Social Policies
#7Key Findings
With good general outcomes, Iceland performs well (rank 7) with regard to social policies. Its score on this measure has declined by 0.2 points since 2014.
After a long period of underfunding, tertiary institutions have received ample new resources. The country’s PISA scores are a source of concern. Students from immigrant families appear to be well served.
Social transfers to households increased sharply during the first year of the pandemic, but have slipped downward since. Poverty levels are low. Substantial increases in housing costs have put particular pressure on young people in Reykjavik. Pension funds have an assets-to-GDP ratio that is very high in cross-OECD comparison.
Public healthcare spending has substantially increased. Paternal and maternal leave is provided, and women’s labor-market participation rates are very high. The share of immigrants in the population has risen substantially over the last decade, and integration success has improved over time.
After a long period of underfunding, tertiary institutions have received ample new resources. The country’s PISA scores are a source of concern. Students from immigrant families appear to be well served.
Social transfers to households increased sharply during the first year of the pandemic, but have slipped downward since. Poverty levels are low. Substantial increases in housing costs have put particular pressure on young people in Reykjavik. Pension funds have an assets-to-GDP ratio that is very high in cross-OECD comparison.
Public healthcare spending has substantially increased. Paternal and maternal leave is provided, and women’s labor-market participation rates are very high. The share of immigrants in the population has risen substantially over the last decade, and integration success has improved over time.
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To what extent does education policy deliver high-quality, equitable and efficient education and training?
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Education policy fully achieves the criteria.
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7
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Education policy largely achieves the criteria.
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4
3
Education policy partially achieves the criteria.
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1
1
Education policy does not achieve the criteria at all.
General government expenditure on education in Iceland amounted in 2018 to 7.6% of GDP compared with 4.9% for the OECD region as a whole and 4.6% for the European Union. These figures include expenditure funded by local, regional and central governments. The composition of education expenditure also matters. In 2018, government expenditure on tertiary education in Iceland amounted to 2.8% of total general government expenditure compared with 2.9% for the OECD and 2.5% for the European Union. This marked a clear improvement from 2016, when government expenditure on tertiary education in Iceland amounted to 20% of total general government expenditure on education compared with 23% for the OECD and 22% for the European Union. In 2018, Iceland spent more than the OECD average on each primary and secondary student, and only slightly less than the OECD average on each tertiary student (OECD). Iceland’s universities are no longer underfunded to the extent they used to be. Iceland caught up.
Municipalities are responsible for primary schools. Upper secondary schools and public universities are run by the central government. The duration of upper secondary education was reduced in 2015 from four years to three so that students now enter university at the age of 19 rather than 20, a sign of increased efficiency.
In recent years, Iceland’s music schools, once the pride of Iceland’s education system due to their unique model of mixed private and public funding, as well as their important contribution to Iceland’s cultural life, continued to fight for their survival, with no end to the struggle in sight.
The OECD has long highlighted the relatively low proportion of Iceland’s labor force with secondary or tertiary level qualifications – a key factor in explaining Iceland’s low productivity, long working hours and high rates of labor force participation. In 2020, 70% of Icelandic 25 to 64 year olds had not attained an upper secondary education compared with 58% for the OECD region on average. Recently revised figures from Statistics Iceland show that Icelanders worked 1,440 hours per year on average in 2020 compared with 1,420 hours on average in Denmark, Finland, Norway and Sweden, and 1,690 hours on average in the OECD. Earlier figures had shown much longer hours of work in Iceland than in the rest of the Nordic region.
Iceland’s low PISA scores, last updated in 2018, have declined since 2000 and are now well below average in the OECD region, and remain a source of concern.
Equity issues arise in education policy only in connection with education in rural areas where high-quality schooling is more difficult to provide to small numbers of pupils of different ages spread over large areas. Pupils from immigrant families appear to be well served.
Citations:
OECD: Education at a Glance 2021, Paris. https://www.oecd-ilibrary.org/education/education-at-a-glance-2021_b35a14e5-en. Accessed 1 February 2022.
OECD: Programme for International Student Assessment – PISA 2018, https://www.oecd.org/pisa/. Accessed 1 February 2022.
OECD: Employment by Education Level 2022, https://data.oecd.org/emp/employment-by-education-level.htm. Accessed 1 February 2022.
OECD: Average annual hours actually worked per worker 2022, https://stats.oecd.org/index.aspx?DataSetCode=ANHRS. Accessed 1 February 2022.
World Bank, World Development Indicators (2022).
Municipalities are responsible for primary schools. Upper secondary schools and public universities are run by the central government. The duration of upper secondary education was reduced in 2015 from four years to three so that students now enter university at the age of 19 rather than 20, a sign of increased efficiency.
In recent years, Iceland’s music schools, once the pride of Iceland’s education system due to their unique model of mixed private and public funding, as well as their important contribution to Iceland’s cultural life, continued to fight for their survival, with no end to the struggle in sight.
The OECD has long highlighted the relatively low proportion of Iceland’s labor force with secondary or tertiary level qualifications – a key factor in explaining Iceland’s low productivity, long working hours and high rates of labor force participation. In 2020, 70% of Icelandic 25 to 64 year olds had not attained an upper secondary education compared with 58% for the OECD region on average. Recently revised figures from Statistics Iceland show that Icelanders worked 1,440 hours per year on average in 2020 compared with 1,420 hours on average in Denmark, Finland, Norway and Sweden, and 1,690 hours on average in the OECD. Earlier figures had shown much longer hours of work in Iceland than in the rest of the Nordic region.
