High wage growth and few disputes mark 2008 bargaining round

The 2008 pay settlements provided the highest wage growth for Norwegian wage earners in 10 years. Moreover, few conflicts emerged in connection with the negotiations. Regarding non-pay issues, the social partner organisations managed to reach agreement, albeit with the help of the government, on a revised scheme for agreement-based early retirement. Norway is currently experiencing labour shortages but experts predict that the high wage growth will ease in 2009.

In the spring of 2008, the two-yearly collective agreements in Norwegian working life were subject to renegotiation. In the private sector, negotiations were carried out as industry-wide talks between the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO). This means that all of the agreements between trade unions affiliated to LO and employers affiliated to NHO were subject to joint renegotiations. Similar discussions also took place between the Confederation of Vocational Unions (Yrkesorganisasjonenes Sentralforbund, YS) and NHO.

Significant wage increases

In June 2008, the Technical Calculation Committee for Wage Settlements (Det tekniske beregningsutvalget for inntektsoppgjørene, TBU) published its first report on the effects of the 2008 settlement, Etter inntektsoppgjørene 2008 (in Norwegian, 980Kb PDF). So far, it is only possible to identify the impact of the nationally agreed increases on wage growth from 2007 to 2008. An additional factor is the effect of ‘wage drift’, which takes into account the impact of company-specific negotiations. Wage drift refers to the difference between the average level of wages actually paid and official wage rates; bonus payments, for example, can lead to a drift away from the standard rate. Although TBU does not provide estimates for the 2008 wage drift, historical figures for the average wage drift can serve as an indicator for what would be expected.

The national negotiations in the LO-NHO agreement area have generated, in conjunction with the wage carry-over from 2007, an overall pay growth of 3% from 2007 to 2008. Wage drift for 2007 was about 2.8%. In the wholesale and retail trade sector, the bargaining round provided – together with the carry-over from 2007 – an estimated wage growth from 2007 to 2008 of 3.25%. In this sector, wage drift has been on average 2.2%–2.3% a year. Overall, expectations suggest an average pay growth of about 5.6% from 2007 to 2008 in this area of the private sector.

In the financial intermediation sector, the national negotiations, combined with the wage carry-over from 2007, will result in pay growth of 3.75%. Assuming that the wage drift rate is the same as the previous year’s rate (2.9%), or at the level of the last three years (3.2%), this area of Norwegian working life will once again be among the winners of collective bargaining.

This year’s settlement in the public sector will provide an estimated wage growth from 2007 to 2008 of 6.1%–6.3% (NO0806019I). In 2007, pay developments in the public sector at both state and municipal level were lagging behind developments in parts of the private sector, which may explain to some extent the higher wage growth rate witnessed in these divisions of the public sector in 2008.

Industrial disputes

Taking into account that all of the nationwide collective agreements have now been renegotiated, it seems that the number of working days lost to industrial conflicts in 2008 is less than 90,000 working days. This is well below the number of days lost within the context of collective bargaining in recent years. One explanation for this relatively positive outcome is that this year’s settlement was carried out as an industry-wide agreement, which is a form of bargaining known to produce fewer strikes and a lower number of working days lost to industrial disputes.

The most comprehensive strike took place in the public sector at municipal level, where the main employee confederation – the Confederation of Unions for Professionals (Hovedorganisasjonen for universitets- og høyskoleutdannede, Unio) – failed to reach agreement with the employer side. Pre-school facilities, nurseries and schools were particularly affected by the ensuing strike action.

Non-pay issues

Collective bargaining in 2008 not only involved bargaining over pay, but also renegotiation of the agreement-based early retirement scheme or ‘agreement-based flexible pension’, AFP. The government contributed substantial funds to put a new AFP scheme in place (NO0804039I), and agreement was also reached on the main principles of a revised early retirement scheme in the public sector.

Commentary

The 2008 wage settlement will generate the highest pay growth rate in 10 years. TBU does not provide prognoses for total wage growth for 2008. Nevertheless, Statistics Norway (Statistisk sentralbyrås, SSB) estimates that average pay growth per person-year worked will be 6% for 2008.

Labour shortages are evident in most sectors of the Norwegian economy, and unemployment is as low as 2.5%. In 2007, gross domestic product (GDP) growth in mainland Norway, excluding the oil industry, was at a record high of 6.2%. Forecasts suggest, however, that the economy’s growth rate will come to a halt, and SSB expects pay growth for 2009 to be significantly lower than in 2007 and 2008.

Kristine Nergaard, Fafo Institute for Applied Social Science