Launamótun

Launamótun is an Icelandic term that translates to "wage indexation" or "wage indexing." It refers to a system where wages are automatically adjusted based on changes in a specific price index, typically the consumer price index. This mechanism is designed to protect the purchasing power of wages from inflation. When inflation rises, wages are increased by a corresponding percentage to ensure that workers can still afford the same basket of goods and services.

The concept of launamótun has been a significant factor in Icelandic economic policy and labor relations for many years. Historically, it has been employed as a tool to manage inflation and to ensure a degree of wage stability during periods of economic fluctuation. The implementation and extent of launamótun have often been subjects of negotiation between trade unions and employers' associations, and have also been influenced by government economic policies.

While the intention behind launamótun is to safeguard real wages, its impact on the broader economy is complex. Some argue that it can contribute to a wage-price spiral, where wage increases lead to higher prices, which in turn necessitate further wage increases. Others contend that it provides necessary stability and prevents significant erosion of living standards for workers. The specific design and application of wage indexation systems can vary, and Iceland has seen different approaches to launamótun over time.