Wages Have Risen too Sharply, Finance Minister Observes

Prime Minister Bjarni Benediktsson

Bjarni Benediktsson, the Minister of Finance and Economic Affairs, believes there are indications that many Icelandic companies are struggling to deal with negotiated wage increases. The interest rates should have been kept higher for longer, he told Morgunblaðið on Wednesday.

A sense of uncertainty

In an interview with Morgunblaðið on Wednesday, Bjarni Benediktsson, the Minister of Finance and Economic Affairs, expressed his concern for wage increases in the labour market:

“I think there is reason to be concerned when companies that have been doing well start to show losses and when wage rates have risen significantly. There have been indications in some financial statements that companies are struggling to cope with the negotiated wage increases.”

“This is unmistakably the case,” Bjarni continued, “and now we need to find some balance again. We need to read the situation and act as necessary. We have emphasised regaining balance in fiscal affairs, supporting the reduction of inflation and protecting vulnerable groups from the effects of inflation while it lasts,” Bjarni observed, noting that there was a sense of uncertainty within the economy.

“It has to be said that there is a certain amount of uncertainty. We see it, for example, in the Stock Exchange, when we witnessed the third biggest stock market drop in a single day since 2009. These are big events. They reflect insecurity and uncertainty, a certain sense of fear and a kind of reset. Things are being reconfigured,” Bjarni remarked.

BSRB strikes ongoing

As noted earlier this week, 1,000 workers belonging to the BSRB union – Iceland’s largest federation of public sector unions, comprising 19 labour unions with some 23,000 members – went on strike as part of BSRB’s ongoing negotiations with the Icelandic Association of Local Authorities (SNS).

The strike actions affect, among others, staff in sports and primary schools in Kópavogur and Mosfellsbær, after-school programs in Mosfellsbær, preschools in Garðabær, and Seltjarnarnes primary school:

Sonja Ýr Þorbergsdóttir, Chair of BSRB, stated that the Icelandic Association of Local Authorities must pay the same wages to BSRB union members as others in similar jobs. BSRB is demanding retroactive wage increases from January 1, when the last collective agreement was still in effect. The negotiating committee has offered wage increases from April 1st.

On Tuesday, BSRB released a statement emphasising that strike actions were planned for next week, extending to sports programmes and primary schools in Hafnarfjörður, Hveragerði, Árborg, Ölfus, and the Westman islands: “Further strike actions are being prepared in light of the fact that there is no progress in the negotiations.”

“The municipal staff have had enough of this injustice – and they want to take further action. Justice is, of course, workers receiving the same salary for the same jobs. Raising the minimum wage is long overdue so that people in essential jobs can make ends meet,” Sonja Ýr observed.

SGS Signs New Contract with SA, Causing Controversy

sgs trade union iceland

A new short-term contract has been reached between SGS, one of Iceland’s larger trade unions and SA, the Federation of Icelandic Employers. The agreement was reached on Saturday, December 3, between 17 of SGS’s member organisations and SA. Notably, Efling, SGS’s largest member organisation, was not a signatory to the agreement.

Rising interest rates have complicated wage negotiations between many of Iceland’s trade unions and SA, with short-term contracts seen as a compromise to cope with the immediate impact of inflation and interest rates, without locking unions and employers into longer-term contracts that may not be suited to economic conditions in the traditional three-year period.

The short-term contract will be valid from November 2022 to the end of January 2024. It includes a flat minimum raise, as well as more holidays and adjustments for inflation.

Read more: VR Leaves Negotiating Table

However, the recent SGS contract has come under heavy criticism.

Kristján Þórður Snæbjarnarson, acting chairperson of the Confederation of Iceland Labour after Drífa Snædal’s resignation earlier this year, stated that the agreement was not suitable for craftsmen. He expressed his wish that the trade unions would stand together during the negotiating process, but that the inconclusive Confederation of Labour Congress earlier this year caused many fault lines to form within the Icelandic labour movement.

“As I said after the congress,” stated Kristján to RÚV, “I believed that we could take positive steps forward to strengthen the union. Just like our congressional elections are supposed to do. But it didn’t work, so this is what it’s come to. What we need to do is work on our internal issues and find a way forward.” 

Read more: Rising Interest Rates Complicate Upcoming Wage Negotiations

In light of difficult labour market conditions, the current round of wage negotiations was seen by many in the labour movement as a time for solidarity in applying pressure against SA, the employer’s union. The recent agreement between SGS and SA is seen by some as a betrayal of labour solidarity at a time when workers hold more power over their employers than usual.

Sólveig Anna, chairperson of the Efling union, has also been critical of the contract. She stated to RÚV: “We, of course, do not agree to take part in some deception where what people have already won is being simply repackaged and sold back to them.”

Efling is notable as having gone into their negotiations with very ambitious demands.

Along with Sólveig Anna, Vilhjálmur Birgisson, chairperson of SGS, and Ragnar Þór Ingólfsson, chairperson of VR, together represent some of the largest labour organisations in Iceland. The SGS contract, however, has driven a divide between these figures.

In a post on social media, Vilhjálmur stated his side of the case, saying that he was “saddened to see people he considered friends stab him in the back.” He also accused other members of the labour movement of leaking details of the contract to complicate the agreement, and of treating the recent agreement “as if a crime had been committed.”



Annual List of Highest Tax Payers in Iceland Published

Finances in Iceland

The financial journal Frjáls Verslun has recently published their annual list of Iceland’s highest tax payers, compiled from public information available in the tax registry.

Number one on the list this year is Björn Erlingur Jónasson, former owner of Valafell ehf., a shipping company which he owned together with his wife, Kristína Vigfúsdóttir. The vast majority of the taxes paid, ISK 689 million of a total of 692 million, were from the sale of Valafell to KG Fiskverkun.

Another noteworthy member of Iceland’s “tax kings” is Haraldur Þorleifsson, former owner of tech company Ueno, which he sold to Twitter in 2021. Haraldur paid some ISK 592 million in tax for the sale, making him the highest tax payer in Reykjavík. However, this honorary status was taken on by choice, as Haraldur negotiated during the sale to pay tax in Iceland, and for the majority of the sale to paid in wages.

This choice placed the realized profit in a much higher tax bracket, as wages are taxed at 46% in Iceland, whereas capital gains income is taxed at a much lower rate of 22%. Haraldur has been an activist for increased accessibility for the disabled in public spaces, and he has stated in an interview with Stundin that he was happy to give back to the society which provided him with his education.

Despite being the highest tax-payer, however, Haraldur is far from the highest earner in Iceland. Stundin has criticized the list as giving an incomplete picture of wealth and inequality in Iceland. According to Stundin, in placing the emphasis on wage, the annual list hides income from capital gains, and thereby obscures the true centers of wealth in Iceland.

For example, the annual list places many of the CEO’s of Iceland’s shipping companies relatively low, as they take relatively modest monthly wages home. However, their total financial assets often represent figures in the hundreds of millions of ISK. As these sources of income are taxed at a much lower rate, the list could be said to present an incomplete view of income in Iceland.

Similarly, the tax report only includes individual income. Many of Iceland’s top earners, including artists, lawyers, and businessmen, make significant portions of their income through partnerships, cooperatives, and other organizations that are registered as separate tax entities.

The annual list also discloses a gender imbalance within the nation’s top earners. The first woman on the list, Kristín Guðríður Jóhannsdóttir, is to be found in 21st place. Within the top 50 earners in Iceland, only five women are represented.