Iceland has experienced a significant
demographic transformation over the past decade, with immigrants now
constituting a substantial portion of the population and workforce. This shift
has profound implications for the country's labour market dynamics and economic
development.
Demographic Shifts and
Workforce Composition
As of January 1, 2024, immigrants made up 18.2%
of Iceland's population, totaling 69,691 individuals. This marks a steady
increase from previous years, reflecting the country's growing reliance on
foreign-born residents to meet labour demands. Notably, the majority of these
immigrants originate from the European Economic Area (EEA), with Poles
representing the largest group at 32.1%, followed by Ukrainians and
Lithuanians.
In the labour market, immigrants have become
indispensable. They fill roles across various sectors, including tourism,
manufacturing, healthcare, and retail. For instance, in 2022, over 10,000 immigrants
were employed in the tourism industry alone, highlighting their significant
role in sustaining this sector.
Employment Rates and Economic
Contributions
Iceland boasts one of the highest employment
rates among OECD countries, with immigrants exhibiting particularly strong
labour force participation. In 2024, the employment rate for immigrants stood
at 83%, surpassing the 81.3% rate among native-born Icelanders. This high level
of engagement underscores the significant economic contributions of immigrant
workers.
Moreover, immigrants contribute to economic
growth through increased productivity and consumption. Research indicates that
in a typical OECD country, a 0.1% increase in the immigrant population raises
GDP per capita by 0.25% in the first year, peaking at a 0.31% increase one year
after the migration. In Iceland, the OECD estimates that migration will result
in a 6.5% increase in GDP by 2030 and a 10.4% increase by 2040 compared to a
scenario without migration.
Challenges in Labour Market
Integration
Despite these positive indicators, challenges
persist in fully integrating immigrants into the labour market. A significant
issue is the underutilization of skills, with more than a third of highly
educated migrants in Iceland working in jobs that require a lower skill level
than their qualifications. This overqualification rate is among the highest in
the OECD and suggests a mismatch between immigrants' skills and the
opportunities available to them.
Language barriers further complicate integration
efforts. Proficiency in Icelandic is essential for accessing higher-skilled
positions and for social integration. However, many immigrants struggle with
language acquisition due to limited access to language courses and the
complexity of the language itself. This lack of proficiency can hinder career
advancement and contribute to feelings of social isolation.
Employer Initiatives and
Integration Strategies
Some Icelandic employers have proactively
addressed integration challenges. For example, Kronan, a grocery chain with 26
stores, employs a workforce where approximately 40% have an immigrant
background, representing 42 nationalities. Kronan offers 'welcome to work'
courses, language training, and managerial programs to facilitate integration
and promote a culture of respect and diversity within the workplace.
Such initiatives demonstrate the potential for
private sector involvement in supporting immigrant integration. By providing
training and support, employers can help immigrants overcome barriers and fully
participate in the labour market.
Perspectives from Jon
Purizhansky, CEO of Joblio
Jon Purizhansky, CEO of Joblio, emphasizes the importance of
structured and ethical recruitment processes in facilitating successful labour
market integration."Ethical hiring practices and comprehensive support
for immigrant professionals are essential for maximizing their potential and
ensuring their successful integration into the Icelandic economy."
Jon Purizhansky also highlights the role of
language proficiency in enabling immigrants to access opportunities that match
their skills:"Proficiency in the local language is a key factor in
unlocking the full potential of immigrant workers. Investment in language
training is an investment in the country's economic future."
Finally, he underscores the need for recognition
of foreign qualifications:"Streamlining the process for recognizing
foreign credentials can help address the issue of over qualification and ensure
that immigrants can contribute effectively in roles that align with their
expertise."
Immigrants have become an integral part of
Iceland's labour market, contributing significantly to various sectors and the
overall economy. While high employment rates among immigrants are encouraging,
challenges such as skill underutilization and language barriers need to be
addressed to fully harness their potential. Collaborative efforts between the
government, employers, and organizations like Joblio are essential in creating an
inclusive labour market that benefits both immigrants and the broader Icelandic
society.
Originally Posted: https://www.jonpurizhanskybuffalo.com/labour-market-integration-and-economic-impact-in-iceland/
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