In this chapter we will summarise the conclusions of the two previous chapters, looking back at the common Nordic labour market since 1954, present some concluding remarks and look ahead to the future of the Nordic labour market. In the final section, we will also spark discussion about future perspectives on the common Nordic labour market.
While the first two parts of the report are mainly based on descriptive statistics and document studies, this chapter is also based on the results of the survey and interviews conducted with stakeholders involved in the common Nordic labour market.
Three main trends when looking back at 70 years of the common Nordic labour market
To summarise, the 70 years of the common Nordic labour market have indeed played a role in the possibility to migrate or commute to work in another Nordic country. Overall the Nordic experience suggests that a large majority of people prefer to live and work in the country or region where they have their roots. Moreover, the comparatively high standards of living and generous welfare states in the Nordic countries suggest that the need to migrate for economic reasons, which is prevalent in many other regions of the world, such as to escape unemployment and poverty, is weak.
While the extent and the direction of migration flows have changed over time, we would like to point to three trends that have been more persistent over time. The first trend is that residents from islands and self-governing territories are more prone to migrate to another Nordic country. Greenland, Åland and the Faroe Islands in particular have a large share of Nordic migrants, while Iceland stands out as being perhaps the most “Nordic” since the population of Iceland has changed its preferred destinations during different periods of time.
A second key feature is that proximity matters. That applies both to geographical proximity and to linguistic and cultural proximity. That is relevant both to migration and commuting patterns – taking up a job in another Nordic country is simply more common if the distances are not too great.
Finally, a third key feature of the Nordic migration pattern is re-migration, which means that many Nordic migrants spend some time in another Nordic country, for example to escape unemployment, gain new professional experiences, for family reasons, to study etc. and move back after a couple of years (Jensen & Pedersen, 2007; Monti, 2020; Weber & Saarela, 2019; Fischer and Straubhaar, 1996).
However, it is not necessary to migrate to take up a job in another Nordic country. Commuting to the workplace or working remotely are also possibilities. From a research point of view, we know less about commuters and remote workers than about migrants since migrants’ change of residence is also recorded in the statistics. However, in certain cross-border areas and sectors, cross-border mobility is of pivotal importance to the local and regional economy and the labour market and in some municipalities as much as over 10% of the working force are commuting from a nearby country. While commuting currently seems to be on the rise in some areas, it is a phenomenon that is highly sensitive to disruptions. Previous experiences have shown that cross-border restrictions can make commuting patterns drop quite drastically, such as during the pandemic, and it also seems that the transport and commuting experience itself plays a role that should not be underestimated.
What can we know about the future?
From a research point of view, the academic literature on why people migrate between affluent countries is limited. Employment, higher wages and the possibility of a better life have been assumed to operate as drivers, although these benefits also need to be weighed against the economic costs and other social transaction costs of migrating or commuting. Multiple factors are at play, which are often described in a simplified way as push and pull factors, or as attraction forces, driving forces or intervening obstacles (Lundgren and Bogason, 2020).
Even if we do not know exactly when and why people choose to migrate or commute to another Nordic country, previous studies on migration flows within the Nordic Region indicate that unemployment and structural change at specific times could act as a financial incentive for migration (Fischer and Straubhaar 1996, Pedersen, Røed and Wadensjö 2008), although the robust social security systems allowed many to stay put (Fischer and Straubhaar 1996). The findings outlined in this report for the years spanning from 1990 to 2022 corroborate those arguments.
From previous studies we know that commuting has dropped dramatically when cross-border restrictions have been introduced, such as during the pandemic (see e.g. Lundgren &Wøien Meijer, 2022). In economic literature that phenomenon of decreased interaction when hurdles arise is often described as transaction costs. These can be related to types of costs other than economic costs, such as the cost of gaining access to information, the time allocated for commuting, the social costs involved with larger distances, language problems and perceived insecurity about the potential benefits of working in another Nordic country. Learning more about those barriers is hence of importance (e.g. Pedersen, Røed & Wadensjö, 2008).
