The Basis for Wage Settlements in 2021 Preliminary Report

Press release from the Norwegian Technical Calculation Committee for Wage Settlements: Preliminary Report 2021.

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 2020 to 2021 and briefly describes prospects for the international economy and the Norwegian economy. The report is based partly on preliminary statistics and estimates for 2020. The report will therefore be updated in March.

The Calculation Committee's preliminary estimate of growth in average pay from 2019 to 2020 is 2 per cent for blue collar employees and 2¼ per cent for white collar employees in manufacturing firms affiliated to the NHO. The combined pay growth for these two groups is estimated at 2¼ per cent. At the wage negotiations in 2020, the NHO estimated, along with their counterpart LO, annual wage growth in 2020 for these groups combined at 1.7 per cent.

The wage carry-over into 2021 for manufacturing (NHO) is estimated at 1¼ per cent. For the major bargaining areas, the preliminary estimates are between ¼ and 1½ per cent.

Average real after-tax pay growth from 2019 to 2020 varies from 0.7 to 2.2 per cent for wage earners with average pay levels and pay growth in major bargaining areas (preliminary estimates).

The Calculation Committee now forecasts the consumer price growth from 2020 to 2021 to 2.6 per cent. As always, the uncertainty in the inflation forecast relates to exchange rates and energy prices but now also to the effects of the pandemic on the economy.

There is a close relationship between the development in competitiveness and profitability. Wage costs as a share of factor income is a central indicator for the development in profitability and for 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 net factor income in Norwegian manufacturing industry, not including imputed labour costs for the self-employed, were 82.3 per cent in 2020, three percentage points lower than the year before. The wage cost share was 84.7 per cent on average over the period 2011–2020, and 81.3 per cent on average over the last twenty years.

Relative hourly wage costs in Norwegian manufacturing fell by an estimated 9.6 per cent in 2020, relative to a weighted average of the trading partners and measured in a common currency. Lower growth in hourly wage costs in Norwegian manufacturing accompanied by a marked depreciation of the Norwegian currency contributed to the reduction. The uncertainty about estimates for the trading partners is larger than usual.

A weaker Norwegian currency and reduced growth in wage costs have contributed to improving the cost competitiveness of the Norwegian manufacturing industry since 2013. The difference in average hourly wage costs in manufacturing between Norway and a trade-weighted average of our EU trading partners, measured in a common currency, fell to 20 per cent in 2020, the lowest since 2001. 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.

The shutting down of economic activity in 2020 due to the pandemic has lead to a larger economic contraction than in any other crisis in modern history. GDP for mainland Norway dropped 10.5 per cent from February to April 2020. Activity then picked up and the overall reduction from 2019 to 2020 was 2.5 per cent.

The level of uncertainty about the development in the Norwegian economy is unusually large. Forecasts made in December 2020 indicate that mainland GDP will grow at a rate of 3.7 per cent in 2021, whereas the forecast was 4.4 per cent in the National Budget (October 2020).

Table 1. Annual pay growth in 2019 and 2020 and wage carry-over into 2021 in major bargaining areas. Per cent

 

Pay growth
2018-2019

Pay growth
2019-2020*

Wage carry-over into 2021*

All employees in the manufacturing industry at firms affiliated to NHO1

3.1

 - Manual workers
at manufacturing firms affiliated to NHO1

3.1

2

1

- Non-manual employees at manufacturing firms affiliated to NHO1

3.0

Employees at firms affiliated to Virke2, retail trade

3.0

1

Employees in financial services

3.4

¾

Central government employees

3.8

1.8

0.4

Local government employees

3.5

-

-

Employees at firms affiliated to Spekter3, excluding health trusts

3.3

¼

Health trust employees

3.4

¾

Confederation of Norwegian Enterprise

The Enterprise Federation of Norway

3An employers’ association.

Preliminary estimates

Contact

Contact person for further information:

Committee Chairman Geir Axelsen
Statistics Norway
Telephone: + 47 488 82 950
E-mail: geir.axelsen@ssb.no