents an analysis of drivers for growth. The analysis builds upon register-based micro data from the Nordic central statistical bureaus. Competitive job creators ( growth companies ) are found in several industries some thriving, others in decline. An important finding is that there are entire industries, which are prosperous, while in others, there is a great deal of polarisation Moreover, in working paper 2, education (secondary and tertiary), tangible assets, and exports are found to be important drivers of productivity. Further, the paper shows that increasing the share of staff with a tertiary education is much more effective in boosting productivity in highly productive companies than in less productive ones, whereas the opposite is true with regards to investments in tangible capital assets, which tend to boost productivity more in the less productive companies than in the most productive ones. Therefore, companies wishing to boost productivity should invest in tangible assets first, welleducated staff second, cf. figures 1 and 2. Figure 1. Relationship between fixed capital assets and productivity (quantile regression). Swedish companies ordered by percentiles of the productivity distribution Regression coefficient (co-variation with productivity) Intangibles fixed assets Least productive Quantile Tangibles fixed assets Correlation is positive and significant between tangible assets and productivity across the entire productivity distribution but strongest among the least productive companies Small negative correlation between intangible assets and productivity across companies Source: DAMVAD 2012 Source: Our calculations, based on data from the Nordic statistical central agencies. Most productive Note: Graphs depict the strength of the relationship between fixed capital assets and productivity within Figure percentiles 2 Relationship of the productivity between distribution tertiary of education companies (X-axis). and productivity (Quantile regression). Danish companies ordered by percentiles of the productivity distribution. 1.2 Tertiary educated (share of staff) Nordic Growth Strong correlation Sectors between share of tertiary educated workers and productivity across 0.8 entire productivity distribution coefficient ith productivity)

19 Least productive Most productive Quantile Source: DAMVAD 2012 Figure 2 Relationship between tertiary education and productivity (Quantile Figure regression). 2. Relationship Danish between companies tertiary ordered education by percentiles and productivity of the productivity (quantile regression). distribution. companies ordered by percentiles of the productivity Danish distribution Regression coefficient (co-variation with productivity) Tertiary educated (share of staff) Strong correlation between share of tertiary educated workers and productivity across entire productivity distribution Correlation is strongest among the most productive companies and rapidly accelerating Least productive Most productive Quantile Source: Source: Our calculations, DAMVAD based Note: on Dotted data from lines the on Nordic the sides statistical of the graph central depict agencies. 95 pct. confidence interval. Note: Graphs depict the strength of the relationship between share of staff with tertiary education and productivity within percentiles of the productivity distribution of companies (X-axis). Dotted lines on the sides of the graph depict 95% confidence interval. The results do not point as clearly to a place to start with regards to employment growth. Tertiary (and not so much secondary) education and exporting are important drivers of employment growth. So are intangible assets, but only for companies that are already fast growers. For Figure Figure 3. 3 Relationship Relationship between between initial initial share share of of tertiary tertiary education education and and employment employment 4-year growth period, over (quantile 4-year period, regression). (Quantile Swedish regression). companies Swedish ordered companies by percentiles or- of the growth over dered slower by percentiles growers, of intangible the employment and tangible growth distribution assets alike are less likely to be employment growth distribution related to increased growth rates. Also, tertiary education is less strongly associated 0.40 to employment growth for the slower growers than it is for the fast growers Tertiary educated (share of staff) Regression coefficient (co-variation with employment growth) Significant positive - and increasing - correlation between share of staff with tertiary education and employment growth expect for 20 per cent slowest growing companies Key findings and policy recommendations Slow growers Quantile Correlation accelerates rapidly among the 20 per cent fastest growing companies Fast growers Source: DAMVAD, Source: Note: Dotted Our calculations, lines on the based sides on of data the graph from depict the Nordic 95 pct. statistical confidence central interval agencies Note: Graphs depict the strength of the relationship between share of staff with tertiary education and employment growth within percentiles of the employment growth distribution of companies (X-axis). Figure 4 Relationship between initial capital assets and employment growth Dotted lines on the sides of the graph depict 95% confidence interval. over 4-year period, (Quantile regression). Norwegian companies ordered by percentiles of the employment growth distribution n coefficients employment growth) Intangibles fixed assets Strong positive correlation between intangibles and employment growth among fast growers Tangibles fixed assets Nordic Growth Sectors 17