Iceland’s low PISA scores, last updated in 2018, have declined since 2000 and are now well below average in the OECD region, and remain a source of concern.
Equity issues arise in education policy only in connection with education in rural areas where high-quality schooling is more difficult to provide to small numbers of pupils of different ages spread over large areas. Pupils from immigrant families appear to be well served.
Citations:
OECD: Education at a Glance 2021, Paris. https://www.oecd-ilibrary.org/education/education-at-a-glance-2021_b35a14e5-en. Accessed 1 February 2022.
OECD: Programme for International Student Assessment – PISA 2018, https://www.oecd.org/pisa/. Accessed 1 February 2022.
OECD: Employment by Education Level 2022, https://data.oecd.org/emp/employment-by-education-level.htm. Accessed 1 February 2022.
OECD: Average annual hours actually worked per worker 2022, https://stats.oecd.org/index.aspx?DataSetCode=ANHRS. Accessed 1 February 2022.
World Bank, World Development Indicators (2022).
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To what extent does social policy prevent exclusion and decoupling from society?
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Policies very effectively enable societal inclusion and ensure equal opportunities.
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For the most part, policies enable societal inclusion effectively and ensure equal opportunities.
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3
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3
For the most part, policies fail to prevent societal exclusion effectively and ensure equal opportunities.
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1
1
Policies exacerbate unequal opportunities and exclusion from society.
From 1995 to 2008, as described in earlier reports, income inequality in Icelandic society increased dramatically, driven by a regressive tax policy and a rapid increase in capital income. After the crash of 2008, the tax system was made more progressive by levying the smallest tax increases on the lowest income groups. The Gini index for total disposable income in Iceland, including capital gains, rose by one point a year from 1995 onward until the crash of 2008, an unprecedented development (Gylfason, 2015, based on data from Internal Revenue Directorate; Ólafsson and Kristjánsson, 2013). According to the World Inequality Database, the distribution of wealth became significantly more skewed after the 2008 crash. In particular, the top 1% share of net personal wealth in Iceland rose from 22% in 2004 to 28% in 2008 and then fell again to 23% during 2015–2021. The huge amount of hidden household financial wealth in tax havens, equivalent to 10% of world GDP in 2008 according to Zucman (2015), casts doubt on official estimates of income and wealth inequality.
Social transfers from the government to households rose from 1% of GDP in 2008, the year of the financial crash, to 1.6% of GDP in 2011 (Statistics Iceland). Thereafter, social transfers to households were cut in stages to 0.7% of GDP during 2017–2019. In 2020, social transfers to households increased again to 0.9% of GDP, as part of the government’s countermeasures against the fallout from the COVID-19 pandemic, and then reduced again to 0.8% of GDP in 2021 and 0.7% of GDP in the government budget for 2022, presented in autumn 2021.
After the 2008 crash, many families were dependent on food aid offered by volunteer organizations, a phenomenon not seen in Iceland for decades. Even so, Iceland performs quite well in international poverty comparisons, suggesting that social policies after the economic crisis were reasonably successful. For some households, however, the economic situation remains difficult but is gradually improving. In the past, young Icelanders could take housing for granted. However, house prices and rents have become unaffordable for many because residential construction in the Reykjavík area has not kept up with demand and the tremendous influx of tourists has led to a substantial increase in rents as well as to the conversion of family dwellings to rental units for tourists. An ongoing effort by the city authorities in Reykjavík to build more housing is intended to remedy this situation by lowering house prices and rent costs over the coming years. Even so, rising interest rates are bound to increase housing costs in 2022 and beyond, which comes on top of rapid increases in real estate prices attributed to a lack of new residential housing being constructed and a housing bubble.
Citations:
Internal Revenue Directorate (2016), http://www.rsk.is/. Accessed 1 February 2022.
Government State Budget for 2022, https://www.stjornarradid.is/library/01–Frettatengt—myndir-og-skrar/FJR/Fj%C3%A1rlagafrumvarp%20fyrir%20%C3%A1ri%C3%B0%202022.pdf. Accessed 1 February 2022.
OECD website, http://www.oecd.org/els/soc/income-distribution-database.htm. Accessed 1 February 2022.
Ólafsson, Stefán, and Arnaldur Sölvi Kristjánsson (2013), “Income Inequality in Boom and Bust: A Tale from Iceland’s Bubble Economy,” in Gornick, Janet C., and Markus Jäntti (eds.), Income Inequality Economic Disparities and the Middle Class in Affluent Countries, Stanford University Press, Palo Alto, 416-438.
Ólafsson, Stefán, and Arnaldur Sölvi Kristjánsson, Inequality in Iceland, University of Iceland Press, Reykjavík, 2017.
Gylfason, Thorvaldur (2015), “Social Capital, Inequality, and Economic Crisis,” Challenge, July.
Statistics Iceland (2015), Gini index, quintile share ratio and At-risk-of-poverty threshold 2004-2015.
Statistics Iceland (2022), Social transfers to households, https://px.hagstofa.is/pxis/pxweb/is/Efnahagur/Efnahagur__fjaropinber__fjarmal_rikissjods/THJ05243.px/table/tableViewLayout1/?rxid=e5dfe07a-0f50-45cd-8c0b-dba30eafede8. Accessed 1 February 2022.
