It has been known for a long time that the oil industry in Norway was struggling with problems related to employee remuneration. However, this situation has changed dramatically. However, every sword has two ends: rising wages in the oil industry pose a threat to the profitability of the oil industry. The increase in wages did not allow for the reduction of mining costs. According to an NHO report released last month, wages in the oil industry continue to rise. The factor determining this tendency is the increase in remuneration awarded to managerial staff.
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High wages in the oil industry
According to the information provided by the Norwegian Statistical Office, over the past 20 years, the reason for the increase in wages in the oil industry is due to the replacement of these costs with those that cover the service industry. What does this mean exactly? First of all, the increase in salaries in the oil industry is associated with outsourcing various works to external companies. How wages have risen sharply in the oil industry is illustrated by the following example:
- mid 90's: services for the oil industry account for 20% of the salary level worker's,
- 2014: Services for oil industry account for as much as 84% of the salary level worker's.
High wages in the oil industry - difficult times for the oil industry
The report published by SBB is clear: increasing wages for oil industry workers may prove disastrous for the industry's profitability. If the trend of rising wages continues, the profitability of companies is at great risk. This, in turn, will lead to their closure. In the longer term, there may be a situation in which instead of high wages, the level of unemployment will increase dramatically.
Summarizing ...
However, these are far-reaching scenarios. The solution that can prevent them from coming true is to significantly reduce the cost of extraction. The problem, however, is that the deposits from which the oil is extracted are a source that is slowly declining. This directly contributes to the inability to reduce mining costs. If companies find a way to reduce the cost of extracting raw materials, a huge economic catastrophe will be avoided.
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