Wage development in the private and the public sector 2005-2013
Regular wages in the Icelandic labour market have increased by 74.6%. Wages have increased by 76.8% in the private sector, 69.4% for central government employees and 68.3% for local government employees.

As shown in figure 1 there was less wage increase in the years 2008-2010 than in previous years but the wage index increased again in 2011. For the years 2005-2013 the annual change was highest in 2007 or 11% but lowest in 2010 when regular wages increased on average by 3.5%.

As can be seen in figure 1, wages differed for the private and the public sector. This can partially be explained by collective agreements. Between the first quarter of 2008 and 2009 there was a considerable difference in the development in the indices for the private and the public sectors. During that period wages for local government employees increased by 12.7%, central government employees by 10.3% and private sector employees by 4.1%. The wage increase for local government employees can partially be explained by several provisions in collective agreements for elementary school teachers which were implemented in 2008 and the first quarter of 2009. For most local and central government employees there were also provisions in collective agreements of an increase in wages in 2008 which were not fully visualised until 2009. At the same time there were no substantial wage increases for most of the private sector.

Wage development is usually greatly affected by collective agreements. The increase in 2012 can partly be explained by two clauses in collective agreements that were implemented in 2011 and 2012. Furthermore, collective agreements during the period generally provided more increase in the lowest salaries.

Real wage development in the private and the public sector
Real wages increased by 2.8% between the 1st quarters of 2005 and 2013, as shown in figure 2. Thereof, real wages decreased by 0.3% for the central government employees and 0.9% for the local government employees but increased by 4.1% for the private sector. Real wages increased during the years 2006 and 2007 but remained approximately the same in 2008. In 2009 and 2010, real wages decreased but increased again in 2011.
Figure 2 shows the annual changes in real wages in the private and the public sector deflated by the CPI which is converted to quarterly averages. Generally, real wages increase when wages increase in real terms but decrease when inflation exceeds wage increase.


About the wage index and revised data
Statistics Iceland has now published a quarterly wage index for the public sector down to administrative levels which goes back to the year 2005.  Employees in the public sector work with municipalities and the central government. Other employees belong to the private sector. The wage index is a quarterly index which shows the changes of regular hourly wages in the private and the public sectors.

The calculation for the total wage index in the public sector has been revised since 2011 and therefore previously published data has changed. Press releases and statistical tables have been revised accordingly.