News - 10.08.2026

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.

Everything is going up except wages

The situation we now find ourselves in could easily have been prevented. Had the larger companies that set prices in Iceland kept their promises to restrain price increases, inflation would be lower than it is today. Instead, they have increased their profits during a period of inflation, not because they have no other choice, but because they can. Similarly, both the state and municipalities have raised their fees far beyond reasonable levels, and instead of protecting families with children, as the municipalities promised, they have put greater pressure on them through higher fees and cuts to services. Essentials such as electricity and heating have increased so much in price that, although these are not the largest household expenses, the increases are having a noticeable impact on inflation. All of this, together with inaction on housing, is causing the assumptions underlying the collective agreements to fail.

Recessionary inflation in the making

The Central Bank’s high-interest-rate policy has further added fuel to the fire, and instead of bringing inflation down, it is now causing increased unemployment while placing the entire burden of the difficult economic environment on borrowers and tenants. This vicious cycle is gradually creating recessionary inflation, which may be difficult to reverse.

We, the undersigned, who represent around 40% of employees in the private sector, have been clear that if the government and employers take no responsibility for the situation, we will be left with no choice but to terminate the collective agreements and demand wage adjustments in order to keep pace with inflation and interest rates. Likewise, the reduction in living standards that families with children in particular have suffered must be rectified, at a time when their interests were supposed to be protected.

A bird in the hand, not in the bush

We have pinned our hopes on tripartite talks between the government, employers and the labour movement producing results before the assumptions underlying the collective agreements fail, but this requires both the political will and the will to act. Employees cannot be left to row alone and deal with an economic situation they did not create.

The current collective agreements were concluded on the basis of promises that were supposed to bring down inflation and interest rates. Those promises have been completely broken, and collective agreements will not hold on the basis of similar promises. What is needed now is a bird in the hand, not in the bush.

Halla Gunnarsdóttir, Leader of VR
Jakob Tryggvason, Chair of RSÍ
Andri Reyr Haraldsson, Vice-Chair of RSÍ and Chair of FÍR
Eiður Stefánsson, Chair of LÍV
Gunnar Sigurðsson, Chair of VM
Óskar Hafnfjörð Gunnarsson, Chair of MATVÍS