News - 18.03.2025
Resolution of the VR Board Regarding the Government’s Efficiency Proposals
The VR Board warns against revising labor market legislation with the aim of increasing the authority of the State Conciliation and Mediation Officer, as can be inferred from the proposals of the Prime Minister’s working group on efficiency in public administration. Furthermore, the VR Board considers it unacceptable for the government to propose outsourcing labor market oversight and reducing the rights of public sector employees.
On March 4, 2025, the Government of Iceland presented the conclusions of the Prime Minister’s working group on efficiency in public administration. The proposals cover a wide range of areas and are of various kinds. Some involve reasonable measures that could be implemented to achieve cost-effectiveness in public administration without reducing services and with broad political consensus. Other proposals, however, are poorly considered and underdeveloped. In some cases, it is unclear how they would lead to increased efficiency, while in others, the working group appears not to recognize the serious and far-reaching consequences of proposals that would disrupt important pillars of society.
The working group’s proposal regarding the legal framework of the State Conciliation and Mediation Officer states that it is necessary to review laws governing the role of the State Conciliation and Mediation Officer and the labor market, particularly in light of linking "major welfare systems to wage developments in the country." The "efficiency" derived from such actions can only be understood as an attempt to suppress wage growth in the country and thereby limit corresponding developments in the welfare system. The proposal references legislation found in other Nordic countries. The objective of this proposal, which seems to be uncritically adopted from the position of the Confederation of Icelandic Enterprise, appears to be to expand the authority of the State Conciliation and Mediation Officer to enforce collective agreements through government-imposed mediation proposals and a centralized wage policy, rather than through collective bargaining as has been practiced in Iceland.
VR objects to the working group’s proposal, considering it an attack on collective bargaining rights and a disruption of the labor market model that has been in place in Iceland for decades. The comparison with other Nordic countries is flawed, as it is essential to examine the role of the State Conciliation and Mediation Officer within a broader context. The foundation for labor market stability is that employees negotiate wages and terms on their own terms and in active dialogue with employers. It is unacceptable to delegate this responsibility to government representatives.
VR is also astonished that this proposal is being presented by the Prime Minister’s working group without consultation with labor organizations. It is particularly noteworthy that the chair of the working group mentioned that numerous public proposals were dismissed because they involved "political issues." The working group’s proposal to alter the role of the State Conciliation and Mediation Officer is, of course, highly political, and in VR’s view, it is being driven by poor politics.
Similarly, VR questions the working group’s proposals on outsourcing tasks within the Administration of Occupational Safety and Health. It is entirely unclear how such privatization would yield significant efficiency gains, as the working group has not provided any financial assessment. Oversight of the labor market is a critically important function in ensuring the safety and working conditions of employees. Unfortunately, numerous examples show that these conditions are not always upheld, particularly concerning foreign workers. Nowhere in the working group’s proposals is there mention of how this outsourcing should be implemented or how the interests of employees will be safeguarded.
Finally, VR objects to the working group’s proposal to align public sector employment laws with the general labor market. The working group proposes abolishing the provision on formal warnings for public employees, thereby weakening job security in that sector. The proposal is presented under the pretext that it is desirable to harmonize rights between the public and private sectors. VR finds it unacceptable to achieve such harmonization by reducing the rights of public sector employees. A more reasonable approach would be to achieve alignment by strengthening rights in the private sector, as VR has long advocated, for instance regarding vacation entitlements and sick leave rights.
VR Board,
March 2025
