The population of Iceland is 376 248 (1 January 2022). The Icelandic nation is one of the youngest in Europe, with an average age of 38 years old and around 70 % of the population being under the age of 50. The Icelandic labour market is characterised by a high participation rate. In 2020, 78.8% of all able-bodied individuals aged 16-74 participated in the labour market.
The most important sectors in Iceland are service industries such as travel, financial services and health services, miscellaneous industries, agriculture and fishing. The relative importance of these sectors has changed somewhat recently; the significance of service industries related to tourism, for example, has increased considerably in recent years, while fishing and other production industries have declined.
40.6% of people in the labour market are university graduates, 35.3% have a higher education (including vocational qualifications) and 24.1% have a secondary education. Another characteristic of the Icelandic labour market is the high proportion of trade union membership, at around 85%.
Unemployment has been low in recent years and averaged 2.4% in 2018. Covid-19 had a considerable impact on the labour market. In 2020 unemployment rate was at 7.9% on average, which was a considerable increase compared to previous years. As Covid subsided, the level of unemployment dropped rapidly. In 2022, unemployment has declined rapidly; in July of this year, unemployment was recorded at 3.2 %. Among the non-national population, the unemployment rate was 7.3 % in July 2022.
Expansion has characterised the labour market in recent years, but after Covid-19 there has been a great demand for staff in Iceland. Although unemployment has decreased, there is still a staffing issue as many companies lost their employees due to them leaving the country during Covid-19. Fluctuations in the Icelandic labour market have reflected the coronavirus epidemic, inflation and the war in the Ukraine, to name a few. The small size of the Icelandic labour market means that external factors can have a great impact.
In the first quarter of 2022, 37 696 non-nationals were employed in the Icelandic labour market, an increase from 2018 when the figure was 36 844. It is likely that the number of non-nationals will increase in the coming months and seasons as demand increases.
The number of job vacancies increased by around 3 200 from 2021 to 2022, when comparing the same quarters of those years. The greatest demand was for staff in the hotels and restaurants sector, in fish farming and in rural administration. The percentage of vacancies was highest in industries such as trade, transport and storage, and also in the hospitality industry. There is also a need for workers in agriculture, forestry and fishing, as well as workers in various types of security, cleaning and tourism.
In the next 3-5 years, the number of jobs for unskilled workers is likely to decrease significantly. There has been a lack of certain types of skilled workers, including carpenters, mechanics and masons, as the number of craftsmen in the Icelandic labour market decreased following the economic crisis in the autumn of 2008. Increased tourism is driving the demand for staff in various services jobs, not least in the hotels and restaurants sector.
Looking 10 years ahead, the demand for a university-educated labour force and for workers with vocational qualifications looks set to increase. There is a growing need for people with various technical qualifications, such as in biotechnology and computer science, as well as people with technical skills in the field of health and social services, partly due to the increasingly ageing population.
Unemployment has decreased in recent months and stood at 3.2 % in July. The number of people with a university education has increased considerably in recent years but it can be difficult for certain graduates to find suitable jobs. This applies, for example, to law, business administration and humanities graduates. It especially applies to recent graduates with limited work experience.