The monthly wage index increased by 0.4% in May 2021 from the previous month. In the last twelve months the monthly wage index has risen by 7.5%.

Changes of wage index from January 2020 to May 2021
  From previous month, % From previous year, %
January 0.7 4.9
February 0.1 4.8
March 0.3 4.9
April 3.3 6.8
May 0.3 6.4
June 0.2 6.7
July -0.1 6.3
August 0.2 6.4
September 0.8 6.7
October 0.7 7.1
November 0.4 7.3
December 0.2 7.2
January 3.7 10.3
February 0.3 10.6
March 0.4 10.6
April 0.3 7.4
May 0.4 7.5

Notes: The wage index is calculated and published according to law No 89/1989. The wage index is based on regular hour's salaries each month.

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 are considered to be equivalent to wage changes. Collective agreements from the years 2019 and 2020 in the Icelandic labour market contained such clauses. In the private sector some collective agreements stipulated the possibility of a workplace agreement between employees and employers with a shortening of the work day up to 13 minutes per day. Other collective agreements stipulated a shortening of 9 minutes per day, from 1 January 2020. Collective agreements in the public sector stipulated a shortening of 13 minutes per day from 1 January 2021 for daytime workers and from 1 May 2021 for shift time workers, including considerable changes in structure of earnings and working hours.

The shortening of working hours according to collective agreements in 2019 and 2020 first affected the wage index in November 2019. The increase in the wage index between November 2019 and May 2021 was 13.0%, but is estimated to be 11.6% without the effect of shortening of working hours. The biggest effects were in January 2020 and January 2021 respectively. The effect of the shortening of working hours in January 2020 is about 0.6 percent points due to collective agreements in the private sector. In January 2021 the effect is about 0.4 percent points when collective agreements in the public sector came into effect. Preliminary estimation in May 2021 indicates that the effect, of the shortening of working hours between April 2021 and May 2021, on the wage index is about 0.1 percentage points. However, not all parties have implemented the shortening of the working week so the effect is anticipated to continue to affect the wage index for coming years.

About the wage index
The wage index is calculated and published according to law 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 earnings 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 this is sometimes the case with the shortening of the workweek as stipulated in recent collective agreements. As stated in the bill of the wage index act, changes in working hours based on collective agreements can affect the wage index if they are equivalent to changes in wages. Further information is available in metadata about the wages index.

Statistics Iceland publishes other measurement on wages and changes in wages to give a broader perspective on the subject. For example, total wage index reflects, unlike the wage index, all wage components and changes in the composition of the labour force or working hours. Sum of taxable wages gives timely information on individuals’ income related to work and is affected when employment and working hours increases or decreases.