The monthly Wage Index increased by 4% in December 2022 from the previous month. The increase can largely be attributed to collective agreements for a large proportion of the Icelandic private sector. Preliminary figures on wage increase in the private sector, suggest that wages increased by 5.6% in December from previous month. That contributes almost all of the increase of the total wage index in that month, but the private sector weights about 71% of the total index. Equivalents preliminary figures for public sector was 0.3% in December.

It should be noted that wage increase affects the Wage Index in the same month as it comes to effect in the payroll systems. Retroactive pay rise is therefore not measured in the Wage Index as revised indices are not published.

Increase of the Basic Wage Index in December 2022 from the previous months was the same as for the Wage Index, or 4%. However, if changes in the last twelve months is explored then the Basic Wage Index increased less (11.7%) than the Wage Index (12.4%). For both indices, yearly changes in December was much higher that yearly change for other months of the year 2022. It can be explained among other things by stipulation of two pay rise according to collective agreements for large proportion of the private sector, that is in January 2022 and in December 2022. Also, there was an extra pay rise in the period due to economic growth bonus for the year 2021. In addition, economic growth bonus for the year 2022 according to agreements, which was due to payments 1 May 2023, was brought forward and fully included in pay rises that came into effects in last December.

Wage development for earlier years shows that wage increased around 8% on average between the years 2021 and 2022, which is the same as for the year 2021 (that is the average between 2020 and 2021). However, average change between years was less in the period from 2017 to 2019, but higher in the year 2016 when wages increased on average over 10% between years. Wages, according to the Wage Index, increased by 11.4% on average between the years 2015 and 2016 and that is the only time since calculation of the Wage Index started (in 1989) that average wage change between years was over 10%.

About wage development and collective agreement
Recent collective agreements in the private sector affect the wage development in December. For example, the agreements between the Federation of General and Special Workers in Iceland (SGS) and Confederation of Icelandic Enterprise (SA), signed in beginning of December 2022, which is a continuation of so called “Lífskjarasamningi” and extends to 31 January 2024. The agreement stipulates a general monthly wage increase for full time employment of 33,000 ISK and special tariff increase from 35,000 to 52,000 ISK. In addition, economic growth bonus for the year 2022, due for payment on 1 May 2023, was brought forward and fully honoured as part of stipulated wage increases. In mid-December 2022, Trade unions of industrial and technical workers, VR and The Commercial Federation of Iceland signed a similar collective agreement with SA. However, the agreement stipulated a general wage increase of 6.75%, with a maximum of 66,000 ISK, but also special tariffs increase and updated pay rate tables as in the SGS agreement.

Wage development according to the Basic Wage Index and the Wage index is the same regarding data and methods, except the Wage Index is based on earnings for contractual working hours and includes all wages paid for daytime and fixed overtime hours, including shift payments and regular bonuses, while the Basic Wage Index is only based on basic earnings for contractual working hours. Accrued overtime payments are not part of regular wages or other irregular wage items, such as one-off payments or corrections, which are not calculated during each pay period. Further information is available in metadata about the wages index.


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