To learn more about what the labour market will look like in the Nordic countries in the future and in order to be able to compare forecasts between the countries, we have chiefly used data from CEDEFOP in this study. In all Nordic countries we find that demography is a strong driving force for developments on the labour market. All the Nordic countries and regions are challenged by the global trends of ageing population and urbanisation. Digitalisation and the green transition are two megatrends currently impacting the labour market in the Nordic countries which will require re-skilling and up-skilling, but also increased adaptation and flexibility, systems for lifelong learning and involvement of the social partners (e.g. Fabricius et al. 2024).
We also find that demand for labour looks very similar in the Nordic countries, with a focus on the business sector and the public services sector. Based on the same data, we also find that demand for a more highly educated and skilled labour force is yet another common Nordic trend. The challenges of filling job openings with the right skills and providing welfare services can be expected to be given higher prominence across the Nordic Region and especially in rural and remote areas. With regard to the common Nordic labour market this could potentially mean increased competition for labour between the Nordic countries. However, previous studies and our data indicates that when accessibility is good and cross-border barriers are kept at a low level, the labour markets can complement each other, at least in specific niches (e.g. Fabricius et al, 2024).
What has been the role of the agreement on the common Nordic labour market?
One of the research questions set out in this study relates to the agreement on the common Nordic labour market: what has been the role of this agreement in terms of the common Nordic labour market?
To address that question, we need to step back to the Nordic cooperation in the legal field which according to research has resulted in a joint Nordic legal mind or legal family, starting as far back as the Nordic lawyers’ meeting in 1872 and containing elements such as pragmatism, realism, absence of formality, equality and transparency. Since then, the Nordic countries have developed similar legislation in many fields with discrete acts instead of civil code and with Denmark, Norway and Iceland showing more similarities to one another and likewise Sweden and Finland. Despite the cooperation and the similarities, however, there is no such a thing as Nordic law or judiciary and the individual countries are responsible for deciding upon drafting and adopting new legislation. Although some claim that the legal cooperation has lost some of its dynamism and spirit with the increased focus on the European Union and harmonisation with European law (Letto-Vanamo & Tamm, 2019), the informal nature of Nordic cooperation also has benefits if it is prioritised and allocated financial resources (Lorange Backer, 2018).
The Nordic cooperation has developed successively through the codification of agreements and setting up institutions and initiatives for the cooperation. While the Nordic Council started up back in 1952, the Helsinki Agreement from 1962 can be seen as a codification of the former Nordic cooperation, stating ambitions for unified regulations. With the foundation of the Nordic Council of Ministers in the 1970s, Nordic cooperation was further formalised as intergovernmental cooperation based on conventions and agreements.
The agreement on the common Nordic labour market in 1954 was a codification of free movement of the Nordic labour force. Hand in hand with that, and further supporting free movement, came the Nordic convention on social security in 1955 and the Passport Union in 1958. While it is hard to judge the exact role the agreement on the common Nordic labour market has had on Nordic labour market mobility, it can be assumed that cross-border labour force migration and commuting would have been lower without the agreements facilitating cross-border mobility. Furthermore, the agreements have been important for the set-up of different Nordic institutions aiming at facilitating cross-border mobility, such as Info Norden, cross-border services and the Freedom of Movement Council.
However, cross-border cooperation is also fostered in the European context, promoting free movement of goods, services, capital and persons and supporting cross-border collaboration through EU support schemes such as the Interreg and Trans-European Transport Networks (TEN-T). Regions across the Nordics and the European territory are involved in cross-border and interregional cooperation (Association of European Border Regions, n.d.; European Commission, n.d.; Interreg, n.d.). Nordic cross-border regional organisations involve multiple organisations from across national borders, such as regional and local authorities, local employment services, business organisations and chambers of commerce. By supporting cross-border integration, the cross-border organisations and their partners also have first-hand information on when barriers and challenges to cross-border mobility arise, such as temporary ID checks, issues related to social security, taxation, banking or validation of qualifications, and transport disruptions.
