Iceland and Jobs: What’s Going On There?

Last week I returned from driving around a country about which people make many erroneous statements.  First, Iceland is not outrageously cold – its winters are about the same temperatures as Chicago’s.  Second, while it has permanent glaciers, most of it looks green, actually rivalling Ireland.  Third, while its population was once unusually homogeneous, now only a minority are stereotypically blonde Scandinavians.  Fourth, while once poor it is now hardly rustic, with a per-capita GDP, 30^th in the world at $46,100, fitting in with others nearby, one spot above Denmark’s and four below Sweden’s. 

Despite a low share of natural economic resources (world-class scenery doesn’t quite count), Icelanders have done, in many ways, an outstanding job with their country.  In 2015, it was ranked the world’s 13th most developed by the United Nations, down from first in the world, soon before their three-year political and economic crisis, in 2007-2008. It has universal health care, the fourth highest life expectancy, lower smoking and obesity rates than in most of Europe, and unusually low pollution.  In 2015 it had almost 1.3 million foreign tourists, four times the resident population.  For those who like that sort of thing, Iceland also has one of the lowest rates of economic inequality, and is informal enough that their people still have, in effect, no last names.  I can personally attest that it has its share of gravel roads, but most of them and all of its paved ones seem in excellent condition.  Taxes are not obscene, and include a flat 22.75% on personal income, only 18% on corporate, a value-added tax (VAT) of 11% on food, room rentals, and other things consumed by humans, and a 24% VAT on everything else.  Unemployment was last seen at 3.1%.  Their government aggressively dealt with financial transgressions during their crisis, and required some bankers to make up a part of their microscopic total of 147 prisoners, a real reason why their currency, the Icelandic krona (ISK), is stable and strong today. 

 

On the other side, there’s one thing that pervades the experience of locals and visitors alike.  It’s expensive!  Not only, as one would think, are the mass of imported goods higher than in their original countries, but so is almost everything else.  In Alaska, locally caught salmon is a relative bargain.  Not so for the lamb and fish raised and caught in Iceland.  Restaurant meals, even plates of those things, seemed to start at ISK 3000, or over $26.  Although tips and tax are included, that’s a lot.  The largest supermarket chains, Netto, Kronan, and especially Bonus, mitigate that somewhat, and while fast food is often available and cheaper it is around double American rates, with the lowest-priced Subway footlong ISK 1199 or $10.51.  Postage on a domestic letter in that small country is ISK 160 ($1.40), and even a postcard to the United States, or elsewhere outside Europe, costs ISK 285 ($2.50).  Items for tourists were no exception either, with ordinary souvenir magnets usually ISK 899 and playing cards almost always more.  Even things where I would not think prices would vary much from one country to the other, such as silver bracelet charms, were at least double those of similar items elsewhere.  That puts a lot of pressure on locals as well as tourists, and is probably the main reason why many have more than one job.  Although I suspect high pay for workers is a real reason, and accounts for such things as unmanned fuel stations, there is no national minimum wage as such.  Yet what is in effect a lack of positions paying comfortable wages in relation to cost of living, and a general sense of balance, did not stop large numbers of Icelanders from unsuccessfully protesting a $3 billion aluminum smelting installation, despite its thoroughly modern environmental safeguards.    

To what does all this add up?  Iceland is certainly an admirable country, but, despite its long-time cultural emphasis on self-reliance, people’s choices are more limited.  There are far fewer opportunities to become truly wealthy there than in the United States.  However, its advantages in health and life expectancy are real, and lofty food prices may help that.  Almost everyone there who wants to can work, which, in 2016, is quite a strength for anywhere fully developed.  Accordingly, while I would never want to force such a system on Americans, little Iceland has plenty to teach us.  And as we have, in the past anyway, excelled at borrowing from other countries, we should keep their ways in mind.