The wage scales of collective agreements in the general labor market will increase by 0.58% starting April 1. This increase is due to activating the wage scale supplement agreed upon in the collective agreements. The supplement is triggered because the wage index in the general market has risen beyond the agreed-upon wage scale increases in the collective agreements.
The collective agreements for the general labor market were signed in March of 2024. These agreements include a provision stating that a special Wage and Conditions Committee, composed of representatives from the Icelandic Confederation of Labour (ASÍ) and the Confederation of Icelandic Enterprise (SA), must assess the wage scale supplement annually in March throughout the contract period. If Statistics Iceland’s wage index for the general labor market shows that wages have increased beyond the minimum wage scale increases specified in the agreements, workers must be compensated through a wage scale supplement.
The committee convened two weeks ago, on March 7. In light of the wage index rising beyond the agreed wage scale increases, the committee ruled that the wage scale supplement should be activated at a rate of 0.58%, as previously mentioned. This represents the full percentage of the excess increase in the wage index relative to the wage scale. All minimum wage scales in collective agreements will increase by this percentage.
The primary goal of the stability agreements signed last year was to reduce inflation and lower interest rates. Both objectives have materialized while wage purchasing power has increased. There are conditions for this trend to continue, although uncertainties exist in the global economy. The Wage and Conditions Committee urges the government, the Central Bank, and businesses to continue working towards these goals. It also emphasizes the importance of restraint in public sector fee increases and calls for efforts in housing development.
The statement of the Committee can be read below.
Wage Scale Supplement Takes Effect on April 1
The Wage and Conditions Committee for Collective Agreements in the general labor market, comprising representatives from ASÍ and SA, held its first meeting on Friday, March 7. During the meeting, it was ruled that the wage scale supplement would take effect on April 1. This supplement results in a 0.58% increase in the wage scales of collective agreements from April 1, due to the general market wage index rising beyond the agreed wage scale increases in the first period of the stability agreement.
The committee, operating under collective agreements from 2024 to 2028, is responsible for monitoring economic developments and potential impacts on the agreements’ goals of reducing inflation and lowering interest rates. The committee is also tasked with evaluating the conditions for the agreements in September 2025 and September 2026.
Inflation Down and Purchasing Power Increased
The primary objective of the agreements is to help reduce inflation and lower interest rates. Inflation stood at approximately 8% when the collective bargaining process began in the autumn of 2023. The committee agrees that the agreements have yielded noticeable results: inflation is now at 4.2%, or 2.7% when excluding housing price effects. Wage purchasing power has increased during the first year of the agreement.
The Central Bank began an interest rate reduction process last October, and policy rates have decreased by 1.50 percentage points since the agreements were made. At the same time, monetary policy tightening has increased, and real interest rates have risen.
Increased Economic Uncertainty
There are grounds for continued inflation reduction in the coming months, which could lead to further interest rate cuts. However, global economic uncertainty has grown, raising the risk that Iceland may be affected by escalating international conflicts and trade wars. The committee emphasizes that the government, the Central Bank, and businesses must continue working towards the agreements’ goals to ensure further inflation reduction and interest rate cuts. It also stresses the importance of collaboration between the government and monetary policy, urging restraint in public sector fee increases and a targeted effort in housing development.
Wage Table for the General Market
Wage Table for Hotels and Restaurants