TBU at 50: Wage formation – the Norwegian model’s unique attribute

The Norwegian Technical Calculation Committee for Wage Settlements (TBU) discusses the “real financial situation” and identifies the room for manoeuvre ahead of wage negotiations, in light of competitiveness and a just division of incomes.

“For me, the Technical Calculation Committee represents the core of the Norwegian model,” Minister of Labour and Social Inclusion Anniken Hauglie said in her speech at the TBU’s 50th anniversary.

“I can’t imagine what it would be like to negotiate if we disagreed on the facts,” the Director General of the Norwegian Confederation of Norwegian Enterprise told the Nordic Labour Journal.

“TBU has clearly played a very important role when it comes to creating a shared understanding of finance policies,” summed up Øystein Olsen, Governor of the Central Bank of Norway.

The Ministry of Labour and Social Affairs has asked Eivind Thomassen and Lars Fredrik Øksendal to write the history about the TBU. The book’s title is ‘Model builders. The Technical Calculation Committee for Wage Settlements 1967 – 2017’. 

Lars Fredrik Øksendal and Eivind Thomassen

In their conclusion, the historians describe the mandate and how this has been followed up over the years:

‘The Technical Calculation Committee for Wage Settlements’ task is to gather the best possible background knowledge before wage negotiations, and present this in a way which will minimise any disagreement between the social partners on “the real situation”. This has been central to the mandate since the beginning in 1967 until today.’

The authors have ‘not assessed “the real situation”, but studied what kind of reality the Technical Calculation Committee has tried to create agreement on, and the effect this understanding of reality has had on the attempts to coordinate wage formation in Norway between 1967 and 2017.’

‘The model of understanding which has been the basis for the Committee’s work, has been expressed through the hovedkursteorien (the main course theory). Hovedkursteorien considers the wage negotiations to be a balancing act between the need for a just division of incomes and the need for maintaining competitiveness, or stability in the foreign economy,’ the authors write, and ‘…that the members of the Technical Calculation Committee have had considerable seniority within their respective institutions and have contributed to creating trust in the reports and the model for understanding.'

Prepares ground for responsible wage settlement

“It has been important for the social partners and the society as a whole to have a committee with professional gravitas which prepares the ground for Norway’s wage negotiations, so that the partners do not need to spend much time to discuss facts when they approach the wage negotiations,” the Minister for Labour and Social Inclusion Anniken Hauglie told the Nordic Labour Journal.

“This is of course important for me as government minister, because it prepares the ground for good wage negotiations and a responsible wage settlement.”

Facts you can trust

The Director General of the Norwegian Confederation of Norwegian Enterprise, Kristin Skogen Lund, says Norwegian businesses agree.

“The Technical Calculation Committee is crucial, because it secures our joint understanding of reality and our agreement on what constitutes the facts. This is a very important step on the road to arriving at the actual wage agreement.”

She believes what has been learned from the TBU can be useful to others too.

“I think there is much to learn here, because the TBU works extraordinarily well. We have very good facts which we can trust and which allows us to make very good estimates. I believe it allowed us to adjust the course very rapidly when we saw the fall in oil prices.

“We have had moderate and conflict-free wage negotiations in recent years, and I believe this is proof that the model works, and that the social partners prove themselves to be responsible.”

A coordinated wage formation

“The Committee’s role is linked to the coordination of wage formation which we have had in Norway,” says Øystein Olsen, Governor of the Central Bank of Norway and head of the TBU between 2005 and 2010.

 Øystein Olsen, Governor of the Central Bank of Norway and former head of the TBU

“So the key word is coordination of the wage formation, but the partners must take responsibility for the actual coordination. The TBU is a committee of experts that provides the facts which everything is built upon, and there are many considerations that must be taken into account in order to arrive at a joint model for understanding,” he says, and continues: 

“If you jointly agree on the basic facts, you have brought the social partners a lot closer to coordinating the wage formation while focusing on the issues which are important in a small and open economy like Norway’s. That is one way of describing the Committee’s role."  

The Committee follows the hovedkursteorien, what does this entail?

“This basically says that Norway is a small and open economy, and since we compete in an international marketplace, foreign cost developments will have strong effects – which to a certain extent should determine what kind of cost development and wage development we should expect at home. That is the brief version.