It should, however, be noted that Nordic cooperation is not limited to what is taking place at the immediate borders. The Nordic web of relationships is complex and vast, covering the economic area, including close industry and business relations, tourism and intensive trade, mergers between companies (such as Nordea, Stora Enso, TeliaSonera, Sampo and Arla – to mention just a few) and co-ownership of infrastructural assets (e.g. Öresund Bridge, Kvarken ports, Malmö Copenhagen port). Furthermore, social and cultural cooperation is extensive, including joint Nordic literature, film and music prizes and the Föreningen Norden with over 90 local associations and 6,600 members across the Nordic Region. The agreement on the common Nordic labour market therefore needs to be understood within that complex web of interrelations and supporting Nordic institutions.
The role of cross-border barriers
Despite the Nordic free movement of people and the common Nordic labour market usually being lauded, freedom of movement has not been without challenges and in some cases has caused tensions and even conflicts. In the 1950s, a conflict arose between Finland and Sweden concerning the right of the Roma population from Finland to settle in Swedish municipalities. Another example is Swedish employers’ headhunting of labour in Finland; in the 1970s that resulted in agreement that recruitment should go through the public employment services (Pedersen, Røed & Wadensjö, 2008 ). More recent examples are the establishment of border controls in the Danish passport affair in 2011, prompting the European Commission to step in to safeguard the Schengen Agreement (Tervonen, 2017), not to mention the migration crisis in 2016/2017 and the Covid-19 pandemic, which had serious implications for cross-border mobility (Giacometti & Wöien Meijer, 2022; Svinesundskommittén, 2024). Tervonen (2017) refers to this as the “unintended consequences of the free movement”, i.e. when free movement comes into conflict with maintaining control over national borders, impacting actors at various levels of government and across the countries.
Cross-border barriers relating to various rules and regulations are still reported as important obstacles to day-to-day work by both employers and individuals, particularly obstacles relating to taxation, social security and eID (e.g. Lundgren & Rasborg, 2023). Only 69.4% of the respondents in our survey say that the Nordic labour market is integrated. However, 73.8% say that the Nordic labour market is more integrated than the EU labour market. Over the years, many initiatives have been launched to support cross-border mobility and the free movement of people, e.g. the Freedom of Movement Council, the cross-border statistics project 2016-2020 and the Nordic Mobility Action Programme 2019-2021. Although Nordic cooperation plays a central role, it should also be noted that many of the Nordic cross-border obstacles need to be addressed in a bi-national context. One example is the re-negotiation of Öresund agreement, which regulates taxation issues between Denmark and Sweden. It is expected to come into force in 2025 and will facilitate working across the Swedish-Danish border for commuters and remote workers (Regeringen, 2024).
Although distance working or working from home was not unheard of earlier, it was during the pandemic that working remotely became more frequent, including for cross-border workers who had difficulty getting to their workplace due to the border restrictions (Randall et al. 2022). In 2022-2023, 35-47% of the workforce in the Nordic countries worked remotely and hybrid working, i.e. working partially at the permanent workplace and partially remotely, has since become “the new normal” (Granath Hansson & Guðmundsdóttir, 2024). Studies show that working remotely may have positive effects not only for individuals, who do not have to commute every day, but also in terms of retaining and recruiting workers in urban and rural areas (Granath Hansson & Gudmundsdottir, 2024; Bogason, Brynteson & Salonen, 2024). To attract hybrid workers, physical and digital infrastructure, good commuting opportunities and access to attractive and affordable housing are important. It has been estimated that small towns and rural areas at a distance of no more than 1.5 hours from a larger urban centre, could benefit most from that development (Granath Hansson & Guðmundsdóttir, 2024).
A recent study finds that many employees now seek out employers who allow remote working at least during part of the working week (Gill and Nordström Skans, 2024). Nordic employers could build on those changed preferences and, where the type of work permits, allow commuters to work remotely. That could free up time that commuters would otherwise spend travelling between work and home and may potentially make commuting more attractive to larger groups.
However, the possibility to working remotely is hampered by the differing tax policies and social security policies in the various countries, which hinders both employers from recruiting and workers from taking up a job in another Nordic country. Tax policy and social security are two policy areas are also closely interrelated, which further complicates the matter. The Freedom of Movement Council and the Nordic Council of Ministers have engaged to look into this in more depth. Identifying one main workplace seems to be one solution to this problem, at least partially (Lundgren & Rasborg, 2023).
