Compressed Wages and Generous Social Insurance
During his visit to South China, Jo Thori Lind held lectures at South China University of Technology, Guangdong Academy of Social Science and Sun Yat Sen University, explaining the history and performance of the Nordic Model of social security. Contrary to the expectations created by classical economic theory, a long tradition of small wage differences, high taxes, a large public sector, strong unions and a comprehensive welfare state, has proved a successful and stable system for Norway. According to Lind, this is not due to timing or a wealthy state, but rather to other relationships between these policies and economic development than most commonly expected.
For example, a system with compressed wages, which is the first of the two pillars of the Nordic Model, causes high technology companies, or generally companies doing well, to pay relatively less for their qualified workforce compared to other countries. The opposite is the case for low performance companies, contributing to driving these out of business. As for the second pillar, generous social insurance, Lind argues that when laid off employees represent less of a social cost, the working force becomes more dynamic.
The Nordic Model as Development Strategy
In this way there are factors of inherent effectiveness in the Nordic model which are important to highlight as they render the Nordic Model a possible development strategy for other countries that do not share the specific economic background of Norway. The Nordic Model has combined dynamic economic development with an egalitarian distribution of resources in the Nordic countries since the 1930s. Before this time Norway was among the poorest countries in Europe.
Jo Thori Lind’s field of research is mainly economic policy and redistribution. He is employed at ESOP – Centre for Equality, Social Organization and Performance – a Department of Economics ‘Centre of Excellence’ which was established three years ago at the University of Oslo. Apart from the Centre of Equality, Social Organization and Performance, Jo Thori Lind is also an affiliate of the Centre for the Study of Civil War at PRIO and the CESifo Research Network.