“Another important aspect is the division of wages. Because here too there is the belief that in order for a small country like Norway to be sufficiently competitive, we also need to be prepared for a just distribution across social groups and between labour and capital.”

Øystein Olsen headed the committee between 2005 and 2010, and is in no doubt about its importance. Since 2000, Professor Steinar Holden at the University of Oslo has led three committees looking at the coordinated wage formation. He also underlines the important role the TBU has played and continues to play in the wage formation.

“The TBU helps coordinate the wage formation. The fact that the Committee establishes a joint understanding of the situation based on professional arguments, helps create trust between people and organisations.

“Coordination is also important in order to make the economy more adaptable to shocks, like the one we saw when oil prices fell in 2014.

“Coordination probably leads to increased investments and higher productivity and better solutions in the labour market, and it builds trust. Trust is a symptom of the fact that there is a reason to have trust,” argues Holden.

Steinar Holden also notes that Norway is not alone when it comes to having coordinated wage formation. Sweden and Denmark, for instance, have a frontfagsmodell similar to the one you find in Norway. This model allows competitive industries to negotiate first, and the result then forms the norm for the general wage growth. Denmark has a statistics committee which is similar to the TBU. Sweden has a slightly different model. The Swedish National Mediation Office is in charge of wage statistics, while the social partners are responsible for describing the financial situation.

A necessary expansion

The Technical Calculation Committee creates a joint understanding of the basic facts. It is then up to the social partners to negotiate wage and labour conditions. The frontfag industries go first. That means competitive industries negotiate first and create a norm for coming negotiations.

Since the beginning in 1967, the social partners comprised the Norwegian Employers’ Confederation (N.A.F.), later the Norwegian Confederation of Business (NHO) on the one side, and the Norwegian Trade Union Confederation (LO) on the employees’ side. From 2000 all the main employers’ and employees’ organisations were included.

Before 2000, changes in the labour market and the big occupational groups which had emerged were not included in debates on the Norwegian economy and the room for manoeuvre the social partners had agreed should create a framework for the coming wage negotiations. This irritated those who were kept outside.

This was also because the white-collar groups in the industry which were supposed to be setting the norm, got pay rises far outside of the framework for industry worker wages. This made it meaningless for higher educated employees in the public sector to keep within the agreed framework for the wage settlement covering industry workers. As a result, the framework for the wage settlement would also include industry white-collar workers, and the Technical Calculation Committee was expanded. Øystein Olsen’s view of that expansion:

“If the frontfag sectors are to negotiate first and safeguard the discipline in relation to foreign competition, and if this should be the industry – and even narrower – the industry worker, this is turning into a small group, which is not representative of Norway’s workers. Over time, of course, if white-collar groups start sliding in local negotiations, this puts pressure on the model. This has been an important reason for expanding the Committee and to welcome other groups into the fold. The Committee has also increasingly focused on women’s versus men’s wages.”

The author’s view

‘The continuity in this model is unique for Norway,’ write historians Eivind Thomassen and Lars Fredrik Øksendal in the book they have called The Model Builders.

Why Model Builders?

“It reflects the fact that one of the central questions we try to answer is whether the Calculation Committee has contributed to maintain certain model characteristics of Norway’s coordinated wage formation, primarily expressed through the frontfagsmodellen. Since we do not put a question mark in the title, we indicate that the Committee more or less has contributed in this manner,” Lars Fredrik Øksendal tells the Nordic Labour Journal.

What level of support does the model enjoy today?

“It is probably stronger than ever. Widening the frontfag term to include industry white-collar workers has been important for creating legitimacy within organisations which have been outside of the traditional LO/NHO symbiosis. The 15 good years preceding the oil price drop, with historically strong real term wage increases for broad groups of people, no doubt reduced friction and increased support for the model."

What challenges lie ahead?

“In the short term I think the Calculation Committee and coordinated wage formation stand strong. In the longer term there could be considerable challenges. One thing is a fall in union membership combined with structural changes in a labour market where much of the growth will probably come in the private sector service industry. Another thing is the fact that in the coming years there will probably not be room for the kind of real term wage increases we got used to between 2000 and 2014. With less cake to share, there will probably be more friction and both employee and employer groups will see incentives to take a more opportunistic approach.”