The Icelandic government will raise unemployment benefits, raise child benefits, and pay job seekers a December bonus. These are some of the measures presented by Prime Minister Katrín Jakobsdóttir on November 20 to combat the economic effects of COVID-19. While earlier economic response packages presented by the government were somewhat more geared toward businesses, the measures presented last Friday focused on vulnerable groups, such as those receiving unemployment benefits and their children.
The government will provide active job seekers with a December bonus of ISK 86,853 ($638/€540), paid out by December 15. From January 2021, unemployment benefits will be raised by ISK 10,422 ($77/€65) per month and an additional payment of ISK 7,498 ($55/€47) will be added to address a large group that will no longer be eligible for income-tied benefits.
Child Benefits Increase
Job seekers with children will now receive an additional 6% per child in benefits on top of their basic unemployment payments, as opposed to the 4% they were previously receiving. As for general child benefits for all parents, the cut-off point will be raised, in order to ensure that it follows the development of the lowest wages in the labour market. This change results in an additional ISK 30,000 increase in child benefits per year for single parents with two children (with an income of ISK 350,000-580,000 per month). A family with a combined income of ISK 700-920,000 per month will receive ISK 60,000 higher child benefits next year than otherwise due to the changes.
Grants for Companies and Self-Employed
The reduced employment benefits scheme will be extended until May 31, 2021. Under this scheme, the government pays up to half of each full-time employees’ salary at businesses that have seen a drop in income due to the COVID-19 pandemic. Additional grants have been announced for companies and self-employed individuals that have lost between 60-80% of their income due to the pandemic.
A total of ISK 895 million ($6.6 million/€5.6 million) will be allocated toward vulnerable groups. This funding will be used to strengthen community services, work against social isolation, and other preventative activities. The government will also set up a response team on the financial situation of Icelandic households with representatives from financial institutions, interest groups, and the debtors’ ombudsman.