Tax cut experiment to target 100,000 young adults in Norway

OSLO (Reuters) - Norway plans to randomly select 100,000 people born between 1990 and 2005 to receive annual tax cuts of up to $2,700 for several years, aiming to measure the effect on income and employment, the Labour Party government said on Tuesday.

Facing rising social security payments and a shortage of workers in many sectors, successive Norwegian governments have explored ways to boost labour market participation by tweaking rules on state financial support and improving job training.

But Tuesday's proposal by Finance Minister Jens Stoltenberg and Labour Minister Tonje Brenna takes this a step further, offering tax cuts for about 8% of workers between 20 and 35 years of age, while the rest see no change.

If approved by parliament, the group of 100,000 people would become part of an academic study and receive the tax cuts of up to 27,500 Norwegian crowns annually for the next three to five years.

They will be compared with those who do not receive the same cuts. "This will give us strong data on whether such a tax deduction really boosts youth employment, and on how much more or less those who are already in a job will work," the finance ministry said in a statement.

The measure was estimated to cost some 500 million Norwegian crowns ($49 million) per year, the finance ministry said.

Norway has a $1.8 trillion sovereign wealth fund, the world's largest, and spends tens of billions of dollars from the fund each year.

($1 = 10.1461 Norwegian crowns)

(Reporting by Terje Solsvik; Editing by David Holmes)