LO and NHO agree revised proposal for private sector collective agreement

In May 2000, the Norwegian Confederation of Trade Unions and the Confederation of Norwegian Business and Industry agreed on a new proposal for a collective agreement in the private sector, ending six days of strike action. The new proposal was subsequently approved by a large majority of LO's members.

On Tuesday 9 May 2000, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Norwegian Business and Industry (Næringslivets Hovedorganisasjon, NHO) agreed on a revised proposal for a new collective agreement in the private sector, ending six days of strike action and preventing the planned escalation of the strike (NO0005191N). The original proposal (NO0004184N) was rejected by a significant majority of LO members in the first ballot (NO0004188F). However, all relevant LO unions approved the revised proposal, as did all the local trade union representatives who had recommended a rejection of the original proposal. As expected, the second ballot, the result of which was announced on 25 May, resulted in a large majority for the new deal, with 78.6% of those voting in favour and 19.8% against.

Revised agreement

In its revised form, the private sector collective agreement between LO and NHO contains the following elements:

  • a general wage increase of NOK 1.50 per hour for all employees. Furthermore, occupational groups with a low average wage will receive supplementary hourly increases of NOK 2.00 or NOK 1.50 (depending on their wage level);
  • the staged introduction of an extra week of annual level will involve the introduction of two extra days in 2001 and another two days in 2002;
  • the agreement will continue to have a two-year term. Central wage negotiations will not take place in 2001, but a general wage increase of NOK 1.00 will be given in that year, in addition to the same low-wage increases awarded in 2000; and
  • the parties have agreed, in conjunction with the public authorities, to consider further the financing of subsistence for workers during leave of absence for continuing and vocational training purposes. It is assumed that such a scheme is to be made applicable to all employees in the private as well as the public sector.

The new agreement deviates from the original proposal in several respects: the general wage increase given is significantly higher the second time around (up from NOK 0.75 to NOK 1.50 per hour); the gradual introduction of the extra annual leave will be speeded up (with two extra days in 2001, rather than one); the two-year agreement period is maintained, rather than the proposed three years; and there is a more binding commitment to the financing of the skills and training ("competence") reform (NO9901113N). The government has also contributed to the new agreement by committing itself to participate in the deliberation process on the competence reform. Its role will include ensuring that the competence scheme is made applicable to all employees, both those covered by collective agreements and those who are not.

The new agreement is expected to produce wage growth of 4.5%-5% in 2000, which is approximately one percentage point more than envisioned in the original agreement. This was necessary, according to many commentators, in order to end the strike that affected vital areas of the Norwegian economy. However, the implication of this is that the costs of the settlement will be much higher than stipulated in the incomes policy compromise between the social partners, the main objective of which has been to keep average wage growth at the level of Norway's trading partners (NO9903120F). The expansion of the financial framework in the private sector wage settlement will also have a bearing on the other settlements to come. On 16 May 2000, the Federation of Norwegian Commercial and Service Enterprises (Handels- og Servicenæringens Hovedorganisasjon, HSH) and LO concluded an agreement which by and large follows the main principles of the LO/NHO agreement. Public sector bargaining is also underway, and LO's member unions in this sector has upgraded their demands in the light of the results achieved in the private sector.

Commentary

An important issue is the extent to which the 2000 wage settlement in the private sector represents a shift in Norwegian incomes policy, or whether it reflects only a "one-off" dissatisfaction with what was regarded as an inadequate agreement. Leading figures among the opponents of the original agreement argue that the 2000 settlement marks the end of the era of moderation, and the end of the incomes policy pursued during the 1990s. Yet, at the same time it is evident that the rationale for rejecting the original proposal and resorting to strike action varied between unions, something which was also reflected in LO's choice of strategy in articulating new demands after the strike had started. LO attributed the strike to generally inadequate offers from the employers' side, and sought alterations to all main points of the proposed deal (wages, holidays, further and continuing education, as well as the duration of the agreement). Furthermore, it is now also clear that a policy of moderation was too much to hope for in a situation that was marked by: frequent reports of major increases in management salaries; significant wage increases and personal bonuses in sectors such as information technology; a general increase in the Bank of Norway (Norges Bank) interest rate a few days before the ballot; and expectations of significant wage increases for unions in the public sector.

It follows that it is too early to determine the extent to which the 2000 settlement will mark a permanent change in LO's wage policy strategy, but this policy will beyond doubt continue to be high on LO's agenda. A public committee is presently looking into the issue of "value creation" and employment, and this will include an examination of the future role of incomes policy. All the main social partner confederations are represented on this committee. The committee's report, and the responses to it, will be the first indicators on incomes policy in the years to come. Wage policy will be an issue during LO's national congress in spring 2001, which will also mark the end of Yngve Hågensen's reign as leader of LO. During his 12 years in office, Mr Hågensen has been an influential actor in the development of the Norwegian incomes policy pursued during the 1990s. As such there is a case to be made that key elements of such an incomes policy are not only decisions of principle, but also tests of the the ability of LO's leadership to keep the organisation together during wage settlements. The question remains, however, whether this will be the case after the 2001 national congress, or whether LO, in the future, will witness less central coordination and the emergence of more independent member unions or cartels.

However, this is not the first time that LO members have rejected a proposal for a collective agreement recommended by the leadership of LO. Although there has been a general consensus among the main confederations about the overall political goal of wage moderation to safeguard competitiveness and employment, the wage settlements of the 1990s have often proven difficult. Membership ballots in the past decade have seen only slight majorities in favour of proposed agreements, and the proposal to pursue industry-wide negotiations in the 1990 wage settlement was in fact rejected in a ballot. Strike action was also taken by the key metalworking industry in 1996, when union members rejected a proposal put forward by the state mediator. Thus, one may argue that the 1990s were characterised not so much by the ability to maintain an enduring moderate wage policy, as by the ability and willingness of the parties to adjust the course subsequent to settlements that has gone beyond the desired economic framework. A consequence of the 2000 wage settlements may nevertheless be that LO member unions may choose not to pursue central negotiations as long as the situation in the labour market is as favourable as it is in Norway today. (Kristine Nergaard, FAFO Institute for Applied Social Science)

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