Moderate wage growth achieved in 1999

Source: Technical Calculating Committee on Income Settlements, Report No. 1/2000.

Developments in management salaries were an important issue prior to the 1998 and 1999 wage settlements (NO9711137N), and received special attention in the press. At the heart of the debate was the claim that moderation in wage settlement also had to apply to managers and senior clerical staff. In the past few years, an analysis of developments in management salaries has been included in the TBU report (NO9803156N). The figures concerning management salaries for 1999 are not available until March 2000, but the 1998 figures showed that administrative directors and operational managers in companies with more than 100 employees witnessed wage growth well above the average. The wage growth of management in firms with under 100 employees was around average.

TBU also estimates wage developments for women, compared with men, but the 1999 figures are not available as yet.

Developments in prices, real pay and competitiveness

Prices increased by 2.3% in 1999, as measured by the consumer prices index, according to TBU estimates. As in 1998, this means that Norway saw price increases which were higher than the EU average, as well as in comparison with its trading partners in general. The TBU expects price increases of 2.25%-2.5% in 2000.

The TBU has also produced estimates for growth in real pay after tax for all wage and salary earners, and for specific groups. In 1999, employees in one-person households experienced on average an increase in real pay of 2.75%. In 1998 the same group of employees witnessed a real income growth of 3.6%.

Despite the relatively moderate wage settlement in 1999, Norwegian manufacturing industry saw a higher growth in hourly wage costs than was the case among its trading partners. Manufacturing industry has lost market shares in the past two years (1998 and 1999), both in the domestic market as well as internationally. According to the TBU, wage costs in Norway are 14% higher than the average costs of its trading partners. The committee believes, however, that the gap would be narrowed if figures concerning wage costs for clerical staff had been included in its comparison, and intends to do so in its next report.

Commentary

The TBU report shows that Norway managed to accomplish the goal of a moderate 1999 wage settlement. This ambition was based on a general concern about the situation in the Norwegian economy, after the 1998 settlement produced much higher wage growth than anticipated, and in the context of uncertainty as to developments in oil prices, interest rates and the national currency. Yet the Norwegian economy as a whole in this period has not been marked by a downward trend. At present, in early 2000, the situation is one of low profitability in manufacturing industry combined with continuing growth in the public and private service sector. A relatively moderate settlement was achieved in a situation in which many branches are witnessing significant staff shortages, and where unemployment increases are found in those parts of manufacturing industry dependent on the offshore sector (NO0001171N). The economic outlooks for 2000 seems to indicate a further decline in growth, significant decline in investments in the oil-related as well as the domestic manufacturing industries (NO9909149F), and a slight increase in unemployment. Nevertheless, the outlooks are more optimistic than at the same time in 1999, and it is stressed that there was indeed a slight upturn in the Norwegian economy in the third quarter of 1999.

The forthcoming 2000 wage settlement is expected to be difficult. The parties are expected once again to reach agreements within the framework set by the public committee which sat in 1999, of wage growth "at the level of Norway's trading partners". the TBU never makes estimates about expected wage growth for the coming year, but other institutions predict that Norwegian wage growth for 2000 will be between 3.25% and 3.75%. The TBU does, however, refer to figures concerning the wage growth of Norway's trading partners, which is estimated to be 3.0%-3.25% in 2000_._ This indicates that a moderate settlement may be reached. There are, however, influential groups in the public sector (first and foremost teachers and nurses) who want to see much larger wage growth than allowed by the proposed moderate framework. These groups support their claim by referring to the pressing staff shortages in these sectors, recruitment difficulties and the fact that they are lagging behind most other groups when it comes to wage developments. There is also uncertainty, in relation to the 2000 wage settlement, as to the type of negotiation strategy chosen by the new union confederation for academically qualified staff, Akademikerne. This organisation has previously signalled a wish to distance itself from the ordinary wage negotiations in the public sector, as well as further decentralisation, in order to be more independent in relation to the fixing of pay rates for its members (NO9911162N). An important question will thus be the extent to which manufacturing industry, which normally leads the way in wage negotiations in Norway, is able to maintain its leading role in face of a crisis in the industry itself, and growth and labour shortages in the public sector as well as some parts of the private services sector. Finally, the continuation of the skills and training reform (NO9804161F) and working time questions (NO9910158F) will also be important issues on the agenda during bargaining.

The preparations for the spring pay round start in early February 2000, with the main confederations working out their demands.

It is also worth noting that the 2000 TBU report does not deviate much from previous reports, despite the fact that the committee now has much broader representation from trade unions as well as employers' organisations (NO9908145F). There is reason to believe, however, that these newly included organisations may wish to extend the content of future reports to account for areas of importance to their members. (Kristine Nergaard, FAFO Institute for Applied Social Science)