September Sees Slight Uptick in Unemployment Rate

building construction cranes Garðabær

Iceland’s unemployment rate rose from 2.9% in August to 3% in September, according to a new report from the Directorate of Labour. Foreign citizens compose 51% of the unemployed population.

Slight increase from August

In a recent report by the Directorate of Labour, Iceland’s unemployment rate for September was recorded at 3%. This marks an increase from 2.9% in August but is consistent with the figures from May of the same year. For comparison, the rate was slightly higher at 3.2% in September of 2022. The Directorate anticipates that the unemployment rate for October will hover between 2.9% and 3.2%.

The report further details that an average of 5,734 individuals were registered as unemployed in September, comprising 3,175 men and 2,559 women. By the month’s end, the total number of unemployed individuals rose to 6,035.

Unemployment rate highest in Southern Peninsula

Last month, Suðurnes, located on the southernmost side of the Reykjanes peninsula, recorded the highest unemployment rate at 4.2%. This marked an increase from 3.9% in August. Conversely, the Northwestern region of Iceland had the lowest unemployment rate at 0.6%. East Iceland reported an unemployment rate of 1.3%, while West Iceland’s rate stood at 1.7%. In the capital region, the unemployment rate remained steady at 3.3%, unchanged from the previous month.

Over 1,000 out of work for more than a year

As noted by, by the end of September 2023, 1,159 individuals had been unemployed for over 12 months. This figure represents a decrease of 67 from August. For context, in September 2022, the count stood at 2,046, indicating a year-over-year reduction of 887. Additionally, 1,469 individuals had been unemployed for a duration of 6-12 months in September 2023, a slight drop from 1,566 in September 2022.

The report highlights that the tourism sector experienced the most pronounced increase in unemployment compared to the previous month.

Foreign citizens overrepresented

The report also finds that there were 3,056 foreign citizens who were unemployed at the end of September, which is an increase of 160 from August. The proportion of foreign nationals on the unemployment register was about 51% by the end of September.

An assistant professor of economics at Reykjavík University recently maintained that the overrepresentation of foreign citizens in unemployment figures suggested that foreign citizens in Iceland faced additional obstacles when it came to finding work.

One Year On: 800 Ukrainians Granted Work Permits in Iceland

Ukrainian President Volodymyr Zelenskyy

Over 800 Ukrainian refugees have received work permits in Iceland since the Russian invasion of Ukraine began last year, an article on the government’s website notes. Today marks one year since the start of the war in Ukraine.

Ukrainians entered the labour market successfully

The Icelandic government has successfully helped Ukrainian refugees integrate into the labour market, according to the Ministry of Social Affairs and Labor. Over the past year, nearly 2,600 Ukrainian refugees have been welcomed to Iceland, with around 1,900 between the ages of 18 and 67, as reported on the government’s website.

“Based on the number of work permits issued, it can be assumed that more than 42% of refugees have already secured employment. However, it is important to note that some have only recently arrived and require time to settle before finding work,” the press release reads.

The first refugees arrived in Iceland from Ukraine in February of last year, with over 500 people fleeing the country in the following month. Since then, approximately 200 Ukrainian refugees have arrived in Iceland each month, with residency permits granted on humanitarian grounds.

“Hard workers” who’ve been well received

The majority of work permits issued for Ukrainian refugees in Iceland are for jobs in cleaning and laundry, as well as various service roles in homes and restaurants. Some have also secured employment in the construction and fishing industries.

“We see that most people from Ukraine who come to us want to enter the labour market as soon as possible and that they put a lot of effort into finding a job. Many of them are willing to accept whatever’s available, despite their high level of education and work experience. They report feeling welcomed, safe, and positively received in Iceland,” Guðlaug Hrönn Pétursdóttir, head of the refugee department at the Directorate of Labour, which provides special services (including Icelandic lessons) to refugees who are looking for employment.

Employers in Iceland have expressed satisfaction with Ukrainian workers, who are known to work hard. In 2022, the Directorate of Labour provided community education to 395 Ukrainians and Icelandic lessons to 419 refugees.

Municipalities Struggle to Provide Housing, Employment for Refugees

Three municipalities are struggling to provide adequate services, housing, and job opportunities to recently arrived refugees as the number of individuals far exceeds initial agreements. RÚV reports that only three municipalities—Reykjavík, Hafnarfjörður, and Reykjanesbær—currently have arrangements with the government to receive and provide for refugees, although it’s hoped that more municipalities will soon participate in resettling schemes.

