News - 01.05.2026

Companies and the government – it’s your move

International Workers’ Day has arrived! All over the world, wage earners gather, celebrate past victories and sharpen their demands for the future. Here in Iceland, rallies are being held across the country where wage earners demonstrate the power of solidarity. It is clear that the state of economic affairs will be high on the agenda. Collective agreements are likely to unravel this autumn due to persistent inflation, which is largely a domestic problem. Housing plays the biggest role, but there are also clear signs of profit-driven inflation, meaning that companies are taking advantage of the situation to raise prices excessively and thereby increase their profits.

Broken promises

Excessive tariff increases, particularly for heating, electricity and preschool fees, have not only led to increased inflation, but also constitute a breach of the government’s declaration in relation to collective agreements. According to the declaration, the state and municipalities intended to moderate tariff increases, especially those affecting families with children and people in vulnerable situations. The opposite has happened, and in addition to tariff increases, a number of municipalities have reduced services to families with children—the same group they specifically promised to protect during a period of rapid interest rate hikes and inflation.

It is important to understand the roots of inflation in order to address the root causes of the problem. The only tool we in the leadership of the unions have to respond to ever-increasing housing costs, extremely high prices and the government’s eagerness to raise fees is to demand corrections through general wage increases. That is what we will do if agreements unravel this autumn, unless those who hold the policy tools use them decisively. Promises on paper are not enough; they have repeatedly been broken.

Solution-oriented demands

VR, LÍV and Fagfélögin have joined forces and worked on proposals on how to combat inflation and support those groups that have been hit hardest by the economic situation. We demand that the banks and large companies that have price-setting effects take responsibility for the situation and lower their return requirements for the duration of collective agreements.

We demand that municipalities withdraw tariff increases on heating, electricity and preschool fees and that public tariffs be frozen for two years.

We demand that the state and municipalities work together to bring stability to housing matters. It is unacceptable that people have no predictability in their lives when it comes to the basic need of having a roof over their heads.

At the same time, we believe it is necessary to specifically support those groups that have been hardest hit during the high-interest period. Families with children, borrowers and tenants have borne the heaviest burdens, while other groups have even profited from the situation. This is unjust and creates inequality for the future. The systems of interest benefits, housing benefits and child benefits must be used to support these groups and strengthen the rights of tenants. At the same time, real measures must be taken to bridge the gap between parental leave and preschool. The proposals are ready—the time for action has come!

High interest rate policy is crushing people

But it is not enough for collective agreements to just barely hold. When they were signed, there were expectations that interest rates would decrease alongside inflation. That did not happen, and the high interest rate policy that has been pursued in Iceland for more than three years is weighing heavily on wage earners. A high interest rate policy is a political policy, not an economic necessity, and primarily serves to make borrowers, tenants and young people bear the burden while shielding capital owners. It is time for that to end.

In connection with the current collective agreements, there were expectations that everyone would pull together to bring down inflation and interest rates. Behind that was the ideology that wage increases alone affect inflation, which had already been shown to lack supporting evidence. It has now also been demonstrated that it is not enough for wage earners to be the only ones rowing.

The government and companies, it is your turn – it’s your move!

Halla Gunnarsdóttir, Leader of VR
Jakob Tryggvason, Leader of RSÍ

The article was first published in Morgunblaðið on May 1, 2026.