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You are here: Home i Articles i Research i Research 2008 i Working Nation: The Mindset of the Enterprising Icelanders

Working Nation: The Mindset of the Enterprising Icelanders

| Text: Stefán Ólafsson, Professor, University of Iceland

The Icelanders are known for being a great working nation. No nation has a larger part of the population in employment at any one time.

This reflects both a high work participation rate amongst Icelandic women as well as amongst the elderly. Indeed many Icelanders stay in paid work up to the age of 70. The Icelanders thus retire later than people in most other nations, helping to keep pension expenditures modest.

In addition to this, people on average work long weekly hours. In a normal working week the Icelanders work up to 8 hours more than the more complacent Norwegians. These long hours are, however, set off against a rather long summer holiday and relatively many occasional holidays during the year. On the other hand, short-term sick leave is rather low by Nordic standards. When you multiply the employment participation rate by the average weekly hours worked, you get an indicator of the overall work volume of nations. This is shown in the graph below:

 Icelandic graph


Here we see that the Icelanders and the South Koreans put in the biggest work volumes in the developed world. Trailing them are the Anglo-Saxon nations, along with the Swiss and Japanese. So the Icelandic Vikings and the Korean Tigers beat the enterprising Americans, famous for their strong work ethic and tight labour market discipline. The highest work volumes are usually a result of both high work participation and long hours, as in the case of Icelanders and the Anglo-Saxons. The South-Koreans are, however, deviant and have excessively long hours with a much lower work participation rate. That produces a great strain on their working population.

The Scandinavians on the contrary have very high work participation rates but quite modest weekly hours, especially the Norwegians. At the low end we have nations with both low work participation rates and short hours, like the Germans, Belgians, French and the Dutch. These nations have difficulties financing their pension systems and may have to do with lower growth rates. It may be argued that the nations that combine high employment rates with modest working hours get the best quality of life, assuming that it is good for most people to do some work, but not too much. Thus it is of interest that Iceland beat Norway in the most recent United Nations ranking of quality of life (see the Human Development Index, November 2007). However, this victory takes on a slightly different meaning when we consider that the Icelanders put in an extra regular working day per week to obtain this outcome!

The Culture of Work

A nation which lets work play a great part in its life must have a positive attitude to work - or force it’s people to work a lot, through coercion or by sheer necessity to achieve the basic means of subsistence. The Icelanders are not at all forced to work as much as they do. They are affluent and have good material living standards and nobody can force them to do anything much against their will. So they must have a strong and positive attitude to work. This is indeed born out by survey research.

My theory is that the Icelanders share many of the social and cultural characteristics that are found amongst the Anglo-Saxon settlers’ nations. The USA, Canada, Australia and New Zealand were all built by settlers from Europe who sailed across the seas to seek their fortune in a new world. The settlement experience shaped their culture in the direction of strong individualism and a great emphasis on self-help and work, along with quests for independence from government and resistance to paying high taxes. In the contemporary world these cultural values are frequently connected to strong materialism and consumerism. Thus materialism becomes a key driver of work for the individual in the affluent market society. The Icelanders were originally established as a settlers’ society in the 9th to the 11th centuries and they have retained some of these characteristics in their mindset and behaviour.

When the Icelanders gradually gained independence, starting in the latter part of the 19th century, the Icelandic spirit was set free. With full independence in 1944 the nation went ahead at full speed towards modernisation with high rates of investment in the economy, which provided a strong demand for labour, giving the materially aspiring folk ample opportunities to seek their fortune through work. Thus the post-war period is characterised by very low rates of unemployment and plenty of job opportunities.

The fishing sector, originally the main industrial driver of the economy, also fostered an enterprising attitude. It often saw great fluctuations between high demand periods, requiring all able hands to quickly process the delicate goods, followed by more moderate periods. This did not provide for a German or Swedish type of ordered and carefully disciplined factory behaviour. Instead this environment fostered flexibility and the will to take on great challenges when the need or opportunity arose. 

The Role of the Welfare State 

There are of course other explanations for differing work volumes. Libertarians, for example, make the most of a presumed negative relationship between taxes and work, assuming that lower taxes lead to more work by individuals. This theory does not seem to explain the Icelandic case, however.

The Icelanders have for example worked more than the Americans for a long time despite a significantly higher tax burden. During the last 10 - 12 years marginal tax rates on individuals have been lowered in Iceland while the overall tax burden on the average and low-income earners has increased significantly (due to a reduced personal tax allowance). Nevertheless, most people have retained similar work patterns. Mothers of young children have even increased their work significantly in this period, despite a growing tax burden on their earnings. In that case a growing supply of affordable childcare places since 1995 seems to have had more to do with the work patterns of this group.

So the characteristics of the welfare system may have much to do with differential work patterns, even more than the tax burden. It is indeed also conceivable that a growing tax burden may lead to more work, especially if great financial commitments and strong material aspirations prevail.

Strong unions and well-organised welfare states have been important in shaping the prevailing work patterns in Scandinavia, i.e. the high work participation and modest working hours. Icelanders have also had strong unions and in many ways a good welfare state.

Why then are Icelandic working patterns not more similar to the Scandinavian ones? The Icelandic unions have not put great emphasis on reducing working hours, thus giving in to the materialist impulse. They should however change their emphasis nowadays. The intense work effort of contemporary Iceland places a great strain on families, and it is also associated with lower productivity.

A good labour policy for the Icelandic future should continue to emphasise high work participation, with dynamism and flexibility, but with a shorter working week. This can be achieved at the same time as productivity per hour worked is significantly increased, thus giving the opportunity to maintain pay levels for shorter working weeks. The welfare of families and children would at the same time be significantly increased.

About the graph:

Yearly work hours are accumulated from survey data and holidays and absence days subtracted. Thus the actually worked hours per year are obtained. Then those are divided by the number of weeks to get the actually worked hours per week (see OECD-Employment Outlook 2007). Multiplying these again by the employment participation ratio produces an approximation of a measure of “Hours actually worked per week, per person at working age”, which we use as an indicator of the total volume of work of a nation.

Here is a close upp view of the four countries who work the most:Icelandic graph close-up




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