A Summer of Inaction
10. August 2026Everything Goes Up Except Wages
While the attention of politicians and voters is focused on an EU referendum, the clock is ticking for the labour market. On 27 August, the Consumer Price Index will be published, and annual inflation will be so high that the assumptions underpinning the collective agreements will no longer hold. For months, the trade union movement has called for action and a response from both the government and businesses, but to no avail.
Everything goes up except wages
The situation we now face could easily have been prevented. Had the larger companies that shape prices in Iceland kept their promises to exercise restraint in raising prices, inflation would be lower than it is today. Instead, they have increased their profits during a period of inflation, not because they have no alternative, but because they can. Likewise, both central and local government have raised fees far beyond what is reasonable and, instead of protecting families with children, as local authorities had promised, they have placed them under greater pressure through higher charges and reduced services. Essentials such as electricity and heating have risen so sharply that, although they are not the largest items in household budgets, the increases are having a tangible impact on inflation. All of this, combined with inaction on housing, means that the assumptions underpinning the collective agreements are breaking down.
Stagflation in the making
The Central Bank's high-interest-rate policy has also added fuel to the fire. Instead of bringing inflation down, it is now contributing to rising unemployment while placing the entire burden of a difficult economic environment on borrowers and tenants. This vicious spiral is gradually creating stagflation, which may prove difficult to reverse. We, the undersigned, who represent around 40% of employees in the private sector, have made it clear that if the government and employers refuse to take any responsibility for the situation, we will be left with no option but to terminate the collective agreements and demand wage adjustments to keep pace with inflation and interest rates. Likewise, the particular erosion in living standards suffered by families with children must be redressed, during a period in which their interests were supposed to be protected.
A bird in the hand, not two in the bush
We had hoped that the tripartite dialogue between the government, employers and the trade union movement would produce results before the assumptions underpinning the agreements failed, but that requires both political will and a willingness to act. Working people cannot be left to shoulder the burden alone and deal with economic conditions they did not create. The current collective agreements were concluded on the basis of promises intended to bring down inflation and interest rates. Those promises have been comprehensively broken, and collective agreements will not hold on the basis of similar promises. What is needed now is a bird in the hand, not two in the bush.
Halla Gunnarsdóttir, President of VR.
Jakob Tryggvason, President of RSÍ.
Andri Reyr Haraldsson, Vice-President of RSÍ and President of FÍR.
Eiður Stefánsson, President of LÍV.
Gunnar Sigurðsson, President of VM.
Óskar Hafnfjörð Gunnarsson, President of MATVÍS.
Article originally published in visir.is 10 August 2026