Statistics Iceland. Dreifing ráðstöfunartekna sveiflast milli ára. https://hagstofa.is/utgafur/frettasafn/laun-og-tekjur/gini-studull-og-lagtekjumork-2018/Accessed 11. January 2022.
Zucman, Gabriel (2015), The Hidden Wealth of Nations: The Scourge of Tax Havens. Chicago and London, England: University of Chicago Press.
Word Inequality Database (2022), https://wid.world/world/#shweal_p99p100_z/FR;DE;GB;WO;IS/last/eu/k/p/yearly/s/false/14.2735/60/curve/false/country. Accessed 1 February 2022.
Social transfers from the government to households rose from 1% of GDP in 2008, the year of the financial crash, to 1.6% of GDP in 2011 (Statistics Iceland). Thereafter, social transfers to households were cut in stages to 0.7% of GDP during 2017–2019. In 2020, social transfers to households increased again to 0.9% of GDP, as part of the government’s countermeasures against the fallout from the COVID-19 pandemic, and then reduced again to 0.8% of GDP in 2021 and 0.7% of GDP in the government budget for 2022, presented in autumn 2021.
After the 2008 crash, many families were dependent on food aid offered by volunteer organizations, a phenomenon not seen in Iceland for decades. Even so, Iceland performs quite well in international poverty comparisons, suggesting that social policies after the economic crisis were reasonably successful. For some households, however, the economic situation remains difficult but is gradually improving. In the past, young Icelanders could take housing for granted. However, house prices and rents have become unaffordable for many because residential construction in the Reykjavík area has not kept up with demand and the tremendous influx of tourists has led to a substantial increase in rents as well as to the conversion of family dwellings to rental units for tourists. An ongoing effort by the city authorities in Reykjavík to build more housing is intended to remedy this situation by lowering house prices and rent costs over the coming years. Even so, rising interest rates are bound to increase housing costs in 2022 and beyond, which comes on top of rapid increases in real estate prices attributed to a lack of new residential housing being constructed and a housing bubble.
Citations:
Internal Revenue Directorate (2016), http://www.rsk.is/. Accessed 1 February 2022.
Government State Budget for 2022, https://www.stjornarradid.is/library/01–Frettatengt—myndir-og-skrar/FJR/Fj%C3%A1rlagafrumvarp%20fyrir%20%C3%A1ri%C3%B0%202022.pdf. Accessed 1 February 2022.
OECD website, http://www.oecd.org/els/soc/income-distribution-database.htm. Accessed 1 February 2022.
Ólafsson, Stefán, and Arnaldur Sölvi Kristjánsson (2013), “Income Inequality in Boom and Bust: A Tale from Iceland’s Bubble Economy,” in Gornick, Janet C., and Markus Jäntti (eds.), Income Inequality Economic Disparities and the Middle Class in Affluent Countries, Stanford University Press, Palo Alto, 416-438.
Ólafsson, Stefán, and Arnaldur Sölvi Kristjánsson, Inequality in Iceland, University of Iceland Press, Reykjavík, 2017.
Gylfason, Thorvaldur (2015), “Social Capital, Inequality, and Economic Crisis,” Challenge, July.
Statistics Iceland (2015), Gini index, quintile share ratio and At-risk-of-poverty threshold 2004-2015.
Statistics Iceland (2022), Social transfers to households, https://px.hagstofa.is/pxis/pxweb/is/Efnahagur/Efnahagur__fjaropinber__fjarmal_rikissjods/THJ05243.px/table/tableViewLayout1/?rxid=e5dfe07a-0f50-45cd-8c0b-dba30eafede8. Accessed 1 February 2022.
Statistics Iceland. Dreifing ráðstöfunartekna sveiflast milli ára. https://hagstofa.is/utgafur/frettasafn/laun-og-tekjur/gini-studull-og-lagtekjumork-2018/Accessed 11. January 2022.
Zucman, Gabriel (2015), The Hidden Wealth of Nations: The Scourge of Tax Havens. Chicago and London, England: University of Chicago Press.
Word Inequality Database (2022), https://wid.world/world/#shweal_p99p100_z/FR;DE;GB;WO;IS/last/eu/k/p/yearly/s/false/14.2735/60/curve/false/country. Accessed 1 February 2022.
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To what extent do health care policies provide high-quality, inclusive and cost-efficient health care?
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Health care policy achieves the criteria fully.
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7
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Health care policy achieves the criteria largely.
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Health care policy achieves the criteria partly.
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1
Health care policy does not achieve the criteria at all.
While the healthcare system in Iceland is efficient and of a high quality, there is considerable variation across regions. For example, healthcare services in Reykjavík and its surroundings as well as the northern city of Akureyri are much better than in more peripheral areas where patients have to travel long distances to access specialized services. After the 2008 economic collapse, substantial cutbacks for a number of regional hospitals were introduced, and various departments and centralized specialized care facilities were closed. In addition, smaller regional hospitals and healthcare centers have consistently faced serious problems in recruiting doctors.
The University Hospital in Reykjavík (Landspítalinn Háskólasjúkrahús), by far the largest hospital in Iceland, has for several years been in a difficult financial situation. There is limited political support for easing the situation by allowing the hospital to independently raise funds through, for example, patient service fees similar to those charged by private clinics. The resulting shortage of nursing and other medical staff increased the work pressures on existing staff, including their hours of work. Despite these difficulties, 79% of Gallup respondents expressed trust in the healthcare system in early 2021, almost one year into the pandemic.
