Norwegians always tell me that Norway is an expensive place to live.  They say that Norway has become rich from all the oil drilling.  They boast about the high wages, free healthcare and education, the strong welfare system and that the government has been putting away a huge nest egg for everyone’s retirement.  Norwegians also like the fact that Norway has been ‘the best country to live in’ as voted by the UN every year.  But just how ‘rich’ is Norway, and how expensive is the cost of living?

Well, if we take a look at economy stats we can get a good idea of the money Norway has to play with.  Norway exports over US$140 bill – chemicals and fish (I hope not together) being two of the largest industries next to oil.  Norway imports about US$77 bill.  That’s a surplus of US$63 bill. – lets go shopping!  Public revenues are about US$230 bill. and expenses are US$160 bill.  Not bad.  With that Norway donates about US$2.20 bill. to foreign aid.  So Norwegians are pretty good at saving, but investing?  All that lovely oil money that was being put safely away for everyones pension was unfortunately invested in foreign banks.  This was a good idea, to let it sit for years and years collecting interest, before the ‘financial crisis’.  Now all the extra earnings is all gone.  Nothing left.  Nudda.  After all that hard work Norway is now at square one.  I wonder who got fired for that?

However, the proper way to check out Norway’s ‘richness’ on a world scale is by looking at its gross domestic product (GDP) and purchasing power parity (PPP) per capita.  For 2008, both the International Monetry Fund and World Bank considered Norway to be the third richest country in the world behind Luxembourg, Qatar/Macau.  Whoo-hoo!  But remember, it is “per capita“.  With this in mind, it means that Norway isn’t actually the richest country in the world – it is just the richest per person.  Since Norway has one of the smallest population in the world with one of the biggest oil industries it’s not hard to see how the stats can obscure perceptions.  In fact, the biggest money making country is the US which earns US$2.1 till. a year.  When we just look at GDP nominal, taking out the PPP, Norway is 24th on the list behind Spain, Brazil, Mexico and Indonesia.  And with just GDP (PPP) 2008 minus the ‘per capita’ Norway is 41st on the list behind Iran, Nigeria, Philippines and Poland.  Since Norway only has a population of 4.5 million and only half of them are in the labour force, it makes ‘cents’ to keep Norway rich by making everything expensive.

So PPP is Norway’s beauty secret.  Without it Norway becomes the Nordic ugly sister.  The best PPP measure for Norway is the Big Mac index.  According the the Big Mac index (What, you think I’m joking about the Big Mac?  Check it out for yourself!) Olso is the most expensive city in the world when it comes to the cost of buying two beef patties with cheese and special sauce on a sesame seed bun: US$5.79  Just behind are Switzerland, Denmark, Sweden and ‘Eurozone’ but lets face it, would you really go to Europe to eat at MacDonalds?  The one thing that the PPP doesn’t consider is quality.  In Norway Big Macs are smaller, flatter and dryer than the other counties.  So The Economist’s Big Mac purchasing power parity might be an amusing way to measure the cost of things but it doesn’t really consider the value of presentation, taste or fill.

Quality is always considered value for money.  So how much quality does Norway have compared to its expense?  According to the United Nation’s Development Program, quite a lot.  For seven out of the last ten years, Norway has been officially recognised by the UN as the best country in the world to live.  The UN uses mathematical equations collectively creating the Human Development Index (HDI) to measure ‘human development‘ – however, this measurement by no means represents ‘quality of life’, especially ‘happiness’.  The HDI measures life expectancies, education and GDP.  It is presumed that ‘standard of living‘ is included in this index, however, it is not included in the literal equation.  ‘Standard of living’ is seen as the quality of housing, fresh water, transport, government, sewerage, etc.  ‘Standard of living’ doesn’t necessarily quate to ‘quality of living’.  That is because ‘quality of living’ is relative to a persons ideology, or so I thought…

The Mercer Human Resource Consultancy has developed a recognised Quality of Living Survey for companies and governments who wish to station employees around the world.  The Quality of Living Survey, ranks cities into the ‘most liveable‘.  It compares cities to New York city and evaluates qualities such as personal safety, housing, recreation, education, consumer goods, natural environment, health and sanitation, public services, politics, and social, cultural and economic environments.  In 2007, Oslo was ranked 26 out of 215 cities.  Ahead was Switzerland with the top two cities: Zürich and Geneva.  Germany had six cities above Oslo, Canada had five and Australia had three.

So, in conclusion, we have established that: 1. Norway isn’t the richest country, 2. It can save money but invests badly, 3. GDP mixed with PPP can obscure perceptions, 4. The UN’s ‘best country to live in’ status is not based on quality of living, and 5. Oslo is just one notch above Dublin in safety, convenience, culture and lifestyle according to NYC business.  However, do we really think all the external surveys, statistics, equations, indexes and measurements will give us an appropriate idea of the ‘richness’ of Norway or its cost of living?  Me thinks not.  What ever happened to learning from experience?

This post was just an introduction to the Series: Cost of Living in Norway.