Norwegian Technical Calculation Committee for Wage Settlement's preliminary report released



    Norwegian Technical Calculation Committee for Wage Settlement's preliminary report released

    Feb 23, Oslo: The Norwegian Technical Calculation Committee for Wage Settlements has outlined The Basis for Wage Settlements in 2016  in its Preliminary Report on Monday.

    According to the Committee, 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 2015 to 2016 and briefly describes prospects for the international economy and the Norwegian economy. The report is based partly on preliminary statistics and estimates for 2015. Parts of the report will therefore be updated in March, and will include figures for pay for managers, by gender and education.Summary of main findings the Calculation Committee estimates average pay growth from 2014 to 2015 for employees in the major bargaining areas to 3 per cent. For wage earners in total, pay growth is estimated to 2.8 per cent. Pay growth varied from 2½ per cent to 3.3 per cent in the major bargaining areas, whereas pay growth in financial services (banking and insurance) is estimated to 4.2 per cent," a stament issued on Monday said.

    Wage growth for workers in manufacturing in firms affiliated to NHO is estimated to 2½ per cent, and wage growth for all employees in manufacturing firms affiliated to NHO is also estimated to approximately 2½ per cent.The wage carry-over into 2016 is estimated to an average of 0.7 per cent for employees in the main bargaining areas. The estimates vary from approximately ½ per cent for Central government employees and employees in firms affiliated to the employers' association Spekter, to 1.2 per cent in financial services.

    Average real after-tax pay for wage earners increased by 0.9 per cent from 2014 to 2015. This is somewhat less than the growth in real after-tax pay from 2013 to 2014. This is partly due to lower pay growth before tax, and partly due to larger tax reductions in 2014 than in 2015. The real after-tax pay varied from 0.7 per cent for manufacturing workers to 2.1 per cent for financial sector employees.

    The Committee forecasts an average consumer price growth of about 2 ½ per cent from 2015 to 2016. The uncertainty in the inflation forecast for 2016 relates in particular to exchange rates, the oil price and electricity prices. Consumer prices in Norway increased by 2.1 per cent in 2015.
    A pronounced depreciation of the Norwegian krone over the last three years, coupled with lower wage growth in Norway, has contributed to improving the cost competitiveness of the Norwegian manufacturing industry. In 2015, the relative hourly wage costs measured in a common currency fell by 9.1 per cent.

    This improvement of cost competitiveness occurs after the difference in hourly wage costs between the Norwegian manufacturing industry and the manufacturing industry in trade partner countries generally increased until 2012. The prolonged increase in relative hourly wage costs of Norwegian manufacturing industry measured in a common currency is connected with, i.a., high growth in export prices and improving terms of trade. However, the drop in the oil price and the recent change in terms of trade has altered the situation. The improvement in the cost competitiveness over the last few years has therefore occurred in a period of lower economic growth and rising unemployment.
    There is a close relationship between the development in competitiveness and in the profitability of industry and commerce. The Norwegian model for wage settlements (Frontfagsmodellen) implies that   operating surplus as a share of factor income is a central indicator of the development in profitability and of the distribution of value added. Wage costs as a share of factor income in Norwegian manufacturing industry, have historically fluctuated with the business cycle around a fairly steady level. The previous two years, the wage cost share has dropped markedly, after increasing over the period 2011-2013. In 2015, wage costs as a share of factor income in Norwegian manufacturing industry were 78 per cent, 4 percentage points lower than in 2014, and 3 percentage points lower than the average over the period 2006-2015. The development in the operating surplus of the manufacturing industry over the last year is strongly influenced by the development in raw material based industries.
    Average hourly wage costs in manufacturing in Norway in 2015 were an estimated 37 per cent higher than a trade-weighted average of our EU trading partners, measured in a common currency. This is 10 percentage points less than in 2014. The reduction is influenced by the marked depreciation of the Norwegian krone from 2014 to 2015. 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, but also higher wage growth than abroad.

    Employment grew by 0.6 per cent in 2015, somewhat less than in the previous four years. Over the last year, employment in services associated with oil and gass extraction fell considerably by 6 per cent. In total, employment in the manufacturing industry is reduced by 2 per cent. In contrast, employment grew by 2.6 per cent in construction. The employment rate also decreased, and the rate is substantially lower than before the financial crisis in 2008. Unemployment increased during the year, and the unemployment rate was at 4.6 per cent in Q4 2015. The annual unemployment rate was 4.4 per cent in 2015.

    A continued drop in the oil price through 2015 and into 2016 contributes to further reduce demand from petroleum related activities onwards. The forecasts for the Norwegian economy point to a continued contraction but with the possibility of an economic expansion in the second half of 2016.

    Expansionary fiscal and monetary policy, increasing international economic growth and time-delayed effects of a weakened krone may also contribute to increase growth. Forecasts for GDP-growth in Mainland-Norway for 2016 are around 1 to 2 per cent. The large regional variation in unemployment is expected to continue in 2016 and annual unemployment is expected to be around 4.6 per cent in 2016. 

    The Oslo Times