The SGS contract: Pros and cons

  • The following article by Stefán Ólafsson was first published on 08.12.2022

The SGS leadership signed a new collective agreement with the employers’ association, SA, on December 1. Out of 19 SGS member unions, 17 are taking part in the new contract. There has been little public discussion about its contents, with most statements involving personal squabbles and irrelevant sidenotes, such as whether the contents of the contract’s draft were leaked to the media before it was signed.

There is, however, ample reason to inspect what improvements the contract provides for workers.

In the picture below, the wage table negotiated by SGS is shown on the left side (monthly wages in each bracket and step), while the right side shows the raises provided to each bracket and step in the table, i.e. raises vs the previous table. These raises include the GDP growth raise, which had already been negotiated in 2019.

The lowest starting wage is 402,235kr/month, while the highest wage for the highest step, i.e. for those who have worked longest at a company, are 453,439kr/month. This is the span of workers’ wages in the new SGS contract.

The lowest raise is 35,000kr, while the highest one may be 52,259kr for those in the highest wage bracket who have worked the longest at the same company (see the right-side table: bracket 17, 5 years). Few will enjoy this highest raise. The average raise over the entire table is 42,958kr.

When you look at common wages of unskilled labourers (brackets 5 to 8, the shaded cells in the table), then the average raise of commonly paid rates are 41,627kr (right-side table). The lowest line on the right-side table shows how high a raise most Efling members would get, or 39,142kr. This is somewhat lower than for SGS unions generally, because fewer Efling members work for 5 years at the same company.

GDP growth raise from the old contract is significant

All these raises shown on the right side of the table include the GDP growth-linked raise, which was negotiated in 2019. It amounts to 13,000kr on the basic rates ansd was to be paid out as of April 2023 (the first date of payment would be May 1). SGS managed to get it moved forward, so that it would be paid from the start of the contract, a 5-month difference (November 2022 to March 2023 are added) – which is a big plus.

Putting that to one side, things already negotiated, i.e. the 13,000kr raise, can be subtracted from the raises mentioned above. So the average increase in the wage tables of SGS unions are 29,958kr (or 42,958-13,000), if we don’t count the growth-linked raise. That lower number is the direct increase for basic salaries which the contract itself provides, in addition to the added months of the growth-linked raise. For most Efling members, this contract would give them 26,142kr (39,142-13,000), if we don’t count the growth-linked raise, which we already had in hand.

The growth-linked raise is about 30% of the average raises of the SGS contract, and about 37% of the raises on the lowest salaries. That is a very big share.

Is the SGS contract similar to the 2019 agreement?

The SGS contract states that it is a continuation of the 2019 collective agreement. The raises in that agreement were 17,000kr in the first year, 24,000 in the second year, 24,000 in the third year and 25,000 in the last year. The average annual raise was 22,500kr.

That contract was made during times of around 3% inflation, in its first three years. Since then, inflation has tripled (to 9.4%). To get similar improvements in purchasing power now, the average raise would have to be three times higher, or about 67,500kr/month (3 x 22,500kr), instead of 42,958kr as the SGS contract has it. That means 24,542kr are missing – even if you include the growth-linked raise.

The contract does not stand up to its description as a “continuation of the 2019 agreements”, and is not at all the “best collective agreement in the Icelandic labour market for decades”, as we have heard. It is much cheaper and more lightweight – during times of more growth than we had in 2019. The wage table would have to have risen by 55,000 to 77,000kr (instead of 35,000 to 52,000, as the SGS table stands), or about 20,000 to 25,000kr more.

This is not to mention that the government provided assistance to the 2019 agreements, which amounted to 80 billion kr during the contract’s term, about 20 billion each year. Of most importance to workers was the lowering of income tax by about 10,000kr each month, which is similar to a 15,000kr raise. Nothing of the sort is connected to the new SGS contract.

There is, therefore, a large difference between the 2019 collective agreements and the new SGS contract.

Pros of the SGS contract

Even though the SGS contract leaves a lot to be desired, it does have benefits. The biggest are the following:

  1. The wage table is fixed. A flat raise for four years running has compacted the table, so the gaps between wage brackets and steps were very narrow. It is useful to stretch out the table, as SGS has done. They deserve praise for that.
  2. The raises apply from the end of the last contract, which is a plus (even though that has happened before – last time for Efling in 2020).
  3. Even though it’s unfair to count raises from the last contract in the new one (the growth-linked raise which was supposed to start in April 2023), its earlier beginning is of benefit. It starts 5 months early, but is still an unusually high part of the raises SGS boasts of.
  4. Finally, the 8% raise of bonuses for fisheries workers are of great value to that group. Most of them are in regional SGS unions. This provides them with an additional raise of 6,000 to 30,000kr each month – in addition to the higher basic salaries. That is great for regional workers, which would not be helpful to the same extent in the capital area, where fisheries have fewer workers.

There are therefore both pros and cons in the contract, and the cons outweigh the pros. The low raises are the main problem. The contract does not provide a similar increase in purchasing power as the 2019 agreements did. Raises in the current inflation are the most important part of a short-term contract. They would have had to be 20,000 to 25,000kr higher to be comparable to the 2019 agreements.

From the standpoint of Efling members, this contract would leave them with much less than the regional workers, especially when compared with fisheries and those who have worked 5 years at the same company. But the cost of living in the capital area, where most Efling members are, is much higher, especially the housing costs. More raises are needed to get sufficient improvements for Efling members.

The author is professor emeritus at the University of Iceland and works as a specialist at Efling.