The conventional wisdom says that Iceland is a happy, prosperous place with that strong Nordic welfare system. But if things are so great in Iceland, why is everyone so angry about the state of the economy, and why are we in the midst of the bitterest labour disputes in years?
For the past month and a half, thousands of people have been on strike, and barring a major breakthrough, it looks like that number might grow significantly in the next few weeks.
Members of BHM, the Association of Academics, an umbrella organisation of 27 unions representing university-educated professionals, have been on strike since the beginning of April. SGS, the Federation of General and Special Workers, representing 19 unions and workers in various fields, including the fishing and tourism industries, has already begun limited strike action, with a 12-hour work stoppage on Thursday, April 30. It has been announced that it will follow up with further short work stoppages on May 28 and 29 and a full strike on June 6 if no agreement is reached in the interim.
A full strike by the SGS will mean large sections of the tourism industry will be paralysed, as many unskilled workers in hotels and restaurants, as well as bus drivers, are members of unions belonging to the SGS. Other unions have also threatened strikes, among them VR, which represents office and retail workers.
Yes, foreign visitors will be impacted
To date the strikes have had a limited impact, although the targeted strikes of a number of professions belonging to the BHM—including health workers and midwives, veterinarians, and lawyers working for the Reykjavík municipality—are beginning to cause serious disruption.
The strike amongst veterinarians who do health inspections has led to a nationwide shortage of chicken and some processed meat products. The strike amongst lawyers working for the city has meant that documents or contracts cannot be registered, no new permits can be issued and no real estate transactions legally completed as deeds cannot be transferred. This has already caused considerable trouble to realtors and anyone buying or selling a home, as payments are held up. The growing backlog of thousands of documents will take weeks to process once the lawyers return to work.
If agreements are not reached soon, and all the unions move from limited action to general strike action, we will see far more serious effects. Over 70,000 workers might be on strike by early summer.
The general secretary of the SGS, Drífa Snædal, notes that foreign visitors will most certainly feel the strike. “The immediate impact on foreign visitors will probably be through air traffic, which will be paralysed as baggage handlers, drivers of oil trucks and retail workers at the Keflavík airport will go on strike,” she says. “Many restaurants will be forced to close their doors, and the cleaning staff of hotels will be on strike as well.”
As Drífa points out, “most daily action will grind to a halt.”
So, why are people going on strike?
Most attention has been paid to the demand to raise the lowest wages to 300,000 ISK per month by 2017, which comes to just about 228,000 ISK per month after taxes (18,600 EUR or 21,000 USD annually).
SA-Business Iceland, a service organisation for Icelandic business, has rejected the demand, arguing that companies will either have to lay people off, or will simply have to go out of business. Wages, they argue, cannot grow much faster than productivity. Any wage increase in excess of 3.5% would lead to inflation that will undermine the economic stability achieved in the past years. Bjarni Benediktsson, the minister of finance, has made the same argument, warning against the inflationary consequences of meeting union demands.
It turns out, though, that not all companies agree that paying a higher minimum wage will spell their ruin. A growing number of smaller businesses, many in the tourism industry, which are not members of SA-Business Iceland have struck deals with the SGS, agreeing to their full demands in order to stave off the threat of strikes later this month. A union leader who spoke to the Iceland’s national public broadcasting service, RÚV, argued that many more companies would like to strike deals with the unions, but are held back by SA-Business Iceland.
In fact, unions’ demand for a raise in the minimum wage enjoys near-universal support. According to a recent Gallup poll, 91.6% of Icelanders support the lowest monthly wage being raised to 300,000 ISK. In fact, when asked what the minimum wage should be, the average figure people gave was 10% higher, or just under 330,000 ISK per month. This is not surprising considering that the Debtors Ombudsman estimates that a single parent with two children needs to make 232,282 ISK in order to exist, and that excludes the cost of housing. So even if the minimum wage is raised in accordance with the demands of SGS, the take-home pay of those making minimum wage will not be enough for some to make ends meet.
