Although wages in Iceland have increased upwards of 65% since 2005, Icelanders’ buying power over the same time period has only increased by 2.8%, reports Vísir. Statistics Iceland published new wage figures yesterday morning which show that over the last eight years, wages in the private sector have gone up 76.8%, while wages for state and municipal employees have increased by 69.4% and 68.3%, respectively.
The differences in wage increases between the public and private sectors can be at least partially attributed to collective bargaining agreements which have gone into effect in the last five years. These include increases mandated by to the collective bargaining agreement for primary school teachers, which came into effect at the end of 2008 and the first quarter of 2009. Likewise, most state and municipal employees had similar provisions in their wage contracts concerning increases during that time.
During the same time period, however, no major groups in the private sector received contractual increases. Any bonuses for private employees were instead delayed until late in 2009, and so the effects of these increases was not seen until 2010.
Despite the dramatic increases in wages, however, due to inflation, Icelanders’ purchasing power has increased very little in the same time period—barely three percent.
When adjusted for inflation, real wages increased by 4.1% in the private sector, but decreased by .3% for state employees and .9% for municipal employees. Statistics Iceland says that real wages increased in 2006 and 2007, and remained roughly the same in 2008. According to their report, purchasing power dropped in 2009 and 2010 (after the collapse of the Icelandic economy), but has been on the rise since 2011.