The Labour marketShort overview of the labour market
The population of Iceland numbers 320 169 (1 October 2008), 50% men and 50% women. The Icelandic nation is one of the youngest in Europe - with an average age of around 36 years and 74% of the population being under fifty. The Icelandic labour market is characterised by a high participation rate (around 84% of all able-bodied individuals in the 16-74 year age bracket).
The most important sectors in Iceland are production industries such as agriculture and fishing, miscellaneous industries and services such as travel, financial and health services. The relative importance of these sectors has changed somewhat recently - the importance of service industries, for example, has increased considerably in recent years while fishing and other production industries have declined.
35% of employees work in jobs that require a university education or other specialised knowledge. Office and commercial workers number around 26%, tradesmen 13%, and 12% are unskilled workers. Farmers and fishermen number around 5%. Another characteristic of the Icelandic labour market is the high proportion of trade union membership, at around 85%.
During most of the last 55 years, the Icelandic labour market has exhibited a considerable excess demand for labour. This is partly explained by the fact that in times of economic difficulty, the solution has been to reduce spending power and decrease the value of the Icelandic króna, whereas countries in the Euro zone have in similar circumstances allowed unemployment to rise.
In 2007 unemployment was 1%, and in May 2008 it was also 1%. There was little difference between genders and regions. Unemployment did increase somewhat during the autumn months and it looks set to increase rapidly over the short term; the number of unemployed was just under 9 000 at the end of 2008, a rate of just under 5%. It is expected to reach somewhere between 7%-9% in 2009.
Considering the massive setback suffered by the Icelandic economy following the collapse of the Icelandic banking system, unemployment figures could easily rise if the operating conditions of the country's companies fail to improve swiftly or if the labour market does not turn out to be as flexible as expected here. It is likely that many companies will have to rationalise their operations over the coming months and that the number of insolvencies will increase greatly. As a result it is likely that the number of jobs will decrease rapidly this autumn and in the year to come. The setback is mitigated by the fact that a large part of the foreign labour force is likely to return home in the near future, and that many people may take the opportunity to extend their education now as employment prospects worsen; there is, however, every likelihood of high unemployment during the next two years.