The article concerns public sector wages in Denmark, specifically occupations.
The researchers have compared the education level, work experience and managerial duties in public sector jobs to create an “assumed wage level”, and then compared this to the real, perceived level for the same jobs.
The econometric method is logical, and I would have performed the study in the same way. I see no problems or errors with the statistical approach. The study is also socially interesting, since there is no “correct” level of compensation for the jobs in the public sector, and wage differences have been relatively rigid for a long time. It is valuable to compare whether levels of education and training match with the salaries, and whether the differences are socially acceptable in the egalitarian context of Nordic society.
The researchers then studied which professions have the largest gaps between the estimated or assumed wage level and the perceived one. The biggest negative gaps are among childminders and various kinds of assistants.
In Finland, the picture would be much the same, and probably for similar reasons. Many immigrant women with high levels of education and training cannot find work that matches their qualifications because of poor language skills and end up in low-paid public sector jobs as childminders, assistants, etc. In Finland, the problem is exacerbated by the notoriously complex language.
In addition, doctors and managers are very well paid, even considering their very high levels of education and responsibilities. The gap between doctors (those who are not supervisors or specialists are called “junior doctors”) and other academics in the public sector might also raise questions. The situation in Finland is very similar and exacerbated by a severe shortage of doctors.
Nursing is often the first profession that tries to breach the wage hierarchy in the public sector, partly due to the strength of the trade unions representing nurses and midwives in all the Nordic countries. The job has also become more technical over the last two decades and involves the use of complicated machinery and other equipment. It might be argued that the work of a nurse has moved closer to that of a doctor. As a result, nurses are often dissatisfied with their disappointing pay, which is below other professions with similar abilities and levels of education and training. The situation is partly the consequence of a lack of appreciation of the work done by nurses and the staff in other female-dominated services in the past.
Wage rigidity is quite strong in all the Nordic public sectors, and there was little change to relative wages between jobs before the 2020s. This creates a problem. How do you combat labour shortages in certain professions if relative wages cannot be adjusted? In addition, if productivity rises faster in some public sector professions than in others, should the workers not be compensated with faster pay increases? In Finland and other Nordic countries, uniform wage increases are often seen as socially acceptable, which adds to the challenge.
If I have understood the situation correctly, nurses in Denmark and Finland have breached the wage hierarchy with programmes to raise their pay. The general public in Finland has received such developments positively, although other occupations in the public and private sectors have been negative.
The article also includes comparisons between the public and private sectors for professions employed in both, which excludes jobs such as police and prison officers.
Both in Denmark and Finland, public sector wages are strongly concentrated. As the wage differences within and between professions are minor, many professionals might find it fruitful to switch to the private sector, triggering employment difficulties in the public sector, a phenomenon perceived in several Nordic countries.
The article also notes that productivity growth is (usually) faster in the private sector, which may mean the public sector encounters difficulties in hiring professional staff. However, significant wage differences between sectors are unacceptable under the Nordic model. This might cause increasing problems for public sector employment, as can already be seen. The clash between the Nordic cultural demand for smaller differences between wages and labour shortages in some public sector jobs may cause problems. As a result, the Nordic model, which matches high international competitive ability with sustainable finances and low wage differences in the public sector, has encountered troubles, just as the research has stated.
In Denmark, where public finances are highly robust and debt and deficit low, the problem of labour shortages and rising wage demands in the public sector can be countered by allowing higher raises for some occupations.
In Finland, the challenge is harder to address. High debt and a large deficit make it harder to raise public sector wages to compete with the private sector opportunities or rising wage demands. Finland has encountered an acute labour shortage in public-sector services, but the country faces difficulties fixing the situation with pay rises because of strict budget restraints and slower economic growth.