Reykjanesbær and Hafnarfjörður are particularly struggling to provide for the number of refugees now living in their municipalities. There are currently 243 refugees living in Reykjanesbær, where the original agreement was for 70. Meanwhile, 270 refugees currently live in in Hafnarfjörður, which only expected to receive 100. Reykjavík agreed to receive and provide for 220 refugees but is currently home to 356.

The Directorate of Labour took over service provisions for refugees on July 1. It now provides housing, a weekly allowance, necessary healthcare, and transportation for recently arrived refugees. Gísli Davíð Karlsson, the Directorate’s Manager of the Department of General Services, says the transfer of refugee services went off without any major problems. But even so, once these individuals have had their applications for asylum approved, they may face waits of up to eight weeks to complete the resettlement process with the Directorate of Labour. And Gísli Davíð says the general lack of housing is causing considerable delays and problems.

“The housing situation is difficult, and we’ve really felt it,” said Gísli Davíð. “Yes, we managed to sort out housing this spring when there was an increase, but the housing market has become a lot more difficult in terms of possible housing for these groups of people because not all accommodations are suitable. Now the challenge—for local municipalities, too—is what housing is available? Where can we accommodate people through the winter? I wouldn’t say we’re bursting at the seams yet, but there’s a decent strain on the system.”

The Directorate of Labour has a ‘Support for Refugees’ page on its website (in English), where it provides information both for refugees themselves regarding recruitment grants, job counselling, and education, as well as for local employers who are looking to hire refugees. Those with available work opportunities are encouraged to email the Directorate at flottamenn[at]

Directorate of Labour Aims to Tackle Long-Term Unemployment

Westman Islands fish processing plant

“It’s very difficult mentally and physically to be unemployed for a long time, especially mentally, all studies show that,” Unnur Sverrisdóttir, Director of the Directorate of Labour, stated in a radio interview on Rás 2 this morning. “That’s why we will focus on that group this winter, to try to help those who we think are maybe at risk of leaving the job market for good. There’s a lot to be gained by helping people.”

When the pandemic left many locals unemployed in Iceland last year, The Directorate of Labour hired around 100 new employees to respond to the increased strain on services. While unemployment rates have dropped significantly since the height of the crisis, Unnur says it’s now important to focus on those who haven’t managed to find new jobs or perhaps don’t foresee finding work again.

“We have a very good group of study and career counsellors who get in touch with these people and offer them interviews and all sorts of courses that people get the opportunity to attend in order to get off the ground. Because everyone that is [receiving unemployment benefits] is coming from the labour market, they have earned the right to unemployment benefits through work, so we know that these were once people who were able to work.”

The Directorate of Labour reported an unemployment rate of 5.5% in August, a decrease from 6.1% in July. The rate has almost halved since April of this year when it measured 10.4%.

Unemployment Among Immigrants Dropped by One Third

Reykjavík restaurant workers

Unemployment among foreign citizens in Iceland has decreased by one-third over the past two months, RÚV reports. Around 3,300 from the demographic have left the unemployment register so far this year. Foreign residents of Iceland have had higher rates of unemployment than Icelandic nationals throughout the pandemic and have been overrepresented on the unemployment register in recent years.

Unemployment among foreign nationals rose rapidly at the start of the COVID-19 pandemic last year. At the beginning of 2021, almost 9,000 immigrants were out of work and the number had more than doubled over the past 12 months. In June, however, that number had dropped to 5,700, according to figures from the Directorate of Labour.

Gundega Jaunlinina, chairperson of the Youth Association in the Icelandic Confederation of Labour (ASÍ), says it is often more difficult for unemployed foreigners to find work than for Icelanders. “Because people may not be as active in their job search and don’t know exactly where they should look and employers are unfortunately less likely to hire foreign workers,” she stated.

While Iceland’s tourism industry has been bouncing back in recent months and hundreds have been hired at workplaces like Keflavík Airport, hotels, and tour companies, Gundega says some foreign workers have also found work abroad, either in their country of origin or somewhere else.

Biggest Drop in Unemployment in Two Decades

Tourists iceland Fjallsárlón glacier lagoon

Unemployment in Iceland dropped from 10.4% to 9.1% between April and May of this year, the largest month-to-month decrease in the country since 1994. The number of people on the unemployment register has decreased by around 2,400 during the same period. The biggest decrease in unemployment was measured in tourism-related sectors, where unemployment decreased between 18 and 20 per cent. Vísir reported first.

