The Union Alliance proposals will bring on valuable benefits (video)

The restoration of the public redistribution systems, child benefits, interest benefits and housing benefits, will bring members of Efling valuable increases in salary that will benefit those with the lowest income the most. These measures will also bring great benefits to those higher up in the income ladder. Proposals, put forward by the union alliance, which is a large coalition built up of Efling and the biggest unions within ASÍ, that the restoration of these systems will be a major factor in the compensation that union members will get when a new collective agreement with the public sector will be signed, are also made in order to bring down inflation and interest rates quickly and safely, to the benefit of all.

In a new video that Sólveig Anna Jónsdóttir, the chairman of Efling, has published she has invited Stefán Ólafsson, professor, advisor at Efling, and Iceland ́s leading expert on the redistribution systems as her guest.

Stefán explains in the video that the strategy that the big coalition formulated for the collective bargaining negotiations was to put the main emphasis on bringing inflation and interest rates down quickly. “It means that we had to proceed with very modest salary increases, especially at the beginning,” says Stefán.

Reform is long overdue

However, Stefán says that of course members of Efling can not accept only getting low to modest salary increases, other compensation must be provided instead. Therefore Efling has put forward proposals that aim to restore the child benefit, interest benefit and housing benefit systems, thus significantly increasing the support for working people’s households and guaranteeing members of Efling an increase in purchasing power.

Furthermore, Stefán explains, that it is high time that this reform of thes system takes place. In the last thirty years we have seen a significant decrease in the value of benefits. “The average family has lost approximately 40 thousand krónur in current value in support, every month, from these systems. That is why we talk about the restoration. It implies that it will be necessary to double the state’s expenditure on these issues, which will then provide low-wage workers and up to the middle-income groups with benefits ranging from 30 to 50 thousand krónur per month, which are tax-free. So this is a very valuable compensation, and the greater part of it goes to the lower wage groups.”

The ball is in the government’s court

Stefán explains that those with a monthly salary of less than 500 thousand krónur would, if the coalition´s demands are met, receive more than 60 thousand krónur more per month, after taxes. The considerable majority of that increase would come from the redistribution systems, over 40 thousand krónur, and as mentioned above, they would be tax-free. For those whose monthly salary is between 500 and 600 thousand krónur, the increase would amount to just over 55 thousand krónur, of which around 40 thousand would come from the redistribution systems. The part that would go to employees from those systems would then slowly decrease up the income ladder. Those with a monthly salary over 1,1 million krónur would not get an increase in benefits.

However, this will not happen, says Stefán, unless the state delivers what is requested regarding the increase in child benefits, interest benefits and rent benefits. The ball is therefore in the government’s court.

Will make a turning point

Stefán says that in many respects this is a new approach. “We reduce claims for wage increases but we want compensation in another form. Then when we’ve got inflation down quickly, when it’s down to 3.5 to 4 percent next year, then the wage increases that are expected that year will deliver a nice boost in purchasing power well up the income ladder. Relatively speaking, the increase in purchasing power will be greatest in the lowest groups, because the form of the salary increases is the flat raise increase that Efling has emphasized. If this new path is followed through and through it will mark a turning point in the development of the welfare state in Iceland. It will strengthen the position of households in the face of fluctuations in income, especially during a crisis, and generally raise the level of purchasing power,” says Stefán.

Efling’s members are encouraged to send questions about the collective bargaining negotiations to the chairman Sólveig Anna, at Numerous questions have already been received and we are working on answering them. When that work is finished, the answers will be sent out to the members’ mailing list, and Sólveig Anna will answer them in more videos like this one.