So, how do people make ends meet? By working overtime or two jobs. According to Drífa Snædal, 60% of the members of SGS, who do not have special sector contracts, are making less than 238,000 ISK per month before taxes. The union’s demand, she argues, is so that its members are able to pay the bills working one job.
This is not just a problem facing the lowest-paid workers. Gylfi Arnbjörnsson, the president of ASÍ, the Icelandic Federation of Labour, argues that a full 30-35% of the nation is struggling to maintain a decent standard of living. Even people earning above median wages have trouble paying basic bills.
It is not just expensive to travel in Iceland
The reason why middle-class professionals are going on strike and demanding a living wage is because Iceland is expensive (as visitors may have noticed). The 2015 Travel and Tourism Competitiveness Report of the World Economic Forum ranked Iceland 128th out of 141 countries when it came to price competitiveness. In a recent OECD report on the salaries of teachers in its member countries, Iceland was in 26th place, well behind most Western European countries. The average annual salary of teachers is 48,932 USD in Denmark, but only 28,100 USD in Iceland when adjusted by purchasing power parity.
Whether we are looking at workers with a university education or not, wages are on average 20% lower in Iceland than in the other Nordic countries, according to the Icelandic Federation of Labour.
Wage costs are also relatively low in Iceland compared to other countries. According to the most recent figures from Eurostat in 2012, wage costs in Iceland were well below the other Nordic countries as well as most Western European countries, and slightly below the European average.
To many in the labour movement, the problem is all about inequality. In fact, the only class of people who earn a higher wage in Iceland than in Scandinavia are business managers and chief executives. According to calculations made by ASÍ, executive pay adjusted for purchasing parity is on average 5% higher in Iceland than in Scandinavia.
You can’t make this shit up!
The day before the first half-day strike action of the SGS, KEA, an investment company headquartered in Akureyri, announced that it was giving its CEO a 20% raise, or an extra five million ISK per year. Drífa Snædal, the managing director of SGS, shared the news on her Facebook page, posting: “One day to strikes… You can’t make this shit up!”
Drífa explains that people are going on strike because they have had enough. “It seems as if there is more than enough money when it comes to raising wages for executives and people in the highest income brackets,” she says, “but when workers ask for a living wage, all of a sudden times are really tough and everyone needs to tighten their belts so that we don’t threaten economic stability.”
Yet, she notes, it is the working class that is asked to shoulder the burden of maintaining economic stability. “The working class is asked to ensure that inflation does not take off, and that economic stability is maintained. But stability which is based on economic injustice is not a stability we can accept.”
Blame the government and the bosses
While Drífa stresses that the main reason for the strikes is that employers have not been willing to accept demands that workers receive something resembling a living wage, she points out that the attitude of employers and the government has enraged many in the labour movement.
It is not just that executive pay has risen significantly in the past few years, Drífa argues, but that the government has lowered taxes on the wealthy and corporations, while raising taxes on food and co-pays in the health services. “The tactlessness of these actions has really angered many people,“ she says.
For example, at the same time as fishing giant HB Grandi was offering its workers pay raises of 3.5%, the company announced a 33% raise in compensation to its board members, which amounted to a five- or six-figure raise for them while workers at the company’s freezer plants were offered a raise of five or six thousand. Other companies have announced similar increases in executive compensation. The insurance company VÍS, for instance, announced a whopping 70% raise in compensation to its board members. Faced with public outrage, the company later withdrew the proposal, citing the need to show restraint and take responsibility for maintaining economic stability.
Meanwhile, Minister of Finance Bjarni Benediktsson has not done much to calm the waters, calling the union demands excessive and proposing legislation that would double the legal limits on bank bonuses. Apparently, some people deserve a raise more than others.
Icelandic Federation of Labour (ASÍ): 51-member unions representing 100,000 workers
Association of Academics (BHM): 27-member unions representing 11,000 workers
SA-Business Iceland: a service organisation for Icelandic businesses, negotiates with unions on wages and working conditions, representing about 2,000 businesses, accounting for 70% of all salaried employees on the Icelandic labour market
Federation of General and Special Workers (SGS): representing 50,000 workers
VR Trade Union: commercial and office workers’ union representing 30,000 workers
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