The healthcare system is a top priority for the general public. In 2016, a third of the electorate signed a record-breaking petition challenging the government to devote 11% of GDP to healthcare provision, up from 8% of GDP. The government responded by increasing public healthcare expenditure to 10% of GDP. A considerable amount of money has also been granted to renovating old buildings around Reykjavík University Hospital over the last decade, an ongoing project.
Opinions remain sharply divided among political parties as to whether partial privatization of hospital services would be desirable.
Life expectancy in 2019 was 83 years, the 18th highest in the world, up from 73 years in 1960 when life expectancy in Iceland was second only to that of Norway (World Bank, 2021). Even so, life expectancy in 2019 was about three to four months less than in 2012, a seven-year stagnation that has not been recorded previously in Iceland. Twice before, a four-year stagnation had followed an adverse economic shock: in 1967 – 1971, following the collapse of herring fishing; and, in 1984 – 1988, following a government clampdown on double-digit inflation with the restoration of positive real interest rates through the introduction of financial indexation.
As in education policy, equity issues concerning access to and provision of healthcare are mostly related to regional differences. Stiff political opposition to increased private enterprise in healthcare provision – opposition to the partial Americanization of Iceland’s essentially European model of healthcare – stems mostly from concerns about equal access. Even so, the share of private clinics in healthcare provision continues to rise.
Citations:
World Bank (2021), World Development Indicators. https://data.worldbank.org/indicator/SP.DYN.LE00.IN?view=chart.
Assessed 11 January 2022.
Gallup (2022), Traust til stofnana (Trust in institutions), https://www.gallup.is/nidurstodur/thjodarpuls/traust-til-stofnana/. Accessed 1 February 2022.
The University Hospital in Reykjavík (Landspítalinn Háskólasjúkrahús), by far the largest hospital in Iceland, has for several years been in a difficult financial situation. There is limited political support for easing the situation by allowing the hospital to independently raise funds through, for example, patient service fees similar to those charged by private clinics. The resulting shortage of nursing and other medical staff increased the work pressures on existing staff, including their hours of work. Despite these difficulties, 79% of Gallup respondents expressed trust in the healthcare system in early 2021, almost one year into the pandemic.
The healthcare system is a top priority for the general public. In 2016, a third of the electorate signed a record-breaking petition challenging the government to devote 11% of GDP to healthcare provision, up from 8% of GDP. The government responded by increasing public healthcare expenditure to 10% of GDP. A considerable amount of money has also been granted to renovating old buildings around Reykjavík University Hospital over the last decade, an ongoing project.
Opinions remain sharply divided among political parties as to whether partial privatization of hospital services would be desirable.
Life expectancy in 2019 was 83 years, the 18th highest in the world, up from 73 years in 1960 when life expectancy in Iceland was second only to that of Norway (World Bank, 2021). Even so, life expectancy in 2019 was about three to four months less than in 2012, a seven-year stagnation that has not been recorded previously in Iceland. Twice before, a four-year stagnation had followed an adverse economic shock: in 1967 – 1971, following the collapse of herring fishing; and, in 1984 – 1988, following a government clampdown on double-digit inflation with the restoration of positive real interest rates through the introduction of financial indexation.
As in education policy, equity issues concerning access to and provision of healthcare are mostly related to regional differences. Stiff political opposition to increased private enterprise in healthcare provision – opposition to the partial Americanization of Iceland’s essentially European model of healthcare – stems mostly from concerns about equal access. Even so, the share of private clinics in healthcare provision continues to rise.
Citations:
World Bank (2021), World Development Indicators. https://data.worldbank.org/indicator/SP.DYN.LE00.IN?view=chart.
Assessed 11 January 2022.
Gallup (2022), Traust til stofnana (Trust in institutions), https://www.gallup.is/nidurstodur/thjodarpuls/traust-til-stofnana/. Accessed 1 February 2022.
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To what extent do family support policies enable women to combine parenting with participation in the labor market?
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Family support policies effectively enable women to combine parenting with employment.
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Family support policies provide some support for women who want to combine parenting and employment.
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Family support policies provide only few opportunities for women who want to combine parenting and employment.
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Family support policies force most women to opt for either parenting or employment.
Family policy has long supported women’s work outside the home. As a result, Iceland’s rate of female participation in the labor force, at 75% in 2020, has long been among the highest in the world. For comparison, the average labor force participation rate for women in the OECD region as well as in the European Union in 2020 was 51%. For further comparison, Iceland’s rate of male participation in the labor force was 83% in 2020 compared with 68% in the OECD region on average and 63% in the European Union. Accordingly, the male-female differential is smaller in Iceland than in most other countries. Family policy has also encouraged a more equitable distribution of the burden of child rearing between genders. Parental leave and kindergartens contribute to this situation. Parental leave is 12 months for a child, six months per parent of which six weeks are transferable. Most children are offered places at kindergartens, which are professionally run by the municipalities.
Citations:
Gender Equality in Iceland 2017. The Center for Gender Equality (Jafnréttisstofa).
Hreinsdóttir, A. M. (2019). Styrkleikar leikskólastigsins á Íslandi: Vangaveltur um skýrslu Eurydice fyrir árið 2019. https://skolathraedir.is/2019/09/10/styrkleikar-leikskolastigsins-a-islandi-vangaveltur-um-skyrslu-eurydice-fyrir-arid-2019/.