20 Tertiary educated (share of staff) 0.30 Significant positive - and increasing - correlation between share of staff with 0.25 tertiary education and employment growth expect for 20 per cent slowest 0.20 growing companies 0.15 Correlation accelerates The results do 0.10 not point as clearly to already fast growers. For slower growers, intangible and tangible per cent fastest assets alike rapidly among the 20 a place to start with regards to employment growth, cf. figures 3 and 4. Tertiary are less likely to be related growing companies to increased (and not so much secondary) education growth rates. Also, tertiary education is and exports are important drivers of less strongly associated to employment employment growth So are intangible growth for the slower growers than it is Slow growers Fast growers assets, but only for companies that are for Quantile the fast growers. Regression coefficient (co-variation with employment growth) Source: DAMVAD, Note: Dotted lines on the sides of the graph depict 95 pct. confidence interval Figure 4. Relationship between initial fixed capital assets and employment growth over 4-year Figure period 4 (quantile Relationship regression). between Norwegian initial capital companies assets and ordered employment by percentiles growth of the employment over 4-year growth period, distribution (Quantile regression). Norwegian companies ordered by percentiles of the employment growth distribution Regression coefficients (co-variation with employment growth) Intangibles fixed assets Strong positive correlation between intangibles and employment growth among fast growers Tangibles fixed assets Small negative correlation Strong negative correlation between tangibles and between intangibles and -0.6 employment growth employment growth among across the entire growth slow growers -0.8 distribution Slow growers Fast Growers Quantile Source: DAMVAD, Source: Note: Our calculations, Dotted lines on based the sides on data of the from graph the Nordic depict statistical 95 pct. confidence central agencies. interval. Note: Graphs depict the strength of the relationship between fixed capital assets and employment growth within percentiles of the employment growth distribution of companies (X-axis). Dotted lines on the sides of the graph depict 95% confidence interval. Working Paper 3: Demand and supply of labour in the competitive job creators surveys and interviews company management and employees as well as relevant organisations, labour market parties and Working policy Paper makers. 3: Demand and supply of people to a larger extent than other labour in the competitive job creators, companies. surveys and interviews company management Even if growth companies do hire a and employees as well as rele- larger share of highly educated people, vant organisations, 8 Key findings labour and market policy parties recommendations they find it difficult to find employees and policy makers. with the right skills. In all of the The paper shows that competitive job countries, the growth companies are creators know at least part of the lesson more inclined to have difficulties finding from working paper 2 or rather, they people with the right competences act as if they do, and hire highly educated than similar non-growth companies. 18 Nordic Growth Sectors

21 This implies a threat to the potential for the growth companies to fulfil their potentials. It is furthermore an observation that the growth companies rank social skills more important in the hiring situation than technical or methodological competences. This can be explained by the fact that the interviewed growth companies underline how education and skills are considered a prerequisite for the candidates to be attractive and a ticket to the job interview, where social skills and being the right person are the characteristics looked for when at the interview. Policy makers and companies are very much in opposition to one another regarding the issue of ageing of the workforce. Whereas government organisations and labour market organisations predict that the ageing of the workforce will set an important limit to recruitment in the future, importantly, companies disregard this as an important factor. This might be explained by the fact that the competitive job creators identified in the analysis employ staff with an average age around 40 years, suggesting that the competitive job creators will not have to face shortages in labour supply for a number of years to come. Also, the issue of the ageing of the population is expected to have an impact in the longer run and not in the near future. Political organisations and labour market parties often tend to observe a longer time horizon than companies do, which may be part of the explanation as to why the companies do not yet see this as a challenge. One way to work around the problem of shortages in the supply of skills seems to be by hiring international labour. However, Nordic languages and importantly Nordic culture are perceived as barriers to international recruitment outside of the Nordic countries. Also, smaller companies rarely use this form of recruitment, as a significant investment in time and resources is required. Working Paper 4: Work well-being in growth companies investigates the state of work well-being in the Nordic companies for growth and non-growth companies for comparison purposes how it may be improved, and how it may stimulate growth. The paper is based on a survey of companies and employees alike and on interviews with relevant policy makers, labour market parties and company management. The literature review in Working Paper 1, as mentioned above, is confirmed in the findings of Working Paper 4. Thus, the psychosocial work environment and imbalances are reported as an important work wellbeing issue. Still, companies and employees alike rate the work environment as being of relatively high quality and only few experience discomforts. This reaffirms findings in earlier studies that Nordic employees rate their work environment relatively high. No big differences between growth and non-growth companies are found. Thus, no evidence is found in support of the work environment suffering more in growth companies than in other companies for instance with regards to imbalance factors, problems of worklife balance, etc. Working Paper 5: Demand for revision of framework conditions, is based on interviews with policy makers, labour market parties and company management as well as surveys of Nordic Growth Sectors 19