This resonates with the results from our survey where bureaucratic and administrative barriers are raised as the major obstacle to a more integrated Nordic labour market (55.7%). Within that group, taxation, problems with electronic identification and differing regulations regarding social security are highlighted.
In second place, after bureaucracy and administrative obstacles, linguistic obstacles (54.1%) are mentioned, which was somewhat unexpected considering the common linguistic background in Scandinavia. Furthermore, these figures remained high (50%) even when respondents from Finland and Iceland where removed. Among the solutions highlighted by the respondents in the free text answers were language teaching of Nordic languages at an early age. In third place came difficulties in coordinating with family (50.8%), while difficulties in finding housing came in fourth place (42.6%) and was also mentioned several times in the free text answers. Interestingly, those figures indicate that the obstacles are not related to the labour market primarily, but to the overall circumstances of taking up a job in another country.
To further enable increased cross-border mobility in the labour market, more knowledge is needed. Collecting and sharing statistics across the borders is more difficult than it may sound, partly due to legal obstacles imposed by data protection legislation and rules governing the exchange of personal information (micro-data) across national borders and partly due to different methods of collecting data and interoperability of systems. However, the need for reliable cross-border statistics on mobility remains undisputed and the Nordic Council of Ministers has called for the collection of these statistics to be made permanent. Stepping up work on cross-border statistics will require both financial resources and clear political will, increased financial resources and motivation to weigh up the benefits of shared statistics in various areas against the costs (Dahl et al., 2022).
While these issues have long been identified by the Freedom of Movement Council and are well known by relevant authorities and ministries; the removal of obstacles seems to be lacking top-priority in the political administrations and hence proceeds at a slow pace.
Looking towards the future
Nordic cooperation is both a success story for regional cooperation and a story of challenges and failures. High ambitions for Nordic integration with plans for a Nordic defence union in the 1930-1940s and a Nordic economic community in the 1960s failed, and instead resulted in the emergence of new Nordic institutions for collaboration, the Nordic Council in 1951 and the Nordic Council of Ministers in 1971 (Strang, 2016). Interestingly the two different narratives about Nordic cooperation seem to continue to co-exist; on the one hand Nordic cooperation is described as a success story often branded as the Nordic Model, while on the other hand it is a narrative focusing more on missed opportunities such as cross-border obstacles hampering mobility as discussed in this report.
It is important to remember that in the time period examined here, from 1954 until today, the geopolitical landscape has changed quite dramatically. We have witnessed the fall of the Berlin Wall, the collapse of the Soviet Union, accession of the Nordic countries to the European Union and the European Economic Area (EEA), expansion of the European Union to 27 countries, globalisation – with increased international migration and global value chains, and digitalisation which has reduced the notion of distance and, more recently, challenging of the world security order – which is contributing to reshaping our relationships with our neighbouring countries. As a result from these developments and the experiences from the pandemic, several reports point to the need for increased Nordic cooperation and dialogue in the field of civil security (Enestam, 2021; Sweco, 2023; Svinesundskommittén, 2024) which also seems to be supported by a public opinion (Hanaholmen, 2023. In that context, it may be asked what that means for the development of the common Nordic labour market?
Nordic cooperation has indeed high political ambitions as to freedom of movement, which is also part of the Nordic vision of becoming the most integrated and sustainable region in the world by 2030. The latest status report shows mixed results on indicators related to freedom of movement with Nordic migration decreasing, Nordic trade remaining at a stable level and commuting across the Öresund showing a slight increase with expectations to further grow (Nordic Council of Ministers, 2023). Our survey of stakeholders engaged in the common Nordic labour market show that just 61% are familiar with the Nordic vision. In a joint declaration of 2022, following the Covid-19 pandemic and its effects on cross-border mobility, the Ministers for Nordic Cooperation (MR-SAM) admitted the serious impact on relations between the Nordic countries and freedom of movement, stating that living, working, studying and running businesses across Nordic borders should be easy and renewed and strengthened the mandate of the Freedom of Movement Council.
