Exposed industries in Norway

Deviding the production sectors into exposed and sheltered sectors (E- and S-sector) is a key element in many macroeconomic contexts, not least in terms of wage determination. In theory there is a sharp distinction between E- and S-industries. This distinction is not always easy in practice. In this study we discuss issues relevant for identifying industries in Norway that should be regarded as exposed. In one way or another, all industries are exposed to foreign competition, but some more than others. We classify some industries as exposed industries based on the share of value added from an industry which is based on exports and import shares for the main products for the industry. The exposed industries are further categorized as

• Resource based industries

• Industries supplying the petroleum sector

• Footloose industries

By footloose industries we mean that the production have no other link to domestic production factors than their employees.

The manufacturing sector is important among the industries we classify as exposed, and only a small part of industry is not exposed to foreign competition of any significance. Petroleum extraction alone makes up for more than half of Norwegian exports. Mining, Forestry, Fishing, and Aquaculture, Shipping services, Pipeline transport of natural gas and Petroleum related services are classified as other exposed industries. In 2012 the exposed industries employed 14 per cent of the total number of employees in Norway. Industries that mainly is based on deliveries to the petroleum industry accounted for 3 per cent of employment, other industries directly or indirectly based on natural resources accounted for 5 percent while footloose industries accounted for 6 per cent of total employment. Footloose industries that are part of Mainland Norway are all manufacturing industries and accounted for 4 per cent of total employment.

We study the economic development during 1970-2012 based on the classification of industries emphasising the period from 2000 and onwards. Data from the national accounts show that the growth in the exposed industries has been quite similar to that of other markets oriented industries although perhaps slightly lower. The average annual growth rate of value added for exposed industries was 2.6 per cent against 3.1 per cent for non-exposed market oriented industries during 2000-2012. Activity growth for mobile industries is close to that of all exposed industries, resource based industries have grown more slowly while petroleum oriented industries have grown faster.

Profitability measured as the share of operating surplus in total factor income has developed in ways quite similar to that of value added. Profitability has improved both in exposed and other market oriented industries. The biggest improvement in profitability has taken place in export oriented and footloose industries and in industries supplying products to the petroleum extraction. The profitability in industries based on natural resources is highly cyclical, but has followed a downward trend since 2000.

Increases in average wage costs per hour from 2000 to 2012 were somewhat higher in exposed industries in Mainland Norway than for other market oriented industries. With the exception of Services relating to petroleum extraction where wages rates have grown fast, the growth in wages has not been higher for petroleum oriented industries than for other exposed industries.