Inflation Outpaces Pay Raises in Iceland Skip to content

Inflation Outpaces Pay Raises in Iceland

The purchasing power of earned income in Iceland depreciated by 0.9 percent between March 2007 and March 2008. The wage index increased by 7.8 percent between years while the inflation grew by 8.7 percent, swallowing pay raises.

According to the Central Bank of Iceland, this has not occurred since 2000. “What it means is that pay raises cannot contend with inflation,” Rannveig Sigurdardóttir, director of analysis and publishing at the Central Bank, told Fréttabladid.

Large groups of workers did not receive pay raises at the beginning of this year. Although purchasing power is depreciating in Iceland overall, it does not affect all groups of wage earners.

For example, office workers have experienced depreciating purchasing power for the past three years while executives have received pay raises beyond inflation for the past few years.

The research department at Glitnir Bank is predicting that inflation will grow further reaching 10.2 percent this month.

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