The 1997 bargaining round previewed

In 1997, the mid-term renegotiations of Norwegian collective agreements will take place in a climate of economic growth. So far, the signals indicate moderate wage demands, in line with the social pact agreed in 1992 by the Government and the central social partners.

The majority of Norwegian wage agreements are of two years' duration, and the current settlements will expire during 1998. However, issues relating to remuneration will be renegotiated at central level in 1997. Most of the agreements between LO (the Norwegian Confederation of Trade Unions or Landsorganisasjonen i Norge) and NHO (the Confederation of Norwegian Business and Industry or Næringslivets Hovedorganisasjon) in the private sector expire on 31 March 1997, and bargaining is expected to commence in mid-March. Agreements in the public sector expire one month later. The social partners have not yet specified their demands, but all the central parties have held initial bargaining conferences. In this feature, we describe the economic climate in Norway prior to the wage negotiations, examine the provisional demands the social partners have put forward, and comment on these demands in the light of the existing social pact between the central labour market parties in Norway, the so-called "Solidarity Alternative" (Solidaritetsalternativet).

1996 - a good year for the Norwegian economy

Common ground for wage bargaining in Norway is provided by the reports of the Technical Calculating Committee on Income Settlement (Det tekniske beregningsutvalg for inntektsoppgjørene), a joint committee made up of representatives from the social partners and the government. The Committee analyses the economic situation before and after pay settlements and provides estimates in areas such as developments in household incomes, wage and price increases and international competitiveness. The most recent report shows that 1996 was a very good year for the Norwegian economy. Economic growth was markedly higher than in 1995 and figures from the Directorate of Labour show that the level of registered unemployment is still on the decline.

The Technical Calculating Committee estimates that average wage growth for 1996 will work out at 4.25%. Wage growth was somewhat higher in the public sector and amongst salaried employees in manufacturing industry, compared with blue-collar workers in the same sector. However, the differences in wage growth between different sectors and groups of workers were not great. The rise in cost of living was still low in 1996, the provisional estimates of inflation being 1.3% .

Demands for the 1997 bargaining round

The 1997 bargaining round consists of mid-term renegotiations, concentrating mainly on questions of remuneration. The parties' demands will not be made public before the negotiations commence, but the main confederations have issued guidelines for the settlement.

LO's general council discussed its guidelines on 11 February 1997. It will demand improved purchasing power for employees on low incomes and for other priority groups. However, LO wishes to continue the line of moderation, having referred to last year's settlement as "good for all groups". In addition to pay, in the coming settlement the parties will have to agree on which groups of employees are to be covered by a new voluntary early retirement scheme which is to cover private sector employees aged from 63 to 64 years from October 1997 onwards. This new scheme adds to the existing "agreement-based flexible pension" (AFP) introduced by a general agreement to reduce the retirement age. The parties agree that the new scheme will cover only employees with long service. In his concluding remarks at the general council meeting, LO's president stated that LO would be willing to take strike action in order to secure a satisfactory solution on this issue.

The two other main union confederations have also discussed general guidelines for the ensuing wage negotiations. YS (the Confederation of Vocational Unions or Yrkesorganisasjonenes Sentralforbund) has signalled demands for real wage growth for groups with low to middle incomes, while AF (the Federation of Norwegian Professional Associations orAkademikernes Fellesorganisasjon) wants to secure a sizeable pay increase (5%) for its members in the public sector, a scale of rise which would go against the guidelines of the Solidarity Alternative.

NHO, which is the dominant employers' confederation in the private sector, is concerned that last year's settlement, along with a strong Norwegian currency, will weaken Norwegian manufacturing industry's international competitiveness. NHO emphasises that local wage increases - the majority of private sector agreements provide for company-level pay bargaining on top of the centrally-agreed settlement - must be based on the individual firm's productivity and financial situation. In addition, NHO believes that a reduction in retirement age must cover only those groups with a clear need to retire early, and that the employers of the workers involved must bear the costs of the reform to a greater extent than the case was for the AFP. The AFP is financed jointly by: the Government; a fund to which all employers in NHO contribute on a collective basis; and the employers of workers who make use of the scheme.


A characteristic feature of Norwegian wage bargaining since 1988 has been the trade-off between the central labour market parties and the Government. While the former have agreed to contribute towards moderate wage growth, the Government has contributed with programmes to reduce unemployment and to secure important welfare policies. In 1992 this understanding was formalised in the Solidarity Alternative, a kind of tripartite "social charter". So far, the results have been good. Norwegian industry has improved its competitiveness significantly during the first half of the 1990s, largely as a consequence of moderate income settlements. In recent years, employment has increased while unemployment is declining. Even though nominal wage growth in Norway has been lower than for foreign competitors, Norwegian employees have enjoyed average real wage growth of approximately 1.4% a year.

The 1996 income settlement was considerably more generous than the Solidarity Alternative presupposed. With an average wage increase of 4.25% and inflation running at 1.3%, commentators have questioned whether or not the central parties are willing or able to fulfil the conditions of the Solidarity Alternative. A central question is whether 1996 was an exceptional year, or whether the "Norwegian model", based on cooperation over incomes policies and centralised wage determination, functions better during recessions than it does during periods of economic growth.

The 1997 settlement will provide an indicator of whether or not the central parties are willing or able to maintain moderation in times of significant economic growth. The forthcoming settlements will also show if the Solidarity Alternative's guidelines will be extended beyond 1997, the last year covered by the present pact.

LO's president has indicated in the media that the organisation should continue in future to aim for moderate wage settlements combined with social benefits such as a flexible retirement age and the right to further education. However, the question remains of whether such a policy will gain sufficient support from the trade unions within and outside of LO. There are considerable grievances over pay levels amongst public sector employees with higher education, groups which constitute a growing proportion of unionised employees, but are organised in unions which are not affiliated to LO. In the long run, it is uncertain whether these groups will accept an incomes policy based on moderation, and they may also be less interested in social benefits such as a lower retirement age and agreement-based rights to further education.

A further element which may influence a possible extension of the Solidarity Alternative is the extent to which employers are interested in continuing with the present centralised system of wage determination. Up until now, Norwegian employers have not attempted to withdraw from bargaining at a national level, nor from cooperation with the government and union organisations at the confederal level. In the short run, there are no reasons to believe that the employers' side will take the lead in a comprehensive decentralisation policy. However, an internal NHO committee has submitted a report which argues for much more decentralised wage determination, with pay essentially being set through individual agreements.

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