NFU Blog

Wage-setting and the future of the Nordic model

One of the advantages with my job is that it tends to take me to occasions where I meet people who really discuss the big questions. Recently I was in Oslo for a seminar arranged by the Council of Nordic Trade Unions (NFS). It was a seminar where wage-setting and the big trade-union questions related to that was elaborated on. Questions we cannot ignore if we intend to keep and develop the Nordic wage-setting models.

For example, how to increase the wage share in a global context – so wages for the people can increase? Wages is the engine of the economy through consumption, and works to guarantee peoples’ living standard. Trade unions have of course an important role to play to increase wages. An interesting fact in relation to this was mentioned at the seminar, namely that through globalization the workforce supply is larger than ever and almost infinite. And research shows that employers can press wages when the labour supply is large. So we would like wages to go up, but employers has the tool to keep them down.

This is indeed not an easy equation to solve, but I guess we need to work cross-border to ensure that countries and companies do not compete with low wages, and thereby support a “wage race-to-the-bottom”. It is quite a task, but if trade unions do not take the lead in this, who will? And if we cannot solve it, and wages starts to go down – what then happens to the legitimacy of the Nordic wage-setting model? Indeed a big question that the seminar brought up.

Another question that came up was how to create a broad and stable consensus that the gap between those who earn the most and those who earn the least is not too big? Put differently, how can we increase the support for redistribution policies?

This can be linked to a hot topic in the financial sectors. Some of the biggest banks have excessive return on equity targets of 15 percent, and huge bonuses and CEO wages are paid. A point that was made in the seminar was that when the wage differences between different socio-economic groups constantly increases, then wage differences becomes more and more accepted. But according to some of the speakers in the seminar it does not stop there. Those who have more will actually strive for even more, since it is the accepted behavior.

If this logic is true, it raises some questions about the financial sectors. We can of course accept that directors and management earns more than a regular employee. But how much more? Where is the moral limit?

Martin Hassel, Policy Officer

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