Image: Golli.

In Focus: Tourism Industry Strikes

 In Business, In Focus, Magazine, Magazine Intro
Since the banking collapse just over ten years ago, Iceland has largely pulled itself back from the brink thanks to a tourism boom. So it’s a great irony that many of the lowest-paid individuals working in this economically integral industry continue to struggle to make ends meet.

This state of affairs came to the forefront at the end of 2018, when wage agreements between multiple labour unions and the Confederation of Icelandic Enterprise (SA), which negotiates wage contracts on behalf of business entities, expired. These unions have a strong hold in the tourism sector and have been advocating for higher wages and a 32-hour work week, among other changes.

Employers, on the other hand, assert that the tourism boom is coming to an end, and higher wages would simply lead to inflation and lower purchasing power for workers. The recent downfall of WOW air has further affected the proceedings: some 1,000 of its employees have been laid off, a situation which could easily weaken unions’ bargaining power.

Though negotiations are progressing, unions have called for a series of strikes that would increasingly impact Iceland’s tourism industry. Several short-term strikes and a general strike beginning on May 1 will remain on the calendar if SA and unions cannot reach an agreement.

The players

Since December, SA has been in negotiations with a number of different unions. These are: Efling; VR, the Store and Office Workers’ Union; the Commercial Federation of Iceland (LÍV); and two local unions representing workers in and around the Southwestern town of Grindavík (VLFGR) and West Iceland town of Akranes (VLFA). The Federation of General and Special Workers (SGS), a union federation composed of 19 different unions, and the Icelandic Confederation of Labour (ASÍ), a federation of 48 unions, are also negotiating with SA.

SGS previously represented both Efling and VLFA, but both of those unions withdrew from the federation in mid-December to take what Efling chairperson Sólveig Anna Jónsdóttir promised would be a more radical approach to negotiations. Minister of Finance and Economic Affairs Bjarni Benediktsson also entered the fray when he presented the government’s proposal for a new tax system which he suggested would alleviate economic stress on women, young people, pensioners, people with disabilities, and renters, but which unions said “destroy[ed] the hope” that governmental input could “rekindle the negotiations process.”

Widening class divide

An ongoing discussion about the widening gap between the lowest and highest earners in society has further fanned the flames of these negotiations. Property prices in Reykjavík are skyrocketing. In a written statement, Sólveig Anna reported that 40% of her union’s membership lives in rental properties – not because they want to, but because they can’t afford to buy homes. Housing benefits have decreased, she continued, and 51% of minimum wage is fully taxed. Meanwhile, she asserted, Icelanders in the top 5% increased their assets by ISK 270 billion ($2.23b/€1.97b) in one year. It was also reported that the CEOs of Íslandsbanki and Landsbankinn, both government-owned banks, received significant pay increases last year, bringing their respective salaries to ISK 4.2 million ($35,162/€30,912) and ISK 3.8 million ($31,809/€27,966) per month. These increases have been partly rescinded in accordance with a formal request from the Minister of Finance.

Demands, counteroffers, and government input

Efling – in congruence with similar demands made by VR and SGS – demands that minimum monthly wage increases by ISK 125,000 ($1,033/€914) over a three-year period. This suggested increase was calculated based on cost of living figures published by the Ministry of Welfare, which suggest that an individual’s monthly expenses amount to ISK 353,000 ($2,919/€2,581).

Industry leaders have said they simply can’t afford to raise employee wages, and moreover, that doing so would contribute to inflation, which would raise prices, which would reduce workers’ purchasing power. Negotiations are closed-door, so the exact terms of union proposals and rejected SA counteroffers are unknown, but a statement coauthored by the chairs of Efling, VLFA, VLFGR, and VR alluded to “an offer […] which would have led to reduced purchasing power […]” and also said that SA had “rejected a fair counteroffer.”

Following this, the Minister of Finance unveiled a new tax plan which was intended to pave the way for SA and the unions to come to terms. According to his plan, a tax cut would be divided among earners at all income levels, rather than just those at the lowest level. This would amount to a relief of ISK 6,760 ($56/€49) per month versus the ISK 20,000 ($165/€146) that Efling chair Sólveig Anna said “could have been the basis for actual talks.” Bjarni’s plan also introduced a third tax bracket which would be set at ISK 325,000 ($2,718/€2,395) per month. The taxation on this bracket would be 32.94%. No high-income tax would be implemented, as labour activists had hoped, and personal tax credits would be frozen from 2020-2022, which unions claim would “[…] hit [low-waged workers] the hardest and claw back a large part of this planned tax reduction.”

Negotiations going nowhere

In December 2018, SGS and LÍV both decided to pursue direct negotiation with SA, while Efling, VLFA, and VR referred their negotiations straight to the state mediator. SGS held 110 direct negotiation sessions with SA before finally turning talks over to the state mediator in late February, as did LÍV.


Efling chairperson Sólveig Anna Jónsdóttir.

First strike

Efling was the first union to step back from negotiations, inviting 8,000 members to vote on whether 700 housekeeping and laundry staff at 40 hotels would strike temporarily. Only 11% of invited members voted on the issue, but the response was 89% in favour. The one-day strike took place on March 8, from 10.00am to 11.59pm.

SA disputed the legality of the vote, saying that according to the Unions and Labour Disputes Act, only members directly affected by the proposed stoppage are allowed to vote on it. The matter was referred to the Labour Court for judgement, who declared the strike and voting process legal.

Domino effect

Efling members later voted to approve a series of strikes and work restriction measures between March 18 and April 30 which would affect hotel workers, bus drivers, and other workers in tourism in the Reykjavík Capital Area. The six planned work stoppages ranged from 1-3 days long. Additional work restriction measures include not checking tickets on public buses or no laundry service in hotels. While hotel workers’ strikes would mostly impact tourists, bus driver strikes would also affect the municipal bus system Strætó, disrupting residents’ daily lives.

Members of VLFGR approved “guerilla strikes” during April which target tour companies and popular destinations, such as the Blue Lagoon. VLFA approved broader strikes affecting restaurants and recreational companies, as well as an ongoing strike which would begin on April 12. Both Efling and VR promised indefinite strikes to begin on May 1 – International Workers’ Day – if contracts haven’t been signed by then. A survey showed that 56% of the country supported the unions’ plans.

Progress (perhaps)

Efling and VR have since recommenced negotiations with SA, eventually calling off a two-day strike planned for March 28 and 29. The strike was cancelled “…in light of a new basis for talks, which has now been presented on behalf of the employers’ association, SA,” wrote Efling in a statement on its website. The exact details of the “new basis” were not specified, but Efling congratulated its members on “the great work that has been put into the planning and execution of the strikes so far, which have now resulted in a limited but significant success.”
Bus drivers’ rush hour strikes and several three-day hotel workers’ strikes are, however, still on the calendar for April, along with the general strike starting May 1 if no contracts are signed by that date. The recent bankruptcy of WOW air, which put some 1,000 locals out of work, has put added pressure on negotiators to reach an agreement as soon as possible. Sólveig Anna stated that strike action was to thank for the recent progress in negotiations, saying “I must express my feeling that we wouldn’t have made it here except for the fact that the strike weapon is a sharp one and it stings.”
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