Iceland's 0utdated benefit system

Everything must be done to avoid a long-term unemployment problem, and to fight for the creation of valuable jobs, she said. 

But to do this the unemployed need support and subsidies. Gylfi Arnbjörnsson is the leader of Iceland's Confederation of Trade Unions. He thinks the unemployment benefit system is designed to help only those who have been salaried workers, but does nothing for recent graduates or for those who have never been in work. The benefit rules were created under very different circumstances. The benefit's size is calculated from a worker's salary level at the time when he or she became unemployed. That is unfair towards those who have never been in the labour market, says Mr Arnbjörnsson.

"There has never been this kind of threat of unemployment among young people in this country. This is a problem which arose from the economic crisis. The system has not been adjusted to reflect this."

The benefit system was designed at a time when unemployment by and large was unknown in Iceland. There are plans to review the system this autumn, including a rethink of how previous earnings are linked to the size of the benefit. 

"New graduates who can't find work get benefits proportionally to how much they worked during their student years. That is different from for instance the Danish system, where an engineering graduate gets money from the engineers' benefit reserve as if he already had worked as an engineer." 

Mr Arnbjörnsson says trade unions protested in vain in the new year against the government's decision to lower unemployment benefits for young people. Municipalities protested too, because they were now put in charge of paying out benefits.

"The idea was for students to attend summer courses which would speed up their studies. But there weren't any courses to attend. Demand outstripped supply. So they had to go to their local municipality and claim benefits instead."

Despite all this, Mr Arnbjörnsson believes it is important to be able to offer education because it gives the unemployed a proper challenge while making them more attractive to the labour market. 

“Most unemployed youths have for various reasons left school early. Most of them are young working class men. They are the first victims of cuts since they have no family commitments and too little education and experience to be attractive to potential employers."