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Photo: A screenshot from RÚV. Katrín Jakobsdóttir at a press conference, September 29, 2020.

Government Presents Measures to Stabilise Labour Market

In an effort to resolve tension on the labour market, the Icelandic government will implement eight measures intended to support businesses and minimise job losses. Prime Minister Katrín Jakobsdóttir announced the measures in a short press conference shortly before noon today. The Icelandic Confederation of Enterprise (SA) has stated that the terms of its current collective agreement with 30 unions are no longer feasible due to the economic impact of the COVID-19 pandemic.

“I hope that these measures will simultaneously serve the goals of increasing business, protecting jobs, creating jobs, and ensure that we can grow out of this recession, but will also support parties on the labour market in reaching an amicable resolution on the labour market, which is hugely important in these times we are living through,” Katrín stated at the press conference.

The eight measures are expected to cost the government treasury up to ISK 25 billion ($180 million/€154 million). They are:

  1. Extending the ongoing project “Allir vinna,” which provides full reimbursement of VAT, until the end of 2021. This will cost around ISK 8 billion.
  2. Temporarily lowering social security contributions in order to minimise the impact of wage hikes. This will cost around ISK 4 billion.
  3. Financial support for businesses that have experienced a significant drop in revenue, on top of the measures that have already been legislated, such as partial unemployment benefits and loans with state guarantees. Consideration will be given to providing direct subsidies to companies that have suffered a collapse in income due to the COVID-19 pandemic. Such grants could amount to ISK 6 billion.
  4. Implementing tax incentives for investment in green initiatives, as well as encouraging public investment through the purchase of shares.
  5. Increasing emphasis on and investment in innovation and food production.
  6. Implementing improvements in urban planning and construction.
  7. Reforming the pension system and labour market via policy changes to be addressed in the fall term and presented in spring 2021.
  8. Introducing a series of bills in the fall term in support of the “standard of living contract,” including bills on the Wage Act and Rent Act, amendments to bankruptcy proceedings, and changes to interest and indexation.

SA members will vote today and tomorrow on whether to pull out of the three-year collective agreement they signed with 30 unions in April 2019. The agreement affects some 100,000 workers in Iceland, nearly half of the labour force. It remains to be seen whether the newly-announced government measures will influence SA members’ voting.

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