22 companies and employees, like papers 3 and 4 above. The paper identifies the specific requests or demands for revisions of the framework conditions put forward by the companies and policymakers. In the realm of the labour market, the (high) level of wages is pointed to as the most important barrier to growth in the survey of companies, but also administrative burdens when handling sick leave and benefits play an important role in all of the countries. Likewise, limitations in recruitment of foreign labour are mentioned as an important barrier. Dismissal protection was also pointed to as one of the most important barriers in the interviews conducted among companies, but this was rated as a midsize barrier in the survey of the companies. Regulations regarding shift work and working hours were pointed to as troublesome in the interviews with both companies and labour market organisations, and they were regarded as outdated and not in line with what is needed in modern growth companies. This is important, as less regulation (government or otherwise) may mean increasing stressors in a work well-being perspective. However, the overall regulation of specific work well-being issues does seem to be well-functioning, and it is not regarded as a large barrier to growth. Companies do find the administrative burdens connected to work well-being regulation somewhat burdensome, but the regulation itself does not seem to be a source of trouble. This is important, as work well-being and efforts to improve this could be seen as barriers by growth companies, as it may increase administrative costs. However, it may even stimulate growth as mentioned above but the way regulation is carried out does have consequences for companies. This may call for more innovative and less regulation-intense ways to regulate or improve work wellbeing. Companies argue in the survey that educational policy does not ensure a sufficient supply of candidates with basic competences required to work in a small or medium-sized company. This is much in line with the fact pointed to above, namely that companies find it difficult to recruit people with exactly the right competences. The Nordic welfare states are facing new challenges in an increasingly globalised world. Fiercer competition has underlined the need for the Nordics to enhance competitiveness and to support and nurse growth in industry and businesses. This report presents the key findings and policy recommendations of the project Nordic growth areas. The objective is to contribute to an improvement of framework conditions in the labour market and work environment policy areas, allowing the Nordic countries to better benefit from their growth companies. Having identified growth companies in the Nordics, the project analyses growth drivers, the match between supply and demand of labour, and growth and other companies perceptions of existing framework conditions and improvement needs. Based on the analyses, a Nordic Policy Forum was held in Copenhagen with participation of policymakers from the 20 Nordic Growth Sectors

23 central administrations, labour market organisations, universities and growth companies, guiding the project group in developing the policy recommendations of the project. In a very general manner, the findings of the project may be summarised as follows: Competitive job creators are found in industries in decline as well as among rising industries. They are found within manufacturing as well as services. Tertiary education, intangible capital assets and exports seem to be important drivers of employment growth for individual companies. Competitive job creators seem to know this and hire well educated people, although, according to the survey, they regard social competences as more important than formal education e.g. technical skills, in the hiring situation. Interviews conducted show that formal education is first and foremost seen as a prerequisite to be considered as attractive for a job, but social skills, rather than academic skills, are important in the actual interview situation. Ageing of the workforce, globalisation pressures and an un-matched demand for qualifications are among the most important challenges to growth in the competitive job creators. Policy makers and companies are very much in opposition to one another regarding the issue of ageing of the workforce. Whereas government organisations and labour market organisations predict that ageing of the workforce will set an important limit to recruitment in the future, importantly, companies disregard this as an significant factor. Growth companies also mention level of wages, dismissal protection, and overall administrative duties as important barriers to growth. Psychosocial imbalances, work-life balance, and a complex regulatory policy framework are among the most important challenges to ensuring a well-functioning work environment in the competitive job creators. Work well-being in the competitive job creators is at the same level as in other companies and quite good. However, psychosocial well-being is challenged. Policy recommendations The policy recommendations developed are based on the results of the project and input from discussions at a Nordic Policy Forum, where members of labour market organisations, authorities, company management and researchers have participated. Overall, the Nordic countries have well-functioning framework conditions. However, our study shows that there is potential to further improve framework conditions in order to enhance competitiveness and support growth. Based on our analysis, we propose action in two policy areas; labour market policy and policy for work well-being. The recommendations are described further in chapter 5 below. The parentheses in the following refer to the relevant chapters. Nordic Growth Sectors 21

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