World Bank, World Development Report (2022), https://data.worldbank.org/indicator/SL.TLF.CACT.FE.NE.ZS. Accessed 1 February 2022.
https://vinnumalastofnun.is/faedingarorlofssjodur/starfsmadur/rettur-til-faedingarorlofs
Citations:
Gender Equality in Iceland 2017. The Center for Gender Equality (Jafnréttisstofa).
Hreinsdóttir, A. M. (2019). Styrkleikar leikskólastigsins á Íslandi: Vangaveltur um skýrslu Eurydice fyrir árið 2019. https://skolathraedir.is/2019/09/10/styrkleikar-leikskolastigsins-a-islandi-vangaveltur-um-skyrslu-eurydice-fyrir-arid-2019/.
World Bank, World Development Report (2022), https://data.worldbank.org/indicator/SL.TLF.CACT.FE.NE.ZS. Accessed 1 February 2022.
https://vinnumalastofnun.is/faedingarorlofssjodur/starfsmadur/rettur-til-faedingarorlofs
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To what extent does pension policy realize goals of poverty prevention, intergenerational equity and fiscal sustainability?
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Pension policy achieves the objectives fully.
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Pension policy achieves the objectives largely.
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Pension policy achieves the objectives partly.
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1
Pension policy does not achieve the objectives at all.
Iceland’s pension system is a fully funded one rather than pay-as-you-go. Pension policy is based on a tax-financed, means-tested social security program supported by tax incentives to encourage participation in occupational pension funds and voluntary savings schemes. The pension funds, which are based on employee contributions of 4% of total wages and employer contributions of 8%, are designed to provide a pension equivalent to 56% of an individual’s average working-life wage. In addition, employees can opt to pay a further 4%, with a further employer contribution of 2%, into a voluntary savings program. There is a large number of pension funds, currently 27, down from 50 in 1997. Pension funds’ average annual returns on investments range from 1.2% to 6.2% in real terms (i.e., adjusted for inflation). Under the period of post-crash capital controls 2009 – 2017, pension funds, which before the 2008 crash had gradually increased their foreign holdings, were confined to domestic placements.
In the past, Iceland’s pension policy appeared both conducive to poverty prevention and fiscally sustainable. However, Iceland’s pension funds experienced heavy losses as their investments in, among others, equities in Iceland’s banks depreciated substantially following the collapse of the banking system in 2008. These losses, which totaled about a third of GDP, caused most pension funds to reduce their payments to members and further reduced the living standards of pensioners. The pension funds have recovered since 2008 and once more have an overall assets-to-GDP ratio that is among the highest in the OECD region. In 2020, total assets in retirement savings plans in Iceland amounted to 207% of GDP, up from 125% in 2010. At 52% of pre-retirement earnings, in 2020, the gross pension replacement rate for men in Iceland was equal to the OECD average.
Two main issues confront the pension system. First, the Pension Fund of State Employees, the largest pension fund, has a huge funding gap that will have to be financed through future tax revenue. Second, given that pension funds have previously been used to fund social programs, as if supporting the government is more important than safeguarding the interests of retirees, there is a persistent danger that the government will seek to claim access to the funds to support its aims in a time of need.
In 2017, two major changes were made to the system. In March 2017, as part of the relaxation of capital controls, the central bank swept away restrictions on pension funds’ investments in foreign markets, which had been imposed following the 2008 financial collapse. The 2016 – 2017 government reached an agreement with the trade unions of state employees on their pension rights. The rights of those employees in the A-section of the Pension Fund of State Employees were changed from equal to age-related. At the same time, the state pension age was increased from 65 to 67 years.
Citations:
Ísleifsson, Ólafur (2012),“Vulnerability of pension fund balances,” Stjórnmál og stjórnsýsla, Vol. 8, No 2., 543-564.
Lifeyrismal.is Upplýsingavefur um lífeyrismál. https://www.lifeyrismal.is/is/frettir/breytingar-a-lifeyrissjodakerfi-opinberra-starfsmanna-taka-gildi-i-dag. Accessed 22 December 2018.
OECD Data: Gross pension replacement rates (2020), https://data.oecd.org/pension/gross-pension-replacement-rates.htm#indicator-chart. Accessed 2 February 2022.
OECD: Global Pension Statistics (2022), https://www.oecd.org/finance/private-pensions/globalpensionstatistics.htm. Accessed 2 February 2022.
In the past, Iceland’s pension policy appeared both conducive to poverty prevention and fiscally sustainable. However, Iceland’s pension funds experienced heavy losses as their investments in, among others, equities in Iceland’s banks depreciated substantially following the collapse of the banking system in 2008. These losses, which totaled about a third of GDP, caused most pension funds to reduce their payments to members and further reduced the living standards of pensioners. The pension funds have recovered since 2008 and once more have an overall assets-to-GDP ratio that is among the highest in the OECD region. In 2020, total assets in retirement savings plans in Iceland amounted to 207% of GDP, up from 125% in 2010. At 52% of pre-retirement earnings, in 2020, the gross pension replacement rate for men in Iceland was equal to the OECD average.
Two main issues confront the pension system. First, the Pension Fund of State Employees, the largest pension fund, has a huge funding gap that will have to be financed through future tax revenue. Second, given that pension funds have previously been used to fund social programs, as if supporting the government is more important than safeguarding the interests of retirees, there is a persistent danger that the government will seek to claim access to the funds to support its aims in a time of need.
