EURES Mobility Conference, June 2007
Praca Islandia
Increased inflow of foreign workers on the
Icelandic labour market
Small homogenous society in the outskirts
of civilisation
Percentage of foreign citizens residing in Iceland
6
5
4
% 3
2
Series1
1
2006
2005
2004
2003
2001
2000
2002
Year
1999
1998
1997
1996
1995
1994
0
Greatly increased flow of workers to Iceland
How come?
• One of Europe´s most overheated labour markets by the time
of EU enlargement.
• The large projects in East Iceland: construction of
Karahnjukar hydroelectric project and Fjardaal Aluminium
smelter.
• New conditions in the credit market, increased credit supply.
State Housing Financing Fund raised it´s loan to value ratio,
the banks followed in competition with the fund in order to
keep their share on the credit market. Mortages issued by
banks increased by 340% > increased appartment buildings,
increased demand and consumption.
• The fact that housing construction demands labour with
similar skills as does the construction of power-intensive
industry projects exaggerated the impact of the latter on the
labour market.
Greatly increased flow of workers to Iceland
• Variations in immigration completely
coinside with fluctations in the economy
and the demand for labour.
• The inflow from EU-8 started before the
transitional restrictions were repealed >
labour demand mainly directs the flow
• By the end of 2006 foreign citizens
constituted 9% of the population and 10%
of the labour force.
Economic consequences of the inflow
• Positive impact on the economy.
• Without foreign workers contribution the inflation
would be higher (up to 1,5%), as would the policy
interest rates, economic growth up to 2,5% lower,
private consumption up to 6% lower, business
investments lower and purchasing power up to
4,5% lower. Because of the foreign worker´s
contribution the average family gained 1.472 € in
2006, also if not for the inflow their debts would
have been 2.393 € higher.
• But difficult to say what would have happened
without the inflow; less economic activity, less
tension and negative effects thereof?
Fears have not materialized
•
•
•
•
Unemployment has decreased
Labour participation increased
No signs of increased demand for benefits
Unemployment lower and labour participation
rates higher amongst immigrants.
• Salaries rose by 10,3% in average 2006, for skilled
construction workers only by 8,8%. Without the
inflow of foreign workers, the wage drift would
probably have been greater.
• On the other hand because of the inflow the
immense tension last years has not caused serious
imbalances on the labour market.
Race to the bottom?
• Impregilo: for the first time we witnessed social dumping
because of a foreign contractor. Impregilo also paved the
way for TWA. The conditions offered by Impregilo seem
to have influenced salaries in general in the construction
industry.
• Enlargement increased the supply of low-cost labour force
and service import (not least through TWA) enabled
strategic circumvention of rules and collective agreements.
• Indications of a submarket with service import and
increase in illegal practises. Social dumping and distortion
of competition.
• Still every reason to be optimistic as the authorities and the
social partners have managed to adjust well to new
conditions on the labour market. Laws on TWA and other
service import has decreased service import.
Race to the bottom?
• Icelandic labour market is sensitive to social
dumping due to the market wage system; market
salaries 30 – 40% higher than union rates.
• Dual labour market - general attitude developed
that it is acceptable to pay foreign workers
according to union rates, while Icelandic workers
get market salaries. According to Icelandic laws
55/1980 it is illegal to discriminate workers on
grounds of nationality but not illegal to pay
according to union rates.
• Important to narrow the gap between union rates
and market salaries.
Current debate in Europe
• Demographic change > labour shortages
• Foreseen competition of labour
• Immigration from third countries
Not an issue yet in Iceland
• Young population
• Foreign workers still regarded as a short term solution to
temporary labour shortages
• Stricter rules for granting work permits to 3-rd country
nationals
• Though certain demand for specialists from 3rd countries
EURopean Employment Services
Set up in 1993, EURES aims to facilitate and promote the free
movement of workers to counter regional imbalances on the
EEA. All 30 countries of the European Economic Area +
Switzerland take part in EURES. Partners in the network include
Public Employment Services, Trade Unions and Employer
Organizations. The partnership is coordinated by the European
Commission. EURES has a human network of more than 700
EURES advisers across Europe.
EURES started it´s operation in Iceland in 1995 under the
Directorate of Labour.
Applications received by EURES IS
Applications per week.
2004
2005
2006
2007
140
195
229
152
Applications by nationality
80,00
70,00
Applications per. week
Poland
60,00
Estonia
Latvia
50,00
Lithuania
40,00
Czech Republic
Slovakia
30,00
Hungary
Slovenia
20,00
Sweden
10,00
0,00
2004
2005
2006
Year
2007
Applications in 2007
Applications 2007
Poland
31%
36%
Estonia
Latvia
Lithuania
Czech Republic
Slovakia
Hungary
0%
4%
5%
18%
2%
0%
3%
1%
Slovenia
Sweden
Other
EURES IS vacancies
Agriculture
3%
5%
4%
Hospitality and Catering
14%
2%
Construction
5%
Healthcare
Food, Fish and meat
processing
24%
Service
21%
Bus drivers / operators
Mechanical/járniðn
12%
10%
Warehouse
Other
Recruitments
Known recruitments
800
700
600
2003
500
2004
400
2005
2006
300
2007 (first 24 weeks)
200
100
0
Year