How Norway's weak krone could affect your wages this year
The effects of Norway's struggling krone have been felt across everyday life in the country. Ahead of wage negotiations between unions and employers, the future strength of the currency could impact salary rises.
Norway's krone has plummeted against other major currencies in recent years, impacting everything from inflation to interest rates as a result.
For some sectors of Norwegian industry, the weaker krone has actually been good news. This is because Norwegian exports have become cheaper and, therefore, more attractive.
Norwegian exports becoming more attractive has resulted in a healthier balance sheet for many companies in Norway.
In the coming weeks, unions will lock into negotiations with employer organisations to negotiate this year's collective bargaining agreement.
Pay and rights in Norway are governed by collective agreements (tariffavtaler), which typically have a duration of two years.
READ MORE: What is a Norwegian collective bargaining agreement?
Every alternate year, employers and unions engage in renegotiations of the entire collective agreement, known as the main settlement (hovedoppgjøret).
This year's talks are centred on a main settlement. Ahead of talks, unions have said they want to secure a real wage increase this year. This is where wages rise more than inflation.
Unions have already said there is a willingness to strike among members if favourable terms aren't secured.
The Confederation of Norwegian Enterprise (NHO) is one of the largest parties representing employers at the negotiating table.
One of its three principles heading into negotiations is to secure businesses and jobs. For this to happen, any wage rises must ensure that Norwegian industry remains competitive.
A fluctuating krone would threaten Norwegian competitiveness if wage increases are too high.
"In order to secure businesses and jobs, wage developments must safeguard the industry's competitiveness. The krone exchange rate has been shown to vary a lot, and the wage supplements that are given now must also be able to withstand if the krone were to strengthen," the NHO's negotiation principles read.
It has also pushed for flexibility in negotiating a reasonable portion of the wage increase at a local level to protect businesses and industries that are struggling.
"There is still a lot of tension in the team. Many companies are doing well, while others are struggling. It underlines the importance of a good balance between central and local negotiations that provide opportunities for adaptations to the individual company's financial situation," CEO of the NHO, Ole Erik Almlid, said in a press release.
How likely is it that the Norwegian krone strengthens significantly?
The Local recently spoke to Dane Cekov, a currency strategist at Nordea. The currency expert told The Local that there were signs that the krone was starting to stabilise.
"For now, it would seem that the krone exchange rate against the euro and US dollar appears to be stabilising. Still, a lot can happen this year… Since the New Year, it has been pretty much stable, from 11.2 kroner against the euro to trading for roughly 11.4 in the last few months," Cekov said.
"So yes, I think, if nothing crazy happens this year, it should trade around here for a while. But overall, we expect it to end up closer to 11 than 12 kroner against the euro at the end of the year," Cekov said.
However, external factors, like inflation in the US could lead to a further fluctuation for the Norwegian krone.
READ MORE: What's next for Norway's weak krone?
Comments
See Also
Norway's krone has plummeted against other major currencies in recent years, impacting everything from inflation to interest rates as a result.
For some sectors of Norwegian industry, the weaker krone has actually been good news. This is because Norwegian exports have become cheaper and, therefore, more attractive.
Norwegian exports becoming more attractive has resulted in a healthier balance sheet for many companies in Norway.
In the coming weeks, unions will lock into negotiations with employer organisations to negotiate this year's collective bargaining agreement.
Pay and rights in Norway are governed by collective agreements (tariffavtaler), which typically have a duration of two years.
READ MORE: What is a Norwegian collective bargaining agreement?
Every alternate year, employers and unions engage in renegotiations of the entire collective agreement, known as the main settlement (hovedoppgjøret).
This year's talks are centred on a main settlement. Ahead of talks, unions have said they want to secure a real wage increase this year. This is where wages rise more than inflation.
Unions have already said there is a willingness to strike among members if favourable terms aren't secured.
The Confederation of Norwegian Enterprise (NHO) is one of the largest parties representing employers at the negotiating table.
One of its three principles heading into negotiations is to secure businesses and jobs. For this to happen, any wage rises must ensure that Norwegian industry remains competitive.
A fluctuating krone would threaten Norwegian competitiveness if wage increases are too high.
"In order to secure businesses and jobs, wage developments must safeguard the industry's competitiveness. The krone exchange rate has been shown to vary a lot, and the wage supplements that are given now must also be able to withstand if the krone were to strengthen," the NHO's negotiation principles read.
It has also pushed for flexibility in negotiating a reasonable portion of the wage increase at a local level to protect businesses and industries that are struggling.
"There is still a lot of tension in the team. Many companies are doing well, while others are struggling. It underlines the importance of a good balance between central and local negotiations that provide opportunities for adaptations to the individual company's financial situation," CEO of the NHO, Ole Erik Almlid, said in a press release.
How likely is it that the Norwegian krone strengthens significantly?
The Local recently spoke to Dane Cekov, a currency strategist at Nordea. The currency expert told The Local that there were signs that the krone was starting to stabilise.
"For now, it would seem that the krone exchange rate against the euro and US dollar appears to be stabilising. Still, a lot can happen this year… Since the New Year, it has been pretty much stable, from 11.2 kroner against the euro to trading for roughly 11.4 in the last few months," Cekov said.
"So yes, I think, if nothing crazy happens this year, it should trade around here for a while. But overall, we expect it to end up closer to 11 than 12 kroner against the euro at the end of the year," Cekov said.
However, external factors, like inflation in the US could lead to a further fluctuation for the Norwegian krone.
READ MORE: What's next for Norway's weak krone?
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.