The monthly wage index increased by 3.7% in January 2022 from the previous month. The increase can largely be attributed to collective agreements for a large proportion of the Icelandic labour market. In the last twelve months the monthly wage index has risen by 7.3%.
Collective agreements from 2019 and 2020 stipulated a pay rise in January 2022 in the form of nominal increase of monthly wage level aiming to improve wage terms for low wage earners. The most common monthly wage increase for full time employment was between 17 thousand ISK to 24 thousand ISK. Most of the collective agreements in the private sector expire later this year while most agreements in the public sector expire early 2023.
From January 2019 to January 2022 the wage index has increased by 24.2%. Collective agreements came into effect on different time points, e.g. the first agreements in the private sector were signed in April 2019 while corresponding agreeements for the public sector were signed in the year 2020 and stipulated two pay rises, for the year 2019 and for 2020.
Collective agreements also stipulated a shortening of the work week for part of the wage earners. Although changes in working hours do not normally affect the wage index, changes in working hours can have effect on the index if they are considered to be equivalent to wage changes.
The shortening of the work week according to collective agreements in 2019 and 2020 first affected the wage index in the second half of the year 2019. From that time, the total effect of the shortening of working hours on the wage index is estimated as 1.8 percentage points. More on shortening of the work week can be found in Statistics Iceland‘s news release from 21 of December 2021.
About the wage index
The wage index is calculated and published according to Act No 89/1989. The index is a price index based on data from the Icelandic survey on wages, earnings and labour cost. The purpose of the index is to reflect changes in wages paid for fixed working hours. The index is based on regular salaries for contractual working hours and includes all wages paid for day time and fixed overtime hours, including additional payments and bonuses. Irregular payments and employers' social contributions and taxes are excluded.
Although changes in working hours do not normally affect the wage index, changes in working hours stipulated in collective agreements can have effect on the index if they can be seen as equivalent to changes in wages. As stated in the Act on the wage index No 89/1989, changes in working hours and their composition shall not affect the index unless they are contractual changes that can be equated to wage changes. See further information in metadata about the wage index.