At least 300 top officials in Norway earn more than the prime minister
Executives and top officials in the public sector have seen a pay increase of 64 per cent.
Officials in the public sector – the state and municipalities – are the employees who have had the strongest wage growth in Norway between 1997 and 2020. This is according to a master's thesis recently submitted by Jørgen Tveit Sandberg to the Department of Economics at the University of Oslo (UiO).
The largest salary increases have gone to top government officials.
Greatest pay increase for management
Wage growth for managers in the public sector in general during this time period was 64 per cent.
This increase is significantly greater than for other state and municipality employees. Sandberg found that it is also significantly more than the pay increase for executives in the private sector.
In the same survey, he notes that the difference in pay between the highest paid government officials and other less well paid public leaders increased significantly during 1997-2020.
Earns more than the Prime Minister
The number of publicly employed officials in Norway who earn more than the Prime Minister has thus increased from about 100 to around 300 in the space of a few years.
This figure is far higher than Nettavisen documented when they wrote about public officials’ salaries in 2019. The online newspaper concluded that fourteen top government officials earned more than the prime minister.
“The difference is probably due to the fact that Nettavisen limited itself to looking at the approximately 250 managers who are registered in the Government's top officials pay system", says Sandberg.
The Prime Minister currently earns approximately NOK 1.7 million a year - just under 172 000 Euros.
“I have around 45 000 leaders in the public sector in my study selection. That’s why I found far more people with higher salaries than the prime minister,” Sandberg says.
He points out that the database for the group 'Managers with higher salaries than the Prime Minister' has some uncertainties until the year 2015. But he believes the database for the years 2015-2020 is very sound.
Increases don’t go to all public officials
The median salary of public officials has largely followed the same pay development as the Prime Minister's.
In other words, the officials with the highest earnings in the state have seen their salaries increase the most.
It is worth mentioning that some of the change in pay differences found by Sandberg is due to changes in the age and education of the employees in the various groups.
Would like to know why
Manudeep Bhuller is a researcher in the Department of Economics at the University of Oslo (UiO). He was Sandberg's supervisor during the work on the master's thesis.
“I think what Sandberg found is sensational,” Bhuller says.
“His findings are very interesting. But we’d like to know more about why this is the case. Is this a desired development or are there other reasons for it?” asks Bhuller.
The associate professor at UiO recognizes that there are many unanswered questions related to top public leaders’ salaries.
Pay increase especially high right after financial crisis
In his master's degree, Sandberg points out that it is particularly remarkable that officials in the public sector received such markedly higher wage growth than other sectors in the years immediately following the 2008 financial crisis.
This period saw other wage earners having their wages reduced compared with previous years.
At this time, political leaders also called for pay moderation for executives in the private sector.
Wants to put on the brakes
Norwegian Minister of Finance Trygve Slagsvold Vedum recently told the national newspaper Dagbladet that he will 'apply the brakes with full force' to stop this development in government leaders’ salaries.
Vedum and the Norwegian Centre Party want to freeze the salaries of top government officials who earn more than NOK 1.5 million. That is approximately NOK 200 000 less than the prime minister's current salary.
Norway's new Labour-Centre government took office on October 14 this year, following elections in September.
The new government platform – dubbed the Hurdal platform – that the Labour Party and the Centre Party have agreed on states in more moderate terms that the parties shall 'promote community interests related to… moderation in top officials’ pay.'
But in the Hurdal platform, it is clearly executives in wholly or partly publicly owned companies that the Labour Party and the Centre Party are most concerned about, not the officials who are employed by state and the municipal governments.
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Mudassar Kapur, the Conservatives' fiscal policy spokesperson until a few days ago, said in September that the Centre Party 'is knocking down open doors' in their fight against high top public officials’ salaries, according to the Norwegian tabloid Dagbladet Børsen.
Kapur pointed out that the civil government has set up a committee to study the salary system for government officials.
According to the website Juristen.no, this committee will submit its report in June 2022.
However, Sandberg examined many thousands of public managers and found that far more than the approximately 250 covered by the state's executive salary system earn well.
Result-oriented executive salaries
There is a lot of research being done on executive pay.
The majority of it has studied executive salaries in private companies. Fewer researchers have studied top officials’ salaries in the public sector.
Much research has also been done on the mechanisms behind increased top management salaries in private companies. Why do executive salaries generally increase much more than regular salaries?
A common explanation is that many top management salaries have become result-oriented. This means that the managers receive bonuses that increase their salary if a company distributes earnings in the form of money to the owners. The use of performance-based pay for executives has increased dramatically in the United States and has also become more common in Norway.
Researchers believe this affects public top executive salaries. Here, managers can argue that their salaries must be competitive in relation to private executive salaries.
Jørgen Tveit Sandberg: Utviklingen i lederlønninger i Norge, 1997-2020. En empirisk studie av utviklingen i lederlønninger i Norge i perioden 1997-2020, med et særlig fokus på ledere i offentlig sektor (Developments in executive salaries in Norway, 1997-2020. An empirical study of the development in executive salaries in Norway in the period 1997-2020, with a special focus on executives in the public sector), Department of Economics, UiO, 2021.
This article was updated on November 18 to change a few mistakes in the translation.