While tourism showed the most change, unemployment decreased across all sectors between April and May, faster than projected. Minister of Social Affairs Ásmundur Einar Daðason expressed his satisfaction with the development, pointing to the government’s employment initiative “Hefjum störf!” that aimed to create at least 7,000 jobs through financial support to both private and public institutions that hired new employees. Around 10,400 jobs are now available through the initiative.

Ásmundur Einar added that the goal is to create even more jobs in the coming months in partnership with the business community. According to the Directorate of Labour’s projections, unemployment is expected to fall to 7.3-7.7% in June, which would mean the number of people on the unemployment register would drop from 20,000 in April to 14,000 by the end of this month.

Unemployment Rates Drop as Tourism Industry Recovers

Flight attendants WOW air Icelandair

The Directorate of Labour has stripped over 350 people of their unemployment benefits between March and May of this year for turning down job offers without sufficient reason, RÚV reports. Icelandic employers have stated it has been difficult to fill positions, even when hiring from among unemployed people, implying that some unemployed people are not interested in working. Economists state that there are other reasons it’s hard to get people back to work as the pandemic winds down and the economy starts back up again.

Job market bouncing back

Complaints from employers in tourism having trouble finding staff have garnered attention, with some implying that individuals receiving unemployment benefits prefer not to work. In April, the general unemployment rate stood at 10.4%, with 20,003 people seeking jobs. Of those, 6,495 had been without employment for more than 12 months.

According to the government’s Let’s get to work campaign website, most of the jobs available through the campaign are in accommodation and tourism, government institutions, retail, and the restaurant industry. Almost 8,500 positions are available and already, at least 2,350 have been filled. The number of positions filled could be even higher as it takes a while for a job seeker finding employment to be fully registered within the Directorate of Labour’s system.

350 stripped of employment benefits

The Labour Director told RÚV that for the three-month period between March and May, the period of the government’s Let’s get to work campaign, just over 350 job seekers had been stripped of benefits for rejecting job offers without explanation or for not meeting activity requirements. They also stated that a similar number of people had been under investigation but it turned out that in most cases, the job seekers in question had already found work or had other valid reasons for turning down job offers. RÚV also inquired how many times employers had notified the Directorate of job offer rejections but those numbers are not available. The Directorate of Labour encourages employers to notify the Directorate if job seekers turn down jobs without valid explanations.

If a job seeker turns down a job without providing a valid explanation, they can lose their benefits for two months. If it happens again, they lose their benefits for three months and if it happens for a third time they lose their right to unemployment benefits altogether. They can reclaim that right after working a full-time job for 24 months.

Unlikely that benefits are too high

The director of the Icelandic Travel Industry Association Jóhannes Þór Skúlason stated in a Kastljós interview that tourism companies had difficulty hiring people from unemployment lists. Hotel and car rental owners have also stated that they’re having difficulties hiring despite high unemployment rates. The new director of BHM Union Friðrik Jónsson stated yesterday that any such discussions should be based on fact, not conjectures. All talk of unemployment benefits being too high, and unemployed people being the problem, couldn’t be supported with logic or statistics. Strætó, the public transportation company, has stated that they have had no trouble filling empty positions, suggesting that job seekers see tourism as an uncertain industry right now and are looking for jobs they believe are more stable.

While employers have complained that it’s hard to get people to work, implying that people are choosing not to work and live off benefits instead, the Landsbankinn economy department has stated that income loss due to unemployment was considerable, even for low-income workers, and that it was unlikely that unemployment benefits kept people from accepting job offers. The more likely reason was that people didn’t have faith that the pandemic was over.

Considerable loss of income

The latest economic report by the Landsbankinn economic department states that regular unemployment benefits are around 55% of average income in Iceland, or ISK 307,000 ($2,550/€2,090). The maximum amount of income-linked unemployment benefits is ISK 475,000 ($3,940/€3,240), about 70% of an average income. For people with higher income, benefits they are eligible for constitute an even lower percentage of their salary. The report points out that all over the world, employers are finding it hard to fill positions created by increasing demand as the pandemic winds down. In Iceland, such positions are mostly low-income jobs in the tourism sector.

“It is estimated that around 30 million fewer people are employed in the richer part of the world than before the pandemic. Such a situation comes with a lot of waste, not just in lost income but also in declining health, skills, and pride within the workforce. It can’t be ruled out that people’s fear of the pandemic plays a part. If so, we can assume that interest in jobs will increase as more and more people are vaccinated and the pandemic winds down.”