In 2017, two major changes were made to the system. In March 2017, as part of the relaxation of capital controls, the central bank swept away restrictions on pension funds’ investments in foreign markets, which had been imposed following the 2008 financial collapse. The 2016 – 2017 government reached an agreement with the trade unions of state employees on their pension rights. The rights of those employees in the A-section of the Pension Fund of State Employees were changed from equal to age-related. At the same time, the state pension age was increased from 65 to 67 years.
Citations:
Ísleifsson, Ólafur (2012),“Vulnerability of pension fund balances,” Stjórnmál og stjórnsýsla, Vol. 8, No 2., 543-564.
Lifeyrismal.is Upplýsingavefur um lífeyrismál. https://www.lifeyrismal.is/is/frettir/breytingar-a-lifeyrissjodakerfi-opinberra-starfsmanna-taka-gildi-i-dag. Accessed 22 December 2018.
OECD Data: Gross pension replacement rates (2020), https://data.oecd.org/pension/gross-pension-replacement-rates.htm#indicator-chart. Accessed 2 February 2022.
OECD: Global Pension Statistics (2022), https://www.oecd.org/finance/private-pensions/globalpensionstatistics.htm. Accessed 2 February 2022.
Graph View
How effectively do policies support the integration of migrants into society?
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Cultural, education and social policies effectively support the integration of migrants into society.
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Cultural, education and social policies seek to integrate migrants into society, but have failed to do so effectively.
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Cultural, education and social policies do not focus on integrating migrants into society.
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1
Cultural, education and social policies segregate migrant communities from the majority society.
Civil rights legislation for immigrants follows the Danish and Norwegian models, which also reflects Iceland’s obligations under the European Economic Area (EEA) agreement. Separate legislation for immigrants from EEA/EU countries and non-EEA/EU countries makes it difficult for citizens outside the EEA to move to Iceland. Legislation for non-EEA/EU countries focuses on the need for foreign labor and restricts non-EEA/EU migrants to temporary work permits. Authorities provide instruction in the Icelandic language for foreign nationals. Nationals from other Nordic countries with three years’ consecutive residency in Iceland are eligible to vote in local elections, while for other foreign national’s eligibility follows five years of consecutive residency. The right to vote in parliamentary elections presupposes Icelandic citizenship.
The center Alþjóðasetur in Reykjavík provides interpretation and translation services to immigrants. The Directorate of Immigration (Útlendingastofnun) – a division within the Ministry of Interior whose mandate includes processing residence permits, visas and citizenship applications – has repeatedly been criticized for expelling foreign nationals on weak grounds. The Directorate of Labor (Vinnumálastofnun) reaches out to foreigners by, for example, providing important information in English on its website. The Directorate of Labor is also responsible for running the European Employment Services office in Iceland.
The number of immigrants in Iceland reached 15% of the total population in 2020, up from 8% in 2012. By November 2021, the Directorate of Immigration had accepted fewer than 600 applications for asylum for 2021, about a quarter of the applications received.
In 2020, the University of Akureyri published the results of a big research project on the inclusion of immigrants in Iceland. The project presented evidence that the integration of immigrants into Icelandic society had improved. While the situation remains imperfect, the results were better than expected overall (see Gunnþórsdóttir et al. 2020; and Guðmundsson and Eythórsson 2020).
Citations:
Guðmundsson B. and Eythórsson G. T. (2020). Félagsleg og pólitísk þátttaka innflytjenda á Íslandi. in: Meckl M. and Gunnþórsdóttir H. (2020): Samfélaga Fjölbreytileikans. Samskipti heimamanna og innflytjenda á Íslandi. Háskólinn á Akureyri 2020.
Gunnþórsdóttir H., Ragnarsdóttir H., Aradóttir L. R. and Viðarsdóttir K. N. (2020). Viðbrögð sveitarfélaga á Íslandi við vaxandi fjölda nemenda af erlendum uppruna. in: Meckl M. and Gunnþórsdóttir H. (2020): Samfélaga Fjölbreytileikans. Samskipti heimamanna og innflytjenda á Íslandi. Háskólinn á Akureyri 2020.
Lög um kosningar til sveitarstjórna nr. 5, 1998 (Law on local government elections no. 5 1998).
Útlendingastofnun (Directorate of Immigration, 2022), https://utl.is. Accessed 1 February 2022.
Wojtynska, A., Skaptadóttir, U. D., and Ólafs, H. (2011), The participation of immigrants in civil society and labor market in the economic recession, University of Iceland, Faculty of Social and Human Sciences.
The center Alþjóðasetur in Reykjavík provides interpretation and translation services to immigrants. The Directorate of Immigration (Útlendingastofnun) – a division within the Ministry of Interior whose mandate includes processing residence permits, visas and citizenship applications – has repeatedly been criticized for expelling foreign nationals on weak grounds. The Directorate of Labor (Vinnumálastofnun) reaches out to foreigners by, for example, providing important information in English on its website. The Directorate of Labor is also responsible for running the European Employment Services office in Iceland.
The number of immigrants in Iceland reached 15% of the total population in 2020, up from 8% in 2012. By November 2021, the Directorate of Immigration had accepted fewer than 600 applications for asylum for 2021, about a quarter of the applications received.
