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Iceland is on its way out of the crisis. Unemployment is slowly falling. Now, as part of a trial, the social partners want to take over the matching of jobs and workers in order to speed up employment. There have been mixed reactions. The Minister For Welfare thinks it’s worth a try, others are sceptical.

“Unemployment is the largest welfare problem we have,” says Minister For Welfare  Gudbjartur Hannesson. That’s why the government has implemented many measures aimed at improving employment rates, but unemployment is not falling fast enough, he feels. 

Unemployment stands at 7 percent, which is still below the European average. It has been that low for the duration of the crisis, but long-term unemployment is rising, especially among young people with low education. 

“This is a serious development. The danger is that people loose their motivation and disappear out of the labour market. We risk a lost generation,” warns Vilhjálmur Egilsson, Managing Director at the Confederation of Icelandic Employers (SA). 

He is not happy with the current employment trend, and feels it is important to speed up debt relief for businesses and to put more emphasis on growth. But that is still not enough, thinks Vilhjálmur Egilsson. There are positions out there which aren’t filled because employers can’t find skilled labour.

“We have a matching problem. New jobs demand different things from people compared to old jobs. Therefore there is a need for new knowledge and skills,” he says.

That is one of the reasons the employers and the Icelandic Confederation of Labour (ASI) want to take over the management of the employment service, currently the responsibility of the state-run Directorate of Labour. During the collective bargaining process last spring the social partners agreed with the government to take over 25 percent of the employment service, as a trial project. Just how this will be executed is still to be decided. 

“We will provide the service, but we will also provide discipline and make demands.”

The various funds which are already part of the partners’ co-operation will provide a model for this work; the pension fund, education fund and the vocational rehabilitation fund. The funds provide possibilities to give support to for instance education.

“We can offer education and updating of knowledge and skills needed in working life. We would measure our success in the percentage of people with secondary education. The drop-out rate is large and leaves many trapped in unskilled jobs.” 

Do you want a privatisation of the employment service?

“I wouldn’t call it privatisation. We don’t have a profit motif. The aim is to reduce the costs of unemployment. If we succeed we can lower the employment tax.”

The agreement has had a mixed reception. While the head of the Directorate of Labour is withholding judgement, professor Stefán Ólafsson at Reykjavik University is critical to what he perceives to be the partners’ motivation.

“The trade unions are worried people will no longer see any reason to become members in the future. Employers want to take over the employment services because they want to reduce benefits and lower costs. They say unemployment benefits are too high compared to the lowest wages.

“We haven’t had unemployment here before, and until 1995 employment services were run by trade unions. They paid unemployment benefits. Then the government took over because they wanted a more universal system.”

He is sceptical to having the partners on both sides of the table when employees need help. He argues against a lack of transparency around how the different funds manage their capital, and he is critical to the employers’ and workers’ organisations’ plans to take over more of the welfare services and he fears a two-tier welfare system. 

“I don’t believe they will do a better job. And it is not good for democracy. If the government can’t provide people’s social safety net you change the role of the government. People will become less interested in voting and we could be approaching American conditions where people don’t see the point in voting because they feel the government does nothing for them.

“I envisage a lot of fighting around this issue in times to come. When we are out of the crisis, a more labour related welfare system will become a conflict issue,” says professor Stefán Ólafsson.