The labor market
The upcoming general wage negotiations are critical for stability in the economy. In past
years, excessive wage increases have invariably resulted in currency depreciation, inflation
spikes, weakening of the labor market, and sometimes fiscal and external deficits. Recent
wage agreements with physicians in the healthcare sector should not serve as a model for
others. The differential in wages and working conditions between Iceland and neighboring
countries in this field had widened to such an extent that severe brain drain was considered
imminent. Moreover, long-term efficiency gains were an integral part of the agreement.
Although the authorities do not participate directly in the collective wage bargaining process
in the private sector, they will support the process as much as possible, as long the outcome
is consistent with economic stability and growth.