In 2020, the University of Akureyri published the results of a big research project on the inclusion of immigrants in Iceland. The project presented evidence that the integration of immigrants into Icelandic society had improved. While the situation remains imperfect, the results were better than expected overall (see Gunnþórsdóttir et al. 2020; and Guðmundsson and Eythórsson 2020).
Citations:
Guðmundsson B. and Eythórsson G. T. (2020). Félagsleg og pólitísk þátttaka innflytjenda á Íslandi. in: Meckl M. and Gunnþórsdóttir H. (2020): Samfélaga Fjölbreytileikans. Samskipti heimamanna og innflytjenda á Íslandi. Háskólinn á Akureyri 2020.
Gunnþórsdóttir H., Ragnarsdóttir H., Aradóttir L. R. and Viðarsdóttir K. N. (2020). Viðbrögð sveitarfélaga á Íslandi við vaxandi fjölda nemenda af erlendum uppruna. in: Meckl M. and Gunnþórsdóttir H. (2020): Samfélaga Fjölbreytileikans. Samskipti heimamanna og innflytjenda á Íslandi. Háskólinn á Akureyri 2020.
Lög um kosningar til sveitarstjórna nr. 5, 1998 (Law on local government elections no. 5 1998).
Útlendingastofnun (Directorate of Immigration, 2022), https://utl.is. Accessed 1 February 2022.
Wojtynska, A., Skaptadóttir, U. D., and Ólafs, H. (2011), The participation of immigrants in civil society and labor market in the economic recession, University of Iceland, Faculty of Social and Human Sciences.
Graph View
How effectively does internal security policy protect citizens against security risks?
10
9
9
Internal security policy protects citizens against security risks very effectively.
8
7
6
7
6
Internal security policy protects citizens against security risks more or less effectively.
5
4
3
4
3
Internal security policy does not effectively protect citizens against security risks.
2
1
1
Internal security policy exacerbates the security risks.
Iceland has always been a secure place to live, with relatively few assaults, burglaries, or other crimes. However, some changes have occurred since the 2008 economic collapse. The government in office before and during the 2008 crash was undermined by a series of protests, which – though largely peaceful – did lead to clashes between protesters and riot police in early 2009. While these events led only to minor injuries and some 20 arrests, they were the first serious riots since the protests against a parliamentary decision to enroll Iceland in NATO in 1949. The main policing priority has been Iceland’s internal security. The police force has for a long time suffered from a manpower shortage, exacerbated by low pay. Even so, in 2021, 72% of Gallup respondents expressed confidence in the police.
Drug smuggling and drug use been on the rise for several years. This trend reflects a related increase in the prevalence of violent attacks by individuals under the influence of alcohol or other drugs, especially on weekends. Organized foreign gangs are considered responsible for the repeated waves of burglaries.
In recent years, Iceland has seen about one murder per year per 100,000 inhabitants, a similar rate as in the European Union on average, and better than the four to five murders per 100,000 inhabitants in the OECD region (although the OECD region includes the United States with nearly six murders per 100,000 inhabitants per year). Iceland’s prison population, at 29 per 100,000 inhabitants, is the lowest in the OECD region, lower even than Japan with 37 per 100,000 inhabitants.
Citations:
Interview with criminologist Helgi Gunnlaugsson in visir.is 6th January 2018. https://www.visir.is/g/2018180109266.
WHO (2022), Estimates of Homicides, https://www.who.int/data/gho/data/indicators/indicator-details/GHO/estimates-of-rates-of-homicides-per-100-000-population.
World Prison Brief (2022), Prison Population Rate, https://www.prisonstudies.org/highest-to-lowest/prison_population_rate?field_region_taxonomy_tid=All. Accessed 1 February 2022.
Gallup (2022), Traust til stofnana (Trust in Institutions), https://www.gallup.is/nidurstodur/thjodarpuls/traust-til-stofnana/. Accessed 2 February 2022.
Drug smuggling and drug use been on the rise for several years. This trend reflects a related increase in the prevalence of violent attacks by individuals under the influence of alcohol or other drugs, especially on weekends. Organized foreign gangs are considered responsible for the repeated waves of burglaries.
In recent years, Iceland has seen about one murder per year per 100,000 inhabitants, a similar rate as in the European Union on average, and better than the four to five murders per 100,000 inhabitants in the OECD region (although the OECD region includes the United States with nearly six murders per 100,000 inhabitants per year). Iceland’s prison population, at 29 per 100,000 inhabitants, is the lowest in the OECD region, lower even than Japan with 37 per 100,000 inhabitants.
Citations:
Interview with criminologist Helgi Gunnlaugsson in visir.is 6th January 2018. https://www.visir.is/g/2018180109266.
WHO (2022), Estimates of Homicides, https://www.who.int/data/gho/data/indicators/indicator-details/GHO/estimates-of-rates-of-homicides-per-100-000-population.
World Prison Brief (2022), Prison Population Rate, https://www.prisonstudies.org/highest-to-lowest/prison_population_rate?field_region_taxonomy_tid=All. Accessed 1 February 2022.
Gallup (2022), Traust til stofnana (Trust in Institutions), https://www.gallup.is/nidurstodur/thjodarpuls/traust-til-stofnana/. Accessed 2 February 2022.
Graph View
To what extent does the government demonstrate an active and coherent commitment to promoting equal socioeconomic opportunities in low- and middle-income countries?
