COVID-19 in Iceland: Government Unveils Further Economic Measures

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.

Vulnerable Groups

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.

Icelandic Music Industry Calls For More COVID-19 Support

Iceland Airwaves 2018

Icelandic musicians and organisations within the local music industry are calling for more support of working musicians, many of whom have lost all their income due to COVID-19 regulations and are not eligible for unemployment benefits due to the independent nature of their work. Supporting technicians, booking agents, and others who work in the industry is also crucial in helping the industry survive the effects of the COVID-19 pandemic.

Singer Sigríður Thorlacius told RÚV musicians have not been able to work due to gathering and social distancing regulations, which have made it near impossible to hold live performances for most of this year. While such regulations remain in place, she says, it’s important for workers in the music industry to be able to access financial support. “We are not demanding to hold concerts while the situation is what it is, because we are all in the middle of it,” Sigríður stated. “What we have maybe been pointing out is that many [of us] have for example not received unemployment benefits, that’s one thing. That it can be arranged so that we can apply for benefits.”

Freelance musicians’ ineligibility for unemployment benefits is one issue covered in a recent report exploring the effects of COVID-19 on Iceland’s music industry. The report also calls for the Icelandic government to review and adapt artists’ salaries and other grants to better support artists during the pandemic.

“One of the things we have emphasised a lot is for some sort of compensation fund to be established and for that we have been looking to Denmark,” explains María Rut Reynisdóttir, one of the report’s editors. Denmark’s has set up a specific fund to compensate musicians who have lost 30% or more of their income due to the pandemic. María added that many musicians work part-time jobs alongside their freelance work in music, and fall outside of many of the government’s response measures.

People on Unemployment May Go Back to School Without Losing Benefits

Háskóli Íslands University of Iceland

People on unemployment will be permitted to enter academic programs without losing their benefits, RÚV reports. This is among the changes to current law being developed by a working group appointed by the Minister for Social Affairs.

Minister for Social Affairs and Children Ásmundur Einar Daðason says that the changes are intended to benefit the long-term unemployed, among others. “People who are long-term unemployed can enter a study program as part of their [re-employment strategy], similar to what was done here after the financial crash. And I’m pinning a lot of hope on this—we’re putting the finishing touches on how it will be implemented and we’ll hopefully be able to introduce it in the coming days,” he explained.

According to a report published by the Directorate of Labour, unemployment at the end of July was at 8.8%. This is a slight improvement over June, if the percentage of people who are receiving both full- and part-time unemployment benefits are considered together. Currently, the number of people on part-time unemployment has gone down, but the number of people on full unemployment benefits has gone up. Taken together, there are currently around 21,000 people on some form of unemployment. Unemployment is expected to remain relatively stable in the coming month, or an anticipated 9% in August.

Unemployment highest in southwest

Broken down, the current data shows that unemployment is highest in the southwest, or 16.5%. It’s also higher among women in the same region: 19% of women versus 15% of men in the southwest are unemployed.

According to Unnur Sverrisdóttir, head of the Directorate of Labour, this gender disparity can be accounted for because a significant number of jobs in the tourism industry are typically staffed by women. “It’s cleaning in hotels, it’s service in restaurants etc, and, of course, it’s also flight crews. You could say that this probably started last year when WOWair went under.”

One out of five foreign nationals unemployed

The directorate’s data also shows that one out of five foreign nationals residing in Iceland is unemployed, or roughly 7,000 people total. The majority of these individuals are Polish, although Lithuanians make up the second-largest group of unemployed foreign workers, followed by Latvians.

“Thought it’s a shame to say, it’s like we’ve said before,” said Unnur. “Foreigners were the first out of the labour market and things have not gone very well for them getting work again.”

Icelandic Students Call for Access to Unemployment Benefits

Háskóli Íslands University of Iceland

The Icelandic government will set aside ISK 2.2 billion ($15 million/€13.9 million) to create 3,400 summer jobs for students in response to the economic impact of the COVID-19 pandemic. The National Union of Icelandic Students has criticised the response as insufficient and called for student access to unemployment benefits.

Iceland’s Minister of Education Lilja Alfreðsdóttir and Minister of Social Affairs Ásmundur Einar Daðason announced the measures intended to support student employment in the coming months. The 3,400 jobs created in government institutions and municipalities will be temporary positions, active between June 1 and August 31. “If it is found that this number of summer jobs and other resources does not reach a sufficient number of students, ways will be sought to create more jobs and/or secure other means of support,” a government notice on the initiative stated.

Students Pay Into Unemployment Funds But Cannot Access Them

The National Union of Iceland Students (LÍS) has released a statement criticising the measures as insufficient, pointing toward recent surveys that showed thousands of students had not yet found summer jobs. “If unemployment among students is actually as high as the [surveys] indicate, this remedy will be short-lived,” the statement reads.

LÍS particularly criticised the fact that since January 1, 2010, Icelandic students have not had access to unemployment benefits, despite paying into the national unemployment insurance fund. According to a Europe-wide study, 87% of students in Iceland work during study breaks and 68% during the lecture period. “A part of people’s salaries are paid into the unemployment insurance fund and the insurance fund for self-employed individuals, including the salaries of students. However, students are not entitled to payments from the fund due to unemployment, even though they have been working and payments flowed into the fund because of their work.”

LÍS has launched a petition calling for the government to ensure students the right to unemployment benefits, which at the time of writing is near to reaching its goal of 2,500 signatures.