VR Blames Companies And Government For Failure
14. August 2026Corporations and Government Caused Collective Agreement Failure
The Board of VR expresses grave concern about the current situation in the labour market, now that it is clear that the premises of the collective agreements will not be met. The Board declares its willingness to engage in solution-oriented discussions with the authorities and The Confederation of Icelandic Enterprise with a view to ensuring that the collective agreements can remain in force. However, if no other solution is found, the Board of VR considers the termination of the collective agreements unavoidable.
When the current collective agreements were signed, wage earners accepted wage increases below the rate of inflation, trusting that companies would refrain from price increases and that the authorities would keep increases in tariffs and fees moderate. It was hoped that this would lead to lower inflation and interest rates. Contrary to their commitments, both the central government and municipalities have raised tariffs and fees excessively, while large companies with significant influence on prices have increased their profits during periods of inflation.
The Board of VR completely rejects the claims made by representatives of the government and employers that the premises of the collective agreements have not in fact failed, on the grounds that the purchasing power of wages has increased and that inflation can be attributed to external factors. Wages stipulated in collective agreements have risen by less than prices, while wage earners, particularly those with children, are also facing enormous housing costs due to extremely high policy interest rates. Interest payments for many households have doubled during the term of the collective agreements, and no one increases their purchasing power under such circumstances except debt-free property owners. Inflation is fundamentally a domestically created problem rooted in mismanagement of housing policy and excessive increases in prices, tariffs and fees. Domestic inflation must be tackled decisively to create the conditions for a concerted effort when external shocks occur.
The authorities and companies have neglected their obligations under the collective agreements, and for months VR has warned about where things are heading and called for action. Those calls have gone unanswered; on the contrary, both tariffs and fees and prices have continued to rise in recent months, unemployment has increased, and everything indicates that inflation will rise rather than fall.
Source: VR