During the 20th century, an extensive social insurance system has emerged in parallel with the Icelandic welfare society. The insurance policies are broadly similar to those in the other Nordic countries. There are general old-age pensions, widow’s pension, occupational injury insurance, unemployment insurance and sickness insurance, as well as family support etc.
In 1946, an insurance law was established that dealt with sickness, unemployment, disability, old age and social assistance issues. Thus, Iceland became the first Nordic country to establish a unified social insurance system.
In the 00s, social spending in Iceland amounted to just over 20% of gross domestic product (GDP), which is the lowest proportion in the Nordic region.
About 3/4 of the total social expenditure is financed by the public sector. The remaining expenses are mainly financed by employers and to a lesser extent by policyholders through deductibles.
The statutory retirement age is 67, but many retirees can work up to the age of 70. The pension, ie basic pension and supplementary pension, amount to 60% of the fixed annual salary, provided that the pensionable working time has been forty years. In addition, in order to receive supplementary pension, you must be a member of a pension fund. Sailors have special pension provisions, and can be granted a pension at the age of 60.
Parental leave is three months for each parent. In addition, parents are entitled to a further three months which they can freely split between themselves. The compensation depends on the extent to which the parent acquires work. Home working women receive a certain basic amount. Most public servants retain their salary during parental leave through contractual agreements. Payments are managed through the general insurance system and the unemployment fund. An income-related child allowance is paid for children up to the age of 18, and for children up to the age of seven, a non-income-related allowance is also given.
For a long time Iceland was relatively spared from high unemployment. The share of unemployed was long below 1%, but at the end of the 1980s it started to increase and in 1990-2008 it varied between 2 and 5%. As a result of the international financial crisis in 2008 and the Icelandic bank collapse in the same year, unemployment rose and rose to 7-8% in the following years. Although Iceland recovered relatively quickly in several areas after the crisis, the high unemployment figures remained in 2012.
Extensive overtime work has previously characterized the Icelandic labor market, but the average weekly working hours have fallen during the 00s. In 2011, men worked an average of 44 hours a week and women 35 hours. The average weekly working time for both sexes is 40 hours.
Iceland has the largest wage spread of the Nordic countries. Visit AbbreviationFinder to see the definitions of ISL and acronym for Iceland. The income differences between men and women are low in international comparison; women have an average of about 70% of men’s salary. In the lowest paid occupations, women are dominant.
In recent years, several steps have been taken to equalize unjustified gender differences in the labor market. In 2014, Iceland introduced gender quotas to corporate boards with the aim of getting more women into top positions in the business sector, assignments that have so far been dominated by men. Iceland became the second in the world to introduce quotas. First out was Norway.
In order to reduce the pay gap between men and women, in 2018, fines are introduced for companies with over 250 employees who do not pay equal pay to men and women even though they do an equal job.