Iceland’s unemployment soars fivefold

“This is completely different from the finance crisis in 2008-2009,” says VMST’s Unnur Sverrisdóttir, as her organisation faces its greatest challenge yet. 

“That was a traditional financial crisis, and now we are dealing with something totally new. The entire economy stagnated in a matter of days and the future consequences are anyone’s guess. This will be complicated,” she continues. 

The economy is at a standstill

Tourism makes up one third of Iceland’s national income. Globalisation has had a positive impact on tourism, but now it has disappeared altogether in Iceland and around the world.

Iceland’s economy was already heading downwards in 2019, but with COVID-19 all tourism activity ended within a few days, travel agencies stopped selling holidays, all flights were grounded and busses which used drive around full of tourists have parked up.  

“It’s the same story for restaurants, shops and anyone working in the service sector,” points out Unnur Sverrisdóttir.

As a result, VMST now faces completely new and challenging tasks. More than 50,000 people are due unemployment benefit at the beginning of May. The previous record, during the 2008-2009 finance crisis, was 10,000-11,000.

A new industry

Since then a completely new industry has emerged. The labour market is also larger than it has ever been. 23,000 work in the tourism sector, and they lost their jobs very quickly, explains Unnur. 

Iceland has recently changed the law to provide company employees 75% unemployment cover if they can only work 25%. Most companies make use of the 25% rule, according to Unnur.

That might be changed as hairdressers and other small businesses and freelancers can start working again. But it is not expected to have any major effect on how things develop. 

VMST is right now going through some major changes. Staff have been working hard and have demonstrated their huge solidarity, says Unnur proudly.

The VMST is now expanding and 35 people will probably be added to the staff of 130-140 in a few weeks.