The Basis for Wage Settlements in 2015

The report outlines recent years’ developments in pay, incomes, prices, macroeconomic development and competitiveness. The Calculation Committee also presents a forecast of consumer price growth from 2014 to 2015 and briefly describes prospects for the international economy and the Norwegian economy. The report is based partly on preliminary statistics and estimates for 2014. Parts of the report will therefore be updated in March, and will include figures for pay by gender and education.

Summary of main findings

The Calculation Committee estimates average pay growth from 2013 to 2014 for employees in the major bargaining areas to 3.2 per cent. For wage earners as a whole to pay growth is estimated to 3.1 per cent. Pay growth varied moderately between the major bargaining areas in 2014. Differences in pay growth between the major bargaining areas varied between 3 per cent for workers in manufacturing in firms affiliated to NHO[1] end local government employees and 3.5 per cent for employees in retail firms affiliated to Virke[2].

Wage growth for workers in manufacturing in firms affiliated to NHO is estimated to 3 per cent, and wage growth for all employees in manufacturing firms affiliated to NHO is estimated to approximately 3¼ per cent.

The wage carry-over into 2015 is estimated to an average of 1.4 per cent for employees in the main bargaining areas. The estimates vary from a approximately 1 per cent for workers in manufacturing in firms affiliated to NHO and employees in retail firms affiliated to Virke to 2 per cent for central government employees.

Average real after-tax pay for wage earners increased by 1.6 per cent from 2013 to 2014 compared to 1.8 per cent the previous year. Lower growth in real after-tax pay is primarily due to lower wage growth in 2014 than in 2013. The real after-tax pay growth rate varied moderately between the major bargaining areas.

The Committee forecasts an average consumer price growth of about 2 ¼ per cent from 2014 to 2015. The uncertainty in the inflation forecast for 2015 relates to in particular to exchange rates, the oil price and electricity prices. Consumer prices in Norway increased by 2.0 per cent in 2014.

Employment grew roughly at the same rate 2014 as in 2013, at 1.1 per cent, but the composition has changed. Unlike in the previous years, in 2014 there was no employment growth in Building of ships, oil platforms and modules or Repair and installation of machinery and equipment, which are important suppliers to the oil and gas industry. The employment rate also decreased, and the rate is substantially lower than before the financial crisis in 2008. Unemployment increased some in the second half of 2014, and was at 3.7 per cent in Q42014. Annual unemployment rate was 3.5 per cent in 2014.

The Calculation Committee presents a number of quantified indicators to describe Norwegian business and industry’s international competitive position in recent years. Several of these components, in particular cost indicators, suggest a weakened situation for Norwegian firms during the last decade. This picture contrasts somewhat with the figures for employment and actual production output in Norway compared with other countries. While some economic indicators show that Norway is doing better than many other economies, the high cost level makes future competitiveness uncertain for firms in parts of the economy.

In the Norwegian model for wage settlements (Frontfagsmodellen), the manufacturing industry’s competitiveness is secured by a system of wage bargaining that ensures a stable distribution of value added between capital owners and wage earners. Wage costs as share of gross factor income in Norwegian manufacturing industry, has fluctuated moderately with the business cycle around a relatively steady level. For 2014, the wage cost share was estimated to 68 per cent, nearly 2 per cent higher than the average wage cost share in the last ten years.

Cost competitiveness in the manufacturing industry, measured exclusively by relative hourly wage costs in a common currency, has deteriorated over the past years due to higher growth in wage costs in Norway than in trade partner countries and due to appreciation of the krone. However, in 2014 a krone depreciation reduced the comparative wage costs by 5.3 per cent.

Average hourly wage costs in manufacturing in Norway in 2014 were an estimated 47 per cent higher than a trade-weighted average of our EU trading partners, measured in a common currency. This is 9 percentage points less than in 2013. The reduction in the relative wage cost gap to our trade partners is chiefly due to the krone depreciation.

Weak GDP-growth among our trade partners has had a negative impact on exports for the last years. Growth rates among our trade partners are expected to increase in 2015, but at a moderate scale. The recent oil price drop is expected to further reduce demand from petroleum related activities. Expansionary fiscal and monetary policy and a weakened krone is acting in opposite direction on GDP. Forecasts for GDP-growth in Mainland-Norway are on the whole lower for 2015 than they where in 2014, and unemployment is expected to increase. 

Table 1. Annual pay growth from 2012 to 2013 and from 2013 to 2014 and wage carry-over into 2015 in some bargaining areas

	Pay growth from 2012 to 2013 in per cent	Pay growth from 2013 to 2014 in per cent	Wage carry-over into 2015 in per cent
All employees in the manufacturing industry at firms affiliated to NHO1	3.9	3¼
Manual manufacturing employees at firms affiliated to NHO1	3.5	3	1
Non-manual manufacturing employees at firms affiliated to NHO1	4.3	3¼	1¼
Employees at firms affiliated to Virke2, retail trade	4.0	3.5	1,0
Employees in financial services	6.7	2.9	1,2
Central government employees	3.5	3¼	2
Local government employees	3.7	3	1¾
Employees at firms affiliated to Spekter3, excluding health trusts	3.6	3¼	¾
Health trust employees	3.8	3.4	1,2

1. Confederation of Norwegian Enterprise
2. The Enterprise Federation of Norway
3. An employers’ association.

Contact 

Contact person for further information:
Committee chairman Ådne Cappelen, Statistics Norway (Statistisk sentralbyrå)
Phone: + 47 488 82 950
E-mail: adne.cappelen@ssb.no