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Source: Government of Norway

The Norwegian Technical Calculation Committee for Wage Settlements

Press release from the Norwegian Technical Calculation Committee for Wage Settlements.

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 2019 to 2020 and briefly describes prospects for the international economy and the Norwegian economy. The report is based partly on preliminary statistics and estimates for 2019. The report will therefore be updated in March.

The Calculation Committee’s preliminary estimate of growth in average pay from 2018 to 2019 is 3.1 per cent for blue collar employees and 3.0 per cent for white collar employees in manufacturing firms affiliated to the NHO. The combined pay growth for these two groups is estimated at 3.1 per cent. At the wage negotiations in 2019, the NHO estimated, along with their counterpart LO, annual wage growth in 2019 for these groups combined at 3.2 percent.

The wage carry-over into 2020 for manufacturing (NHO) is estimated at 1.2 per cent. For the other major bargaining areas, the preliminary estimates are between 0.8 and 1.4 per cent.

Average real after-tax pay growth from 2018 to 2019 varies from 1.0 to 1.7 per cent for wage earners with average pay levels and pay growth in major bargaining areas (preliminary estimates). Real after-tax growth in average pay for all wage earners was 1.5 per cent, according to preliminary national accounts.

The Calculation Committee forecasts the consumer price growth from 2019 to 2020 to approximately 1.5 per cent. The uncertainty in the inflation forecast for 2020 relates in particular to exchange rates and energy prices.

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 87.0 per cent in 2019, 0.8 percentage points lower than the year before. The wage cost share was 85.0 per cent on average over the period 2010–2019, and 81.4 per cent on average over the last twenty years.

Relative hourly wage costs in Norwegian manufacturing fell by an estimated 1.6 per cent in 2019, relative to a weighted average of the trading partners and measured in a common currency. This is related to the depreciation of the Norwegian currency. Higher growth in hourly wage costs in Norwegian manufacturing than in the trading partner countries contributed in the opposite direction.

A weaker Norwegian currency and reduced growth in wage costs have contributed to improving the cost competitiveness of the Norwegian manufacturing industry since 2013. In a longer perspective, the hourly wage costs of the 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 2019 were an estimated 33 per cent higher than a trade-weighted average of our EU trading partners, measured in a common currency, the same as in 2018. 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 Norwegian economy was in a moderate expansion from the end of 2016 to mid-2019. The employment rate increased accordingly. Employment increased by 1.7 per cent in 2019, more than in 2018, but growth was reduced from the second quarter. The decline in unemployment came to halt in 2019.

Economic growth was weak in the second half of 2019. Several forecasts indicate that the economic expansion is over. This is linked to the economic development abroad and an expected change in pace in petroleum industry investment.

Table 1. Annual pay growth in 2018 and 2019 and wage carry-over into 2020 in major bargaining areas. Per cent

Pay growth
2017-2018

Pay growth
2018-2019*

Wage carry-over into 2020*

All employees in the manufacturing industry at firms affiliated to NHO1

2.6

3.1

1.2

 – Manual workers
at manufacturing firms affiliated to NHO1

2.8

3.1

1.1

– Non-manual employees at manufacturing firms affiliated to NHO1

2.8

3.0

1.3

Employees at firms affiliated to Virke2, retail trade

2.7

3.0

1.0

Employees in financial services

3.2

3.4

1.4

Central government employees

2.7

3.8

1.2

Local government employees

2.9

3.5

1.2

Employees at firms affiliated to Spekter3, excluding health trusts

2.9

3.3

0.8

Health trust employees

3.4

3.4

1.0

Footnotes 

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

* Preliminary estimates.

Contact 

Contact person for further information:

Committee Chairman Geir Axelsen, Statistics Norway
Tel.: + 47 976 36 282
E-mail: [email protected]

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