Collective agreement in public sector triggers strong wage growth

At the end of May 2008, the social partner organisations concluded collective agreements covering different parts of Norway’s public sector. The new agreements will generate an estimated wage growth in the public sector of 6.13% at state level and 6.34% at municipal level between 2007 and 2008. In the municipalities, strike action was taken by the Confederation of Unions for Professionals; however, the dispute ended after negotiations recommenced.

Background

In the spring of 2008, all bi-annual agreements in the public sector were subject to renegotiation. In most areas, the trade unions and employer organisations managed to reach agreement following a process of mediation. However, at municipal level, the Confederation of Unions for Professionals (Hovedorganisasjonen for universitets- og høyskoleutdannede, Unio) resorted to strike action. The dispute ended when negotiations recommenced following a 12-day strike.

Norway’s labour market situation is characterised by a shortage of workers in the public sector, while the wages of public sector employees have lagged behind other groups in 2007. As a result, this year’s wage settlement has been relatively favourable in general and in particular with regard to public sector employees. In 2007, different groups of public sector employees achieved wage increases of between 3.8% (teachers) and 5.1% (state employees), whereas the average pay increase for workers in the manufacturing sector amounted to 5.3% (NO0804019I).

Provisions at state level

At state level, the social partners agreed on general increases ranging between NOK 16,000 (about €2,013 as at 20 August 2008) and NOK 32,000 (€4,025) a year. Funds have also been set aside for so-called ‘central adjustments’, whereby adjustments are made to the placement of groups into various levels of positions. At the same time, 1.3% of the total wage bill has been earmarked for decentralised company-level bargaining in this year’s public sector settlement at state level.

The social partners have also agreed to grant women a larger proportion of the wage increases in the company-level negotiations than that which is allowed for by a pro-rata distribution. Priority is also being given to more highly-educated groups of workers who are difficult to recruit. Overall, the collective economic framework for bargaining in the state sector will generate a wage growth of 6.13% between 2007 and 2008.

Provisions at municipal level

All public sector employees at municipal level will receive a general increase of 2.5%. In addition, 1.6% of the total wage bill is being set aside for company-level negotiations. The minimum wage levels in the collective agreement have also been adjusted upwards. Moreover, the parties agreed on a new clause which stipulates that full-time employees with at least 20 years of seniority will secure a minimum wage level of NOK 290,000 (€36,468) a year. The economic framework for the agreement area pertaining to the Norwegian Association of Local Authorities (Kommunenes Sentralforbund, KS) – which covers all municipalities and county municipalities in Norway with the exception of Oslo – amounts to 6.34% overall.

The municipal social partners also agreed on wage increases for 2009. Accordingly, from 1 May 2009, a general rise of 3.1% will be granted to all employees; at the same time, the minimum wage of employees with at least 20 years of experience is to be increased to NOK 300,000 (€37,732).

Early retirement measures

The social partner organisations also agreed on the main principles of a joint agreement-based early retirement scheme (Avtalefestet pensjon, AFP) in the public sector. The scheme will replace the existing two systems at state and municipal level, and will be similar to the new AFP scheme agreed on in the private sector. Among other things, it will entail the possibility of combining AFP benefits with ordinary income from work ([NO0804039I](/search/node/efcms OR articles.php?oldIndex)). It also provides for an increase in the level of annual pension payments in line with the number of additional years in employment (delayed early retirement).

In addition, a joint social partner committee is to be set up to examine, among other things, how the duration of education, gender and part-time work affect employees’ pension accumulation. This provision is deemed particularly important by the trade union organisations, as many female- dominated groups in the public sector work part time, while highly-educated groups enter working life later than other groups and may find it difficult to meet the requirements of the AFP scheme (40 years of occupational activity).

The final provisions of the public sector AFP scheme are to be postponed until the 2009 wage settlement, when agreement is to be reached on how to adjust the public sector occupational pension schemes to the new national pension system (NO0501102F).

Strike action in municipalities

Earlier on in the negotiations, the trade union confederation Unio resorted to strike action on the grounds that employees with a higher education would not, in relative terms, benefit from the bargaining round. The teachers’ organisation the Union of Education Norway (Utdanningsforbundet), which includes preschool teachers, was particularly dissatisfied with the negotiations. However, following 12 days of strike action, the social partners reached an agreement. In one of the agreement’s protocols, the parties have agreed to monitor the wage developments of workers in the education sector, taking remedial measures in 2009 and 2010 if the pay developments prove to be lower than the average level in the municipal sector. Moreover, a committee will also be set up to evaluate the need for special pay measures directed at public sector employees with a higher education in the municipalities.

Kristine Nergaard, Fafo Institute for Applied Social Science