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What are you going to do?
When the collective agreements were signed, workers took a significant risk by accepting modest wage increases during a period of inflation. In return, companies were expected to exercise restraint in raising prices to help bring down inflation and interest rates. However, prices have continued to rise, and interest rates remain extremely high. The assumptions underlying the collective agreements have therefore failed, and the agreements could be terminated on 8 October.
The Government Balances the Budget at the Expense of Workers
The VR Board expresses serious concern over the Government’s budget bill, which, if left unchanged, reduces the likelihood that the collective agreements in the private sector can remain in force. The Board demands that the Government and Parliament reconsider the bill with the interests of workers as their guiding principle, reduce the planned additional burdens on households, freeze public-sector fees and charges, and put forward genuine measures to bring down inflation and interest rates.
The Governor of the Central Bank and the Hatchet
When the Central Bank’s Monetary Policy Committee announced its decision on the third interest rate hike this year, it cited two main reasons for the increase in inflation. The statement reads: “The rise in measured inflation has primarily been shaped by increases in public-sector fees and the effects of the conflict in the Middle East.” That was all it had to say.
Policy rate in the spotlight at an open meeting hosted by VR, LÍV and Fagfélögin
A large crowd attended an open meeting hosted by VR, LÍV and Fagfélögin on the relationship between policy rates and inflation on Wednesday, 19 August. The Central Bank of Iceland’s Monetary Policy Committee had announced shortly before the meeting began that it was raising the interest rate to 8%, a decision that naturally shaped both the meeting and the discussions among participants. The meeting was also streamed live on visir.is and mbl.is.
VR appoints a negotiating committee
At its meeting on 13 August, the VR Board approved the appointment of a negotiating committee for the collective bargaining negotiations that lie ahead this autumn.
The committee consists of Halla Gunnarsdóttir, Leader of VR, Birgitta Ragnarsdóttir, Jónas Yngvi Ásgrímsson and Tómas Gabríel Benjamín. The Board also approved inviting a representative of the Commercial Federation of Iceland to join the committee.
Neglect by companies and the authorities leads to the collapse of the premises of collective agreements
The Board of VR expresses grave concern about the current situation in the labour market, now that it is clear that the premises of the collective agreements will not be met. The Board declares its willingness to engage in solution-oriented discussions with the authorities and The Confederation of Icelandic Enterprise with a view to ensuring that the collective agreements can remain in force. However, if no other solution is found, the Board of VR considers the termination of the collective agreements unavoidable.
Persistent pains - Open meeting on the interaction between interest rates and inflation
For almost four years, interest rates have been very high in Iceland, with the aim of reducing inflation. This has not worked; on the contrary, inflation has risen over the past year. High policy interest rates hit those who are in debt, those who rent, and not least families with children, the hardest. It is now time to pause and consider whether this policy is serving its intended purpose.
A Summer Without Action
While the attention of politicians and voters is focused on the referendum on the EU, the clock is ticking in the labour market. On 27 August, the Consumer Price Index will be published, and annual inflation will be measured at such a high level that the assumptions underlying the collective agreements will fail. For months, the labour movement has called for action and a response from both the government and companies, but without success.
Failure to Act Increases the Likelihood of Collective Agreements Being Terminated
For a long time in Iceland, it has been argued that inflation can fundamentally be traced back to wage increases. The story is fairly simple and easy to understand: when wages rise, business owners need to raise prices, and price increases lead to inflation. Simple problems have simple solutions, and therefore inflation could supposedly be avoided by preventing wage increases, or even by lowering wages. But is it really that simple?
Wage Increases Have Little Impact on Inflation
There was strong interest in the breakfast meeting hosted by VR, LÍV and Fagfélögin, held June 11. The title of the meeting was “The Chicken or the Egg?” The discussion focused on the interaction between inflation, prices and wages at a time when there are warning signs in the economy and much suggests that the assumptions underlying the current collective agreements may not hold when the agreements are reviewed this autumn.