Efling and its fellow unions in negotiations, VR, LÍV, Framsýn, VLFA and VLFG have signed the collective agreement with the Confederation of Icelandic Enterprise (SA), provided the government steps in. The collection of trade unions under SGS also signed a similar contract. The current basis will form part of a wide consensus for an increase in pay for wage-earners where employers, the government and the central bank will all contribute something.
This far-reaching collaboration between society’s institutions on raising the pay of wage earners is a direct consequence of the struggle of Efling and their fellow unions.
On Tuesday evening, the negotiating commitee of Efling empowered the president to finalize the collective agreement, which was signed tonight.
It is entirely possible that no wage contract in Iceland has ever contained better assurances of pay rises for low-wage workers. All the pay rises which the contract guarantees for the members of the fellow unions are actual increases in kronas, in addition to certain rate-increases in kronas.
Efling is proud to have participated in forming a wide consensus with VR and the Commercial Federation of Iceland (LÍV) on the pay rises in kronas as well as the rate-increases. This strong solidarity will in the future effect salary policy towards other groups in the private and public sector. Efling is also proud to have made sure that those gains cannot be extracted through the tax-system, as was done while the last wage-contract was in effect.
Pure pay rises for those who are paid according to rates amount to 90 thousand kronas in four increases during the wage-contract’s period, which is 3 years and 8 months. This rise is more than a quarter lower than the demand of Efling and other SGS-unions for a pay increase of 125 thousand kronas in three years. A small increase in the year 2019 is what most decreases the total amount of the pay rise. This is accepted in light of the state of the economy after bankruptcies and layoffs in the tourist-industry, and with an aim to create favorable conditions for the lowering of interest rates.
In addition to coventional pay rises, certain other matters will have the effect of increasing disposable income and thus are equivalent to pay rises.
In the contract there is a novel stipulation insuring that economic growth will result in pay rises in kronas for wage-earners. If economic growth per capita reaches a certain level, pay rises will automatically be added to the conventional, contractual increases in pay. As is the case with other pay rises in kronas in the contract, this economic growth-based benefit is designed to be more beneficial for those who are paid according to rates. Judging by the average economic growth of the past 30 years, such a benefit could add 10-24 thousand more to the total increase in pay during the contract-period.
One of the prerequisites for the agreement is for the Central Bank to lower the short-term interest rates. The negotiating parties agree that the contract will create the conditions for that to be possible. The lowering of interest rates will have a profound effect on the expenses of homes in debt and it will also lead to a decrease in rental prices. The contract will include an annulment clause which will be enacted should interest rates not be lowered.
As the contract is signed the government will commit to the incremental lowering of taxes to result in an increase of 10 thousand kronas in the disposable income of the lowest-paid workers in society. The elevated tax-free limit will be guaranteed to maintain its real value throughout the contract-period. The elevation of the curtailment limit of child benefits, in addition to the increase in child benefits announced in the national budget of last year, will also greatly benefit low wage earners.
The government’s actions regarding matters of housing will include an increased budget for the purchasing of apartment housing for low wage earners and legislation to inhibit excessive rental price hikes.
Additionally, the government will commit to systemic changes regarding wages and the financial sector, in particular it will take steps to abolish indexation.