More Reproduction Needed in Iceland

Looking at the formulae above what do you see? I guess if you aren’t a major in advanced maths or statistics it won’t mean much but the answer to this set of calculations actually proves that Iceland is one of the best countries in the world to live in, at the moment.

The jumble of numbers and algebra is in fact the equation used by the United Nations in determining which countries are the least and most liveable places on earth. It is called the Human Development Index or the HDI and this year it says that Iceland is officially the second best place to be a citizen.

The HDI was developed in 1990 by the Pakistani economist Mahbub ul Haq and has been used by the UN since 1993 to compile its yearly Development Report. HDI is a comparative measure of poverty, literacy, education, life expectancy and other factors throughout all the countries worldwide. It is the UN’s standard measurement of “well-being” and reflects greatly on areas such as child welfare. The HDI uses three basic dimensions to measure all of this: Life expectancy at birth, knowledge (i.e. literacy and educational achievements), living standards (i.e. gross domestic product (GDP) and purchasing power parity (PPP)).

Using these three points a world ranking is made and Iceland’s straight in at number two.

The report is produced by an independent team of experts under an advisory network of leaders in academia, government and civil society. Norway tops the table this year. At the bottom is the drought-ridden and locust-beset country of Niger; officially, the worst place on earth to be alive. This year’s report, though, shows that in general the world is improving.

Over the past year, Iceland has moved up the rankings overtaking countries such as Sweden and Canada, with continuous growth in GDP, and an outstanding ranking in education being the impetus for this. The report also highlights the fact that Iceland has one of the best gender equality ratings in the world, with women playing a bigger part in the structure of its society and business, accounting for an equal proportion to men in contributing to the percentage of workers within the family unit. Even though the gap is small between the genders, there is still clear daylight between the two, with men making considerably more income compared to that of their female counterparts, with an average $11,000 divide between the two sexes. In addition, although women make up 30.2% of the seats in the Alþingi (lower parliamentary house) only a small minority make up the higher positions at ministerial levels.

Iceland may be one of the “great states” and success stories at the moment but worryingly it is following trends similar to those of most Western countries. With a dropping birth rate, the community patterns are starting to change. The population of those in the demographic of the age 65 and above are starting to increase, largely due to the fact that healthcare and living standards have risen significantly allowing for people to live longer. By 2015 14% of the Icelandic population will be over 65; in contrast, the demographic of the population under the age of 15 is going in the opposite direction. By 2015 this demographic will have fallen to 19% of the total population from 22%, at which it currently stands.

The forecasted annual population growth rate for Iceland shows that this gulf will only get bigger. As any economist will tell you, this is bad news. What will start to happen is that the younger, diminishing working sector will have to shoulder the burden of the ballooning older retired generation. Currently in Iceland the retired are supported by generous pension contributions subsidized from the coffers of the government treasury, i.e. the taxpayer. The government has realized that this older top-heavy society will prevail and that one day there will be a deficit in pensions that will be unsustainable by the tax payer, which is why workers are now contributing to their own state run pension schemes.

The question is this: when Iceland has a multitude of old people, who is going to pay the tax to sustain the services that this demographic will keep using when they are retired. People don’t walk into a room when they retire and wait 20 years to die. No, they still use the roads, healthcare, sanitation and all the other services that the taxpayer must be burdened with. In effect, the youngest generation and more so the one after will be under dramatically more pressure as individuals to keep the country running. Taxes are at massive peaks already. Is it possible to keep raising them to pay for the retired population?

Welcome the immigrants or the third children

Iceland thus finds itself at the peak of living standards at the moment. How can it keep this up? One obvious way is to kick start the birth rate; this means various things, more candlelight suppers, perhaps, but as we all know more children equals more cost and people find it hard to afford this. One country in a similar position to Iceland is France. France has the second highest birth-rate in Europe, at 1.9, high compared to Europe’s average of 1.4 and way higher than Iceland’s 1.0. The government there is still trembling at the prospect of a future population diminishing and an older top-heavy society evolving. To combat this, a plan unveiled by the Prime Minister of France, Dominique de Villepin will double cash incentives for big families. Women in France are being offered up to 1000 euros a month to stop work for a year and have a third child (this being attached to the parent’s salary). The underlying problem in Iceland and France is that middle-class, working women are postponing the age at which they reproduce, due to the fact that they are enjoying a new empowerment and equality that wasn’t available in the past.

France hopes that their measures, combined with new government initiatives for cheap childcare, will encourage more parents to have that third child, thus giving the population that needed boost for future growth and stability.

Barring the third child reward, a more controversial way of achieving this is by increasing significantly the levels of immigrants allowed into the country. It has been proven that countries that are higher on the HDI attract the more talented immigrants (economic value and individual capital) and discourage potential emigrants from leaving. Britain has one such policy, inviting all levels of workers to the country, ranging from menial employees to highly educated doctors and has done so for many decades. These immigrants provide valuable revenue from tax and are helping to boost the economy and the birth rate.

A new place to wave the flag

In the meantime Iceland’s youth must get in touch with their paternal sides and build a new generation to sustain themselves. In a recent BBC survey, the largest of its kind, with 51,000 people questioned in over 160 countries, it was found that Icelanders were one of the most nationalistic people in the world and had more pride in their state than most other citizens.

If this is the case then every Icelander should think of it as his/her duty to go out and reproduce (responsibly) and make their great nation greater by having more babies. If my neighbours are anything to go by, it seems that people could have already worked out the equation and the flag waving may well have already begun.