Aftenposten economics magazine allows each week an economist comment important issues in the past week. Today it is chief economist Per Richard Johansen Norwegian Association commenting prospect front spring wage settlement.
– Norway goes more uncertain times ahead, and the employees should plan on a smaller salary increase this year, LO leadership said this week. No reason to hope for substantial pay increases this year, then?
– No, there are several factors pointing in that direction. One thing is that the labor market is showing signs of weakening. More crucial is that LO leadership is now clear that labor since this time adds up to a moderate settlement. Projected inflation for 2015 from the Technical Reporting Committee, which annually delivers the numerical terms for settlements, shows that it takes very small wage increases in years before purchasing power is maintained for most professional groups.
– The applies to both private and public sectors?
– Absolutely. In the private sector will the central well be marginal, with the addition primarily for the very lowest earners. In state and municipality will pay increases normally be larger, but here we must remember that a public sector not to the same extent can count on local as well.
– Is low wage only an advantage for Norway?
– We can not continue to have pay increases which every year is sky high above the level of our main trading partners, especially now that the oil industry is no longer the growth locomotive as it has been. Therefore, it certainly makes sense to “cool down” wage in this country.
– How is it that people can maintain purchasing power in 2014 without pay increases?
– It’s a bit complicated to understand, perhaps. But there are so wage increases last year is intended to contribute to an increase in the purchasing power of wage-makers from 2014 to 2015 of 1.4 percent, and slightly lower for the industry. Meanwhile estimates Technical Calculation Committee the inflation this year at around 2.25 percent. The gap that may be covered in other words, not much. And it should matter not covered by pay increases alone, since it always takes a certain wage drift locally.
– Much will be clarified when LO and NHO has laid the framework for its settlement?
– Absolutely, and since it is an interim settlement will now only be negotiated about money, and then we have a model where the front subjects – companies in the competitive sector of industry – is the first.
– The front subjects come forward will also frame the rest of the settlement being driven by?
– Yes. Through the so-called frontfag model expected the more moderate wage growth to propagate into the industries that are not exposed to international competition. This is of course also applicable for the upcoming wage settlement for government, which starts after the front subjects added frame.
– Low addition can probably also lead to lower consumption?
– It may well be, and it’s not entirely positive because it can again have a negative impact on employment. There we also tend to see when forming clouds on the economic sky is that people’s savings increases, it can provide additional negative effect.
– What impact will a muted oil economy mean for employment?
– Much. We must remember that it is the oil industry that has made Norway different country in Europe in recent years. Now wage starting to come down, not just for the oil business, but for the mainland economy in general. This reflects the fact that oil pendulum about to turn. Oil prices have fallen sharply, and oil investments are also expected to fall during the year. The pressure on the labor market slows, and unemployment rises.
– For municipalities, which are your work, low wages have a positive impact?
– Both yes and No. Total wage costs for municipalities make up over 60 percent of their total expenditure, so there is a heavy item of expenditure. Reduced payroll will therefore quickly turn positive in the accounts. But simultaneously, the lower the salary increase for the whole society also mean lower growth in tax revenues, and that is not good either for municipalities or community.
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