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Government actions in support of the Labour Market Living Standards Agreement

  • 45 actions in support of the Living Standards Agreement
  • Scale over the term of the Agreement ISK 80 billion
  • Childbirth leave extended to 12 months
  • In combination, reforms of the income tax system and child benefit payments could increase the disposable income of families of four by up to ISK 411 thousand per year
  • Extensive actions in housing affairs and development of a social housing system
  • Effects of index-linking mitigated and new consumer loans to be based on a price-level index that excludes housing as a factor
  • Targeted actions against social dumping
  • Child care benefits to be increased by 16% and curtailments of child care benefits to low-income households to be reduced, with curtailment thresholds raised from 2018 from 242 thousand to 325 thousand ISK
  • Permission to use 3.5% of pension premiums, tax-free, for the purchase of housing For example, co-habitants with a combined income of ISK 650,000 could elect to use ISK 273,000 annually, free of tax, to buy a home
  • Non-indexed housing loans to be made an option for all income categories
  • Option of using private pensions toward payment of housing loans extended for two years
  • The state and municipalities will promote price stability by limiting tariff increases to 2.5% in 2020, and less if inflation is lower

The government presented its statement relating to the Living Standards Agreement between the social partners. The proposed actions are extensive and contribute to social reforms for the benefit of the public as a whole. Special measures are taken in support of young parents and low-income groups. The actions are the product of consultations between the government and social partners over the past year.

Katrín Jakobsdóttir, Prime Minister: “The government’s actions and the agreements that have been reached in the labour market provide a foundation for a broad consensus and create conditions for social and economic stability for the long term. On the part of the government these actions represent important social reforms, whether with regard to a more equitable tax system, development of a social housing system or extension of childbirth leave; all of the actions will support increased well-being for everyone and greater equality.”

Bjarni Benediktsson, Minister of Finance and Economic Affairs: “The government is in a position to support responsible wage contracts because of the strong position of the Treasury. A reduction in payroll taxes recently passed into law, and now taxes on earned income will be reduced in stages. A new lower tax bracket will be introduced that will secure the greatest benefit, ISK 10,000 per month, to the lowest-income groups in the labour market. This comes in addition to the recently announced tax reduction for the same group. The total impact corresponds to a tax reduction of ISK 20 billion, which amounts to about 10% of the total tax base. This makes it one of the most extensive tax reforms of recent years.”

Sigurdur Ingi Jóhannsson, Minister of Transport and Local Government: “In my opinion a giant step has been taken here today, a step in the direction of a society where conditions for quality of life have been secured for a greater number of people than before. The social partners have concluded a responsible agreement that, in combination with the government's contribution, creates conditions for stability, particularly with regard to the housing market. The concrete actions in the direction of eradicating index-linking are a source of particular satisfaction for the Progressive Party, which has stressed the need to limit the impact of index-linking on the general public to the extent possible.”


Government statement on targeted actions to eliminate price-level indexing

Government support for the Living Standards Agreement


Działania Rządu wspierające Umowę zbiorową przedstawicieli rynku pracy, dotyczącą poprawy warunków życia - The announcement in Polish

Oświadczenie Rządu na temat podjętych kroków w kierunku zniesienia indeksacji

Wsparcie władz wobec Umów zbiorowych mających na celu polepszenie standardu życia społeczeństwa


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