The relevance of a common Nordic labour market is further acknowledged in the survey, with the main benefits mentioned being more job opportunities (82.3% of the respondents), lower unemployment (74.2%), a higher supply of potential jobs (62.9%) and better skills matching (59.7%). According to the respondents, many sectors could benefit from a more integrated Nordic labour market, in particular the healthcare and social care sector (44.3%) the services and tourism sector (39.3%) and the industry and engineering sector (31.1%).
As we have seen, the Nordic countries are facing very similar challenges in relation to the labour market, many of which are related to the ageing population and decreasing workforce. In parallel, we find increasing demand for educated and skilled labour in many sectors, in particular the business sector and the welfare sectors. Based on “Nordic thinking”, which encompasses a belief in a “virtuous circle between equality, efficiency and social solidarity as important values” (Petersen, 2019, p. 31), it might be assumed that increased cooperation and sharing of best practices could play a greater role. This is also reflected in a Nordic white paper on attractive vocational education and training in the Nordic Region (Nordic Council of Ministers, 2022).
Based on the previous data, we have seen that re-migration and proximity matter, which leads to the assumption that it is in cross-border regions and in regions with cultural, social and economic proximity that the greatest potential for labour market mobility lies. While the role of economic cycles seems to have diminished since all the Nordic countries are subject to the same macro-economic trends, if the timing and the sectoral effects differ between the countries, migration may still be prompted (Pedersen, Røed & Wadensjö, 2008). Since the Nordic countries largely face similar challenges, it may also be asked whether it might be worthwhile to seek joint solutions for the future, such as joint schemes for skills in demand across the Nordic Region. At various points in time, joint conventions, such as on social security, the use of Nordic languages or credentials for healthcare staff, have been agreed upon to advance the common labour market. And, just as many of the top universities have set up European programmes that include studying in multiple locations across Europe, why not having Nordic programmes for fields such as energy engineering, nursing, business administration or innovation? For Nordic vocational training, institutions such as Utbildning Nord in Övertorneå could perhaps serve as inspiration (Utbildning Nord, n.d.).
The ageing population and declining workforce outside the large urban areas, are indeed major challenges across the Nordic Region, and it might be thought that the increasing immigration to the Nordic countries the last decades could be a solution to the situation of labour shortage. However, on a Nordic scale, the current figures of inflow of immigrants are still too small to replace those retiring. There are also many hurdles to integration of immigrants into the labour market such as language barriers and lack of skills (Berlina and Cavicchia, 2023). However, immigration is considered as part of the solution to the labour shortages, such as in the Finnish roadmap for education-based and work-based immigration, where the government is seeking to at least double the current volume of work-based immigration by 2030 and increase the numbers of foreign students threefold (Finnish Government, 2021), along with the aim of raising the employment rate in Finland (Finnish Government, 2023).
The Nordic institutions aimed at reducing cross-border obstacles and the multiple actors involved in supporting cross-border cooperation are likely to play an important role in sharing information about the possibilities and helping people to take the step of working across the border. However, despite the aspirations, we have little evidence that mobility on the common Nordic labour market will increase in the future. On the contrary, with the strong future demand for labour within the Nordic countries, the motivation to seek a job in another Nordic country will remain low and we may expect the stable to downward trend of migration to persist. In certain cross-border regions, such as the Öresund region, reports indicate that the potential for increased migration and commuting lies primarily in the possibility for third-country nationals from Sweden to take up a job across the border and in improving the commuting experience (e.g. Øresund Direkt).
Based on research, we know that larger labour markets have positive impacts for both individuals and the economy, being able to increase both competitiveness and attractiveness, yet the potential of integrated cross-border labour markets is still to a large extent unexplored. However, mergers and close cooperation across the borders continue, with the Öresundståg and the newly established Swedish-Danish Chamber of Commerce being two examples.
The majority of the Nordic efforts to sustain the common Nordic labour market and support cross-border mobility are fairly small in scale and many of them are also downstream, e.g. focusing on obstacles. Perhaps it is time therefore for attempts that are bigger in scale and target current joint challenges, as well as upstream efforts, in order to see major achievements on the common Nordic labour market.