news’s economic commentator Cecilie Langum Becker writes on news Ytring on 29 November that your wage growth can keep rents up. The claim is based on a lack of insight into how we negotiate wages in Norway, and the consequences this has for inflation and economic policy. It is crucial to clear up such misconceptions. If we lose this wage formation, we are really in a bad place. One of Langum Becker’s premises is that wage growth is one of the “heaviest forces” that contribute to price growth still being high. Where did news’s economic commentator get this from? Wage formation in Norway is what keeps interest rates low, and this is something that the governor of the central bank and a unanimous Holden committee attach great importance to clarifying. It is beyond any doubt that the rise in prices in Norway is due to international conditions. This price rise enters Norway through two channels – through increased import prices and increased export prices. While the rise in import prices means increased costs for Norway, the rise in export prices means increased income. The money is in Norway, but Langum Becker seems to think that it should not go to the employees. We strongly disagree with Langum Becker there. The salary settlement in 2022 illustrates the consequence of her recommendations. While the workers in industry received a 3.7 per cent wage increase, the white-collar workers with a large amount of bonus agreements took out 5 per cent and the managers in industry received 10 per cent. When Langum Becker tries to explain the connection between wage growth and price growth, she has three causal explanations: Demand pressure, expectations of inflation and cost-driven price growth. The first two show a lack of understanding of how the Norwegian economy works, and the challenges we face. The third is correct, but the consequences for politics are poorly understood. Demand pressure is described by Langum Becker as follows: “With more money available, consumers can spend more, which increases the demand for goods and services and can drive up prices.” My question to Langum Becker is then: How many Norwegians have experienced in recent months that they have more money at their disposal? And that they can therefore consume more than before? We must remind you that there has been a decline in real wages in Norway for the past seven years. There is no increased demand that drives up prices, there is no rush hour in Norway. People struggle. Expectations of inflation are described as follows: “Workers will demand higher wages to compensate for the expected price increase, and businesses will continue to raise prices.” No, Langum Becker. This is not true. This is not how salary negotiations work in Norway. The employees have organized themselves and negotiate collectively based on the earning capacity of the industrial companies. Research on Norwegian data provides strong support for wage formation preventing price and inflationary spirals in Norway. Although Langum Becker may not read this research, it has been clearly communicated over the past year and a half. We do not disagree with a cost-driven price increase. On the contrary, it is the entire explanation for the price increase, so let’s concentrate on which policy should be pursued against this. Things are going very well in the parts of Norwegian business that compete with foreign countries, partly because of increased global prices and a weakened krone exchange rate. This means that there is a high earning capacity in the companies, and the trade union movement has thus demanded its share of the surplus. The frame in the front subject was 5.2 per cent. It is lower than price growth – so real wages have not increased, cf. what I have written about wage and price spirals above. But it is clear that increased labor costs translate into increased prices in many companies, and this is one of the explanations for the rise in prices in 2023. But there is just as much money coming from increased export prices. The front subject model has been developed to avoid this leading to a further wage and price spiral. High profits in the companies lead to high wage demands, and thus increased costs for the companies that do not have profitability from the international price rise. But as long as the other two mechanisms are not allowed to play out; demand pressure and expectations, then price inflation will not continue to increase. This is a fairly unique, but also fragile system, which is completely dependent on all parties involved understanding the mechanisms and adapting. In industry, we now see that profits have increased much more than labor costs. This means that workers have borne the burden of expensive time and increased interest rates, while capital takes the income. If we do as news’s commentator recommends and refrain from demanding that the employees share in the increased export prices, it will become an inequality machine of all dimensions. Langum Becker pretends that this is in the best interests of most people. It is a big misunderstanding. If enough people agree to Langum Becker’s premise, the result will be that the high-paid in Norway will continue to increase their wealth and purchasing power. While the rest of the population will have to bear the burden of increased electricity prices, increased commodity prices and increased interest rates. Interest rate increases hit our members particularly hard – on top of increased electricity prices and expensive time. It is challenging to keep the team together, and now we are experiencing that Norges Bank is helping to make it even more difficult. Interest rate increases are a further burden on our shoulders – we are expected to lead a responsible settlement at the same time as our members report a large drop in purchasing power. We are afraid that this could undermine the employees’ will for coordinated wage negotiations. And we cannot have it so that economic policy contributes to this. Also read the comment:
ttn-69
news’s economic commentator misses – Statement
