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Tech savvy, flexible workers boost COVID-hit Nordic economies

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09/18/2020 | 07:49am EDT
FILE PHOTO: Spread of the coronavirus disease (COVID-19) in Oslo

Helen Balfors, a project leader at Norwegian conglomerate Orkla, has been working from home for longer than most of her colleagues after returning from a skiing trip to Italy in February as the new coronavirus took hold in Europe.

The mother of three said that while the company had always encouraged a good work-life balance, some managers had required their employees to be in the office before the pandemic hit.

"But now they realise it works just as well to be at home," she said. "I just needed an extra screen and an extra keyboard from the office, which I got in a couple of days."

Well-developed digital infrastructure has helped the Nordic economies weather the pandemic better than most of Europe.

Britain's economy contracted by around a fifth in the second quarter, Spain registered an 18.5% drop, while the euro zone economy as a whole shrank 11.8%.

In contrast, Finland's GDP fell just 4.5% although Sweden and Norway saw larger hits of 8.3% and 6.3% respectively.

"Better digital infrastructure means we were quicker at being able to work from home. The infrastructure is there and we are used to using it," said Robert Bergqvist, chief economist at Swedish bank SEB.

"That has helped hold up production and consumption."

Denmark, Sweden, Finland and the Netherlands had the most advanced digital economies in the EU in 2018, a research paper from the European Commission showed, based on connectivity, human capital, internet use and extent of e-commerce.

(Graphic: Development of GDP in Europe during COVID pandemic, https://graphics.reuters.com/HEALTH-CORONAVIRUS/GDP-EUROPE/oakveowygvr/chart.png)

FLEXIBILITY

The Nordics - home to telecoms infrastructure firms Ericsson and Nokia - topped the EU table for home-working even before the pandemic. Sweden, in first place, had just under a third of workers working from home, at least occasionally, in 2019, according to the European Foundation for the Improvement of Living and Working Conditions (Eurofound), an EU agency. The EU average was around 10%.

Long-term flexible employment practices, such as allowing parents to stay home with sick children and an emphasis on a healthy work-life balance have encouraged remote working.

During the pandemic, around 60% of Finns have been able to work from home, around double the level in Spain. Sweden and Denmark are also well above the EU average of less than 40%, according to Eurofound.

A high proportion of information technology-focused jobs that lend themselves to distance working has helped but businesses and individuals have been quick to make the digital leap.

That, along with well-established rules for furloughing employees, means working hours have dropped less than in most of Europe - by 4.2% in Norway in the second quarter against a drop of 10.7% for the euro zone as a whole, Eurostat data shows.

With workers retaining at least some income, household spending and consumption have held up well.

Eurofound's survey showed around 70% of Swedes, Finns and Danes were optimistic about their future against just 45% across the EU. 

(Graphic: Development of working hours during COVID pandemic, https://graphics.reuters.com/HEALTH-CORONAVIRUS/EUROPE-EMPLOYMENT/qzjvqybwevx/chart.png)

TO LOCK DOWN OR NOT TO LOCK DOWN

The Nordic economic resilience has come despite very different approaches to fighting the virus.

While Sweden took a light-touch approach, Norway, Denmark and Finland all opted for stricter measures, with Finland isolating its capital from the rest of the country.

That means other factors have played a significant role.

"The structure of the economy is an obvious candidate, where many southern European countries are more dependent on tourism," Riksbank Deputy Governor Martin Floden said this earlier month.

Tourism accounts for just under 15% of GDP in Spain and Italy - two of the economies worst hit by the pandemic - according to the World Travel & Tourism Council. Denmark's share is 6.6% and Norway 8.0%.

On the flip side, Norway has had to contend with the collapse in oil prices, while Sweden's automotive sector has been badly hit.

But strong public finances have given Nordic governments the flexibility to spend their way out of trouble. Norway raided its wealth fund - the world's biggest.

According to SEB, the Nordics have implemented direct spending measures of around 5.5% of GDP compared with around 4.4% for France, 3.7% for Spain and 3.4% for Italy.

Yet government largesse is not everything.

Germany has spent more, around 8% of GDP, yet in the second quarter its economy contracted almost 10%.

Analysts caution that a final assessment of government and central bank measures and the effects on health and the economy will have to wait given the risk of a second wave of infections and the longer-term goals of many spending programmes.

Working from home, however, is here to stay.

Orkla's Balfors said many people were now questioning why they needed to spend a whole day travelling to Norway for meetings with her company when there was the technology to hold them remotely.

"It is going to change the way people see working from home - I'm completely sure of that," she said.

By Simon Johnson


Stocks mentioned in the article
ChangeLast1st jan.
ERICSSON AB 2.55% 97.42 Delayed Quote.19.45%
LONDON BRENT OIL 0.40% 42.56 Delayed Quote.-34.86%
ORKLA ASA -0.09% 92.86 Delayed Quote.4.38%
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