Proposed equal pay fund faces rocky road ahead

In October 2009, the Norwegian government signaled its intention to contribute to an equal pay compensation fund. The issue of how to distribute such a fund has divided trade unions in Norway. It is expected that the matter may be incorporated into the upcoming bargaining round in the spring of 2010. However, due to a number of obstacles, a decision on the matter may be postponed until the 2012 wage settlement.

Background

The Norwegian Gender Equality Commission presented its final report in February 2008 (NO0804029I). One of its recommendations to reduce the gender pay gap was a general wage increase for female-dominated occupations in the public sector. The increase would be based on an agreement between the social partners, allowing for a higher pay rise in the public sector than in the private sector. The rise would be financed through a pay compensation fund of NOK 3 billion (about €367 million), financed through the state budget. The social partners in the private sector were also called on to set aside funds for pay increases for both low-wage workers and female-dominated occupations.

Government earmarks equal pay fund

In its political platform (in Norwegian, 1.31Mb PDF) of October 2009, the Norwegian government followed up on the Gender Equality Commission’s proposal for an equal pay fund. In its declaration, the re-elected coalition government stated that:

The Government shall ask the parties to clarify whether a real basis exists for a special equal pay scheme in the public sector, as well as preparing a recommendation for which groups shall be included in this scheme.

While no promises were made by the government about its financial contributions to the equal pay fund, it confirmed that it is ‘prepared to enter into a closer dialogue on the equal pay issue already in connection with the 2010 wage settlement’, provided that the parties have made sufficient progress. The government declaration has brought the issue of an equal pay fund high up on the agenda of the social partners. Nevertheless, it has also underlined how, even when all of the trade unions agree on the need for equal pay measures, there is still a long way to go in terms of finding a consensual model allowing for such an extraordinary pay rise for female-dominated groups.

Obstacles ahead

The trade union organisations’ wish for financial support to balance the wages of men and women cannot be met unless a solution is found to a number of major obstacles, as follows.

  • Firstly, a precondition set for introducing an equal pay fund is to allow the total wage growth in the public sector to exceed that of the private sector – in other words, to grant higher wage increases in the public sector. The Norwegian model for wage negotiations is based on the principle that wage growth must be at a level which industries exposed to international competition can tolerate. Normally, the parties in the exposed industries – that is, the trend- setting trades – are the first to bargain in Norway, effectively setting the economic level for the subsequent bargaining rounds in both the public and private sectors.
  • If the distribution of an equal pay fund is made part of the state sector bargaining round, the economic framework in the public sector will have to depart significantly from the level set in the exposed industries. Such an outcome is unlikely to be accepted by the employers in the exposed industries – in particular, by the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) and the Federation of Norwegian Industries (Norsk Industri). The leader of the Confederation of Unions for Professionals (Hovedorganisasjonen for universitets- og høyskoleutdannede, Unio), Anders Folkestad, has already warned that his organisation is unwilling to accept the traditional trend-setting trades model in next year’s settlement. Mr Folkestad wants to see a substantial pay rise for women in the public sector. The central question is how to achieve this increase under the present economic crisis, and at a time when both the government and the social partners in the trend-setting industries are advocating the need for wage moderation.
  • The leader of the Norwegian Union of Municipal and General Employees (Fagforbundet), Jan Davidsen, has proposed a model under which the distribution of the equal pay fund takes place after the ordinary wage settlement – in other words, introducing an additional and extraordinary settlement in 2010. It is uncertain, however, the extent to which this solution is suitable for dealing with the problems related to the trend-setting model, since such extra ordinary pay increases may cause problems for the 2011 settlement.
  • A second major challenge will be to determine how the funds are to be distributed. The introduction of an equal pay fund has been on the agenda of Unio and the Norwegian Nurses’ Association (Norsk Sykepleierforbund, NSF) for a long time. Both organisations are in favour of distributing the main bulk of the funds to female-dominated groups with higher levels of education. Nonetheless, in the government’s political platform, there is no evidence to suggest that such a course of action should be taken. Both the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Vocational Unions (Yrkesorganisasjonenes Sentralforbund, YS) have made it clear that their support for a proposed equal pay fund would be conditional on the funds being distributed fairly to a larger number of occupations. In LO’s opinion, the equal pay issue is as pressing in other occupations as it is in the nursing profession, and even more pertinent in some low-pay occupations.

In addition, Unio had hoped that the state would take a central role in the distribution of funds. Now, however, it is clear that it is to be left up to the social partners themselves to agree on the matter. This is in line with the demands of both LO and YS.

At the outset, YS was reluctant about the idea of such an extraordinary pay fund, fearing a shift in wage formation away from collective bargaining to politics. As the largest trade union organisation, LO is normally the most influential in negotiations, and the model outlined by the government may make it harder for Unio to have its demands met. The government’s declaration has angered the leader of Unio. Mr Folkestad argues that LO and NHO have, so far, been unable to reduce the wage gap, and fears that nothing will change in this settlement if responsibility for action is left to these two organisations.

Commentary

It is still uncertain whether the proposed equal pay fund will be coming into effect. One solution is to agree to postpone a decision on the matter until the 2012 wage settlement, at which time the economic situation will most probably have improved. This is hardly an acceptable solution to Unio, which has fought this case for years. Unio’s Mr Folkestad has indicated that the incumbent government is in danger of losing many of its core voters. In particular, women in the public sector have traditionally constituted an important electoral basis for the present coalition government.

Kristin Alsos, Fafo

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