Icelandair Lays Off 88

Keflavík airport Icelandair

Icelandair laid of 88 employees yesterday, and the dismissals take effect tomorrow, October 1, RÚV reports. Most of the staff, or 68, are pilots. Over 180 have lost their jobs due to group layoffs this month. The Directorate of Labour’s preliminary figures show unemployment was as high as 10% in September.

As of tomorrow, Icelandair will have just 71 pilots on its roster. The layoffs came as a surprise to pilots, stated chairman of the Icelandic Airline Pilots Association Jón Þór Þorvaldsson. The company had just raised funding in a successful public stock offering, in which many of them participated. Jón pointed out that Icelandair will need to train pilots to fly the new Boeing MAX planes that it is expected to receive in the coming months. In his opinion, it would have been more constructive to use the coming period for training.

Unnur Sverrisdóttir of the Directorate of Labour stated six different companies resorted to group layoffs this month. “Five announcements came from the tourism industry. In total 155 who lost their jobs there. And then there is one group layoff in the construction industry.” All of the companies are based in the capital area or on the nearby Suðurnes peninsula, where Keflavík airport is located.

Over 20,000 Apply for Benefits Due to Reduced Employment


Over 20,000 Icelandic residents have applied to the Directorate of Labour for benefits due to reduced employment ratio, RÚV reports. An additional 5,000 have applied for standard unemployment benefits. The Icelandic government has promised to temporarily pay up to 75% of salaries for businesses that reduce their employees’ hours in response to the coronavirus pandemic in order to encourage them to retain staff.

Benefits paid out by April 7

More than half of those who have applied for benefits from the Directorate of Labour have been reduced to a 25% employment ratio, says Unnur Sverrisdóttir, its director. Applications continue to stream in, mostly from those employed in the tourism industry. “These are a vast amount in passenger transportation and all kinds of transportation of people both in the air and on land and these are hotels, hostels, car rental agencies, and restaurants and just all these services that are connected to tourism,” Unnur stated.

Due to the sheer number of applications, it is not possible for the Directorate of Labour to pay out all benefits by April 1, but Unnur says the plan is to do so by April 7.

Hundreds laid off nevertheless

Around 4,500 people have lost their jobs in Iceland this month, and must therefore apply for standard unemployment benefits. Unnur says it is difficult to predict how many more will be laid off in the coming weeks.

Despite government measures intended to preserve jobs, some large employers have resorted to layoffs in addition to reducing staff’s employment ratio. Icelandair has laid off 240 employees, the Blue Lagoon has laid off 164, and airport services company Isavia has laid off 101. All three companies have reduced the working hours of all or most of their remaining staff.

All three companies have a high proportion of employees based in Reykjanesbær, Southwest Iceland, which has in recent years experienced a higher unemployment rate than anywhere else in the country. That rate has now spiked to 14%.

The town’s mayor Kjartan Már Kjartansson says the rates may be higher than following the 2008 banking collapse, but the town is ready to take on the challenge. He points out, however, that the town has experienced rapid population growth in recent years and calls on the government to allocate funding to its institutions in accordance with the number of residents. “We’re talking about the Suðurnes Hospital and Health Centre, we’re talking about the police, junior college, transport and more. Because population growth has been, as has often been stated, extremely rapid here in recent years. And government agencies have not received funding that is in line with population growth.”

Three to Four Hundred WOW Staff Still Unemployed

Flight attendants WOW air Icelandair

Three to four hundred former WOW air staff are still unemployed over six months after the airline declared bankruptcy, according to the Directorate of Labour. The company’s employees, numbering around 1,100, all lost their jobs when the airline went bankrupt in March this year. Unemployment numbers are higher than the directorate had predicted.

“They’ve been decreasing slowly and steadily but maybe not as quickly as we hoped,” stated Unnur Sverrisdóttir, the director of the organisation, in an interview with RÚV. “There are still about three to four hundred left and the biggest group are flight attendants.”

Unnur says WOW’s former staff that remains unemployed is generally well educated. If plans to found two new airlines prove successful, that could provide needed jobs. Many pilots who were employed by WOW have, however, already found work abroad.

Unemployment rates are higher this year than projected. An unemployment rate of 4% is expected in December, though it is projected to lower in March of next year. The number is uncharacteristically high for Iceland, and Unnur says she hopes to see improvements next spring.