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The Basis for Wage Settlements in 2019 Preliminary Report

Press release from the Norwegian Technical Calculation Committee for Wage Settlements: Preliminary Report 2019.

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 2018 to 2019 and briefly describes prospects for the international economy and the Norwegian economy. The report is based partly on preliminary statistics and estimates for 2018. The report will therefore be updated in March.

The Calculation Committee's preliminary estimate of average pay growth from 2017 to 2018 is 2¾ per cent for blue collar employees and 2¾ per cent for white collar employees in manufacturing firms affiliated to the NHO. The combined average pay growth for these two groups is also estimated at approximately 2¾ per cent. At the wage negotiations in 2018, the NHO estimated, along with LO, annual wage growth in 2018 for these groups combined at 2.8 percent.

The wage carry-over into 2018 for manufacturing (NHO) is estimated at 1.2 per cent. For the other major bargaining areas, the preliminary estimates are between 0.7 and 2 per cent.

Average real after-tax pay growth from 2017 to 2018 varies from 0.3 to 0.6 per cent for wage earners with average pay levels and average pay growth in major bargaining areas (preliminary estimates). Real pay growth before tax does not exceed 0.4 per cent. Wage earners with pay level and growth equal to the averages for all wage earners had a real before-tax pay growth of 0.3 per cent and a real after-tax pay growth of 0.1 per cent. Average pay growth for all wage earners from 2017 to 2018 was 2.8 per cent, according to preliminary national accounts.

The Calculation Committee's preliminary estimate of consumer price growth from 2018 to 2019 is approximately 2.2 per cent. The uncertainty in the inflation forecast for 2019 relates in particular to exchange rates and energy prices.

There is a close relationship between the development in competitiveness and in the profitability of industry and commerce. Wage costs as a share of factor income is a central indicator of the development in profitability and of the distribution of value added. The Norwegian model for wage settlements (Frontfagsmodellen) builds on the principle that the distribution of factor incomes in manufacturing is stable in the long term and forms a norm for wage growth in other parts of the economy. The wage cost share in the Norwegian manufacturing industry fluctuates considerably over the business cycle. According to preliminary national accounts, wage costs as a share of factor income in Norwegian manufacturing industry, including imputed labour costs for the self-employed, were 92 per cent in 2018, nearly 6 percentage points higher than the year before. The average wage cost share was just below 88 per cent over the period 2009-2018, and 83 per cent on average 1998-2017.

Lower growth in wage costs in Norway than for the trading partners and appreciation of the Norwegian krone contributed to an estimated decrease in relative hourly wage costs measured in a common currency of 1.2 per cent in 2018. The growth rate of hourly wage costs for the trading partners in 2018 is estimated with considerable uncertainty.

A weaker Norwegian krone and lower growth in wage costs in Norway have contributed to improving the cost competitiveness of the Norwegian manufacturing industry since 2013. In a longer perspective, the hourly wage costs of the Norwegian manufacturing industry have increased more than in trading partner countries. This is related to high growth in export prices and improved terms of trade. Average hourly wage costs in manufacturing in 2018 were an estimated 29 per cent higher than a trade-weighted average of our EU trading partners, measured in a common currency. This is 2 percentage points lower than in 2017. The higher hourly wage costs in Norwegian manufacturing industry compared with the trade partners reflects the high levels of productivity and income of the Norwegian economy and a more equal distribution of income.

Employment increased by 1.1 per cent in 2017 and by 1.5 per cent in 2018. Employment grew particularly in construction, business services including employment activities and in hotels and restaurants. In manufacturing, employment grew in industries that primarily supply the petroleum industry, such as ship building, metal and machine industry. Employment changes were smaller in other private industries.

Futures prices indicate that, going forward, oil prices, measured in USD, will not change much. Petroleum investments are expected to rise markedly in 2019 and export growth is expected to increase. Many forecasts suggest that the economic recovery in Norway will continue at the same moderate pace in 2019 as in 2018. According to forecasts, employment is expected to increase less in 2019 than in 2018 and unemployment is not expected to change much.

Table 1. Annual pay growth in 2017 and 2018 and wage carry-over into 2019 in major bargaining areas. Per cent

 

Pay growth
2016–2017

Pay growth
2017–2018*

Wage carry-over into 2019*

All employees in the manufacturing industry at firms affiliated to NHO1

2,4

1.2

 - Manual workers
at manufacturing firms affiliated to NHO1

2,6

1.1

- Non-manual employees at manufacturing firms affiliated to NHO1

2,7

1.3

Employees at firms affiliated to Virke2, retail trade

3,14

2.74

1.1

Employees in financial services

3.8

3.1

1.3

Central government employees

2.3

Local government employees

2.5

2.9

0.7

Employees at firms affiliated to Spekter3, excluding health trusts

2.4

2.9

0.8

Health trust employees

3.65

3¼ 6

2

  1. Confederation of Norwegian Enterprise
  2. The Enterprise Federation of Norway
  3. An employers’ association.
  4. Structural changes, including new member enterprises, increased estimated wage growth.
  5. Delayed wage settlements for a group of employees in 2016 decreased estimated annual wage growth 2015-2016 by 0.4 percentage points and increased it by the same amount from 2016 to 2017. Parts of the 2016 wage settlements were paid out in 2017, further reducing estimated wage growth from 2015 to 2016, and increasing it from 2016 to 2017. Structural changes worked in the same direction.
  6. Structural changes, including an increase in the number of doctors, contributed to higher wage growth in 2018.

* Preliminary estimates

Contact

Contact person for further information:

Committee Chairman Ådne Cappelen, Statistics Norway
Telephone: + 47 488 82 950
E-mail: [email protected]

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