Agreement on pensions reached in difficult public sector bargaining round

In June 2009, the social partners reached agreement in a difficult public sector bargaining round, thus averting strike action in both the state and municipal sectors in Norway. The most controversial issue on the bargaining agenda was changes to the public sector pension scheme; however, following intensive pressure from the trade unions, the present arrangements were largely maintained, linking pension amounts to the length of employment.

Bargaining context

The results of the 2009 bargaining round constituted an intermediate settlement, usually implying only adjustments to existing wage rates in the collective agreements. This year, however, the parties were also to renegotiate the agreement-based early retirement and occupational pension schemes in the public sector. The reason why these two issues were placed on the agenda was the ongoing revision of Norway’s national pension system, the National Insurance Scheme, which is to be implemented from 2010 (NO0611019I).

Current pension provisions

The employers originally put forward the idea of a so-called ‘add-on model’, whereby employees with long occupational careers would receive higher pensions than today, while those with shorter careers in the state and municipal sectors would receive lower pensions than under the current model. The add-on model was applied when the agreement-based early retirement scheme in the private sector was renegotiated in 2008 (NO0804039I). Today, public sector employees are guaranteed an old age pension amounting to 66% of their final salary in the case of a full pension, conditional on 30 years of service in the public sector. Moreover, employees who have accumulated full pension rights may retire from the age of 65 years, even if the statutory retirement age is 67 years. The present system regarding early retirement in the public sector also means that most workers may chose to retire at the age of 62 years without this having any major impact on their old age pension.

Trade union position

The four main trade union confederations involved in bargaining in the public sector – including the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) – jointly called for a continuation of the present pension system, refusing to accept any changes resulting in reduced pensions for any of their member groups.

Mediation deadline extended

After the deadline for mediation expired without the bargaining parties reaching consensus, they agreed to extend the mediation deadline by a week instead of going on strike. This was followed by meetings between government representatives, including the Minister of Labour and Social Inclusion, Dag Terje Andersen, and the relevant trade union bargaining parties in the state and municipal sectors. In reaching the new mediation deadline, the parties agreed on a system that essentially entails a continuation of the present occupational pension and early retirement schemes (see minutes (in Norwegian) of the State Mediator). Thus, the trade unions managed to successfully force the government to accept their demand for a public sector pension system that is largely based on the principle of pensions increasing in accordance with the length of employment.

Commentary

In Norway, failure to reach agreement by the end of a mediation period usually leads to industrial conflict. This is the first time that a mediation deadline has been extended so long in this type of dispute. The government has also been more directly involved in the negotiation process than is normally the case in Norwegian collective bargaining. Media as well as other public commentators argue that the result must be regarded as a victory for the trade unions, which were willing to maintain a united front and go on strike to retain the current pension model.

Kristine Nergaard, Fafo Institute for Labour and Social Research

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