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Unions Strike a Deal with State

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Unions Strike a Deal with State

Reykjavík with Hallgrímskirkja in the background

Reykjavík. Photo: Páll Stefánsson.

An agreement was reached at about 5:00 am between the State and SFR Union of Public Workers, the Union of Nurses’ Aides and the Police Federation of Iceland, RÚV reports. The agreement is good through March 2019.

Árni Stefán Jónsson, head of SFR, reports the deal reached is comparable to those made by other state workers lately and builds on agreements reached by arbitration earlier this year: “As far as the content goes, we left off with goal of attaining the framework reached by arbitration for [the Association of] Academics. We reached our goals.”

News last night that a broad alliance of employees and employers in private and public sectors, had signed an agreement regarding new working methods when negotiating wages, was reportedly the turning point in negotiations.

The goal of the agreement of this broad alliance, sometimes called the SALEK Group, is to ensure a lasting increase in purchasing power. The agreement was signed by 70 percent of unionized employees. Because of a disagreement regarding retirement funds, neither the Association of Academics nor the Teachers’ Union are part of the broad alliance’s agreement.

Purchasing power will be secured with low inflation, steady exchange rate, and lower interest rates. The group has been headed by the State mediator. The broad alliance felt change was needed because even though wages have increased almost twice as much here as in other Nordic countries, purchasing power has increased half as much here as there in the past 15 years. Inflation here has been three times as high as in other Nordic countries. The Icelandic króna has been devalued by 50 percent since the turn of the century, while the currency of our neighbors has remained steady compared with the Euro. Finally, because of high inflation and a fluctuating economy, interest rates here have been three times as high as by our Nordic neighbors.

The agreement entails that a common wage policy will be in place through 2018 in an effort to put an end to a so-called “leapfrogging” in the labor market (where one group of employees demands wage increases larger than the rest). A national interest council shall be established for the labor market, the Central Bank of Iceland and for government, and a new labor market model created.

The definition of room for wage increases will be based on the competitive position toward our main trading partners abroad. Thus, manufacturing or service companies in export will influence how much room there is for wage increases.

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