10
9
9
The government actively and coherently engages in international efforts to promote equal socioeconomic opportunities in low- and middle-income countries. It frequently demonstrates initiative and responsibility, and acts as an agenda-setter.
8
7
6
7
6
The government actively engages in international efforts to promote equal socioeconomic opportunities in low- and middle-income countries. However, some of its measures or policies lack coherence.
5
4
3
4
3
The government shows limited engagement in international efforts to promote equal socioeconomic opportunities in low- and middle-income countries. Many of its measures or policies lack coherence.
2
1
1
The government does not contribute (and often undermines) efforts to promote equal socioeconomic opportunities in low- and middle-income countries.
Iceland joined the United Nations in 1946.
The Icelandic International Development Agency (Þróunarsamvinnustofnun Íslands, IIDA) is a public institution associated with the Foreign Ministry, established in 1981. Its mandate is to cooperate with and assist developing countries. IIDA has reduced the number of countries in which it ran projects (bilateral cooperation) from six to three: Malawi, Mozambique, and Uganda. Further, the IIDA is involved in a regional project on geothermal power in East-Africa. In late 2015, the IIDA was incorporated into the Ministry of Foreign Affairs.
Among the earlier six recipient countries was Namibia, where Icelandic experts provided valuable help with the development of the Namibian fishing sector until 2010. In 2019, Wikileaks revelations indicated that Samherji, Iceland’s largest fishing firm, paid huge bribes to Namibian ministers, among others, to secure fishing quotas. The scandal led to the immediate arrest of two Namibian ministers and four other Namibian individuals who have since been held in custody. At the time of writing, the case is still under investigation.
In 2020, Iceland’s contribution to development aid amounted to 0.2% of GDP (Statistics Iceland), unchanged from 2008 and thus still well below the UN target of 0.7%. The government set a goal of 0.35% of GDP for 2022, but budgeted 0.3%. In 2013, parliament resolved to meet the UN target, but has so far failed to implement this resolution.
In 2013, Iceland joined the OECD’s Development Cooperation Directorate.
Apart from its rather limited development assistance, Iceland has not undertaken any specific initiatives to promote social inclusion in the context of global frameworks or international trade.
Citations:
Ministry of Foreign Affairs, Development Cooperation (Þróunarsamvinna). https://www.stjornarradid.is/verkefni/utanrikismal/throunarsamvinna/. Accessed 22 December 2018.
OECD ilibrary (2022), https://www.oecd-ilibrary.org/sites/fd3d1d29-en/index.html?itemId=%2fcontent%2fcomponent%2f5e331623-en&_csp_=b14d4f60505d057b456dd1730d8fcea3&itemIGO=oecd&itemContentType=chapter.
Accessed 12 January 2022.
Statistics Iceland (2022), https://px.hagstofa.is/pxis/pxweb/is/Efnahagur/Efnahagur__fjaropinber__fjarmal_rikissjods/THJ05242.px/table/tableViewLayout1/?rxid=be4adaab-bbd7-427b-b16d-f1c4a088b4a1. Accessed 2 February 2022.
The Icelandic International Development Agency (Þróunarsamvinnustofnun Íslands, IIDA) is a public institution associated with the Foreign Ministry, established in 1981. Its mandate is to cooperate with and assist developing countries. IIDA has reduced the number of countries in which it ran projects (bilateral cooperation) from six to three: Malawi, Mozambique, and Uganda. Further, the IIDA is involved in a regional project on geothermal power in East-Africa. In late 2015, the IIDA was incorporated into the Ministry of Foreign Affairs.
Among the earlier six recipient countries was Namibia, where Icelandic experts provided valuable help with the development of the Namibian fishing sector until 2010. In 2019, Wikileaks revelations indicated that Samherji, Iceland’s largest fishing firm, paid huge bribes to Namibian ministers, among others, to secure fishing quotas. The scandal led to the immediate arrest of two Namibian ministers and four other Namibian individuals who have since been held in custody. At the time of writing, the case is still under investigation.
In 2020, Iceland’s contribution to development aid amounted to 0.2% of GDP (Statistics Iceland), unchanged from 2008 and thus still well below the UN target of 0.7%. The government set a goal of 0.35% of GDP for 2022, but budgeted 0.3%. In 2013, parliament resolved to meet the UN target, but has so far failed to implement this resolution.
In 2013, Iceland joined the OECD’s Development Cooperation Directorate.
Apart from its rather limited development assistance, Iceland has not undertaken any specific initiatives to promote social inclusion in the context of global frameworks or international trade.
Citations:
Ministry of Foreign Affairs, Development Cooperation (Þróunarsamvinna). https://www.stjornarradid.is/verkefni/utanrikismal/throunarsamvinna/. Accessed 22 December 2018.
OECD ilibrary (2022), https://www.oecd-ilibrary.org/sites/fd3d1d29-en/index.html?itemId=%2fcontent%2fcomponent%2f5e331623-en&_csp_=b14d4f60505d057b456dd1730d8fcea3&itemIGO=oecd&itemContentType=chapter.
Accessed 12 January 2022.
Statistics Iceland (2022), https://px.hagstofa.is/pxis/pxweb/is/Efnahagur/Efnahagur__fjaropinber__fjarmal_rikissjods/THJ05242.px/table/tableViewLayout1/?rxid=be4adaab-bbd7-427b-b16d-f1c4a088b4a1. Accessed 2 February 2022.