The National Economic Council has held extra meetings in order to prepare for this autumn’s collective agreement negotiations, RÚV reports. Nearly 160 collective agreements expire this fall, and continued inflation, now at 9.9%, is expected to complicate talks. Prime Minister Katrín Jakobsdóttir expressed concern about the economic situation.
“The economic situation here in Iceland is complicated, as elsewhere in Europe,” Katrín stated. “I am concerned about the economic situation, not least because we are emerging from the recession caused by the global pandemic and have entered another situation closely connected to the Russian invasion of Ukraine.”
Wages have increased, but so have housing costs
Housing costs are a key factor in rising inflation, and the Prime Minister says it is important to address inflation by ensuring additional housing availability. The state and municipal authorities signed an agreement earlier this month to build an additional 35,000 apartments over the next ten years. Katrín stated that addressing housing availability was only one of several measures that were required.
While inflation has impacted purchasing power in Iceland in recent months, wage increases over the past year have mitigated its effect. Purchasing power decreased by 0.9% between June 2021 and June 2022 in Iceland according to data from Landsbankinn bank. It has not been lower since December 2020. Purchasing power is expected to continue decreasing over the coming months, as inflation is expected to continue rising and no collective agreements account for wage increases before October.
Collective agreements set to expire
Over 100,000 workers’ collective agreements expire in October or November. The National Economic Council (Þjóðhagsráð), which includes government ministers as well as representatives from unions, municipal governments, the Central Bank, and the Confederation of Icelandic Enterprise (SA), has been holding additional meetings to prepare for the upcoming negotiations. “I think it is very important to continue this conversation,” the Prime Minister stated.