Even if the economy recovers from the aftermath of the economic crisis, Icelanders must face the reality that their purchasing power will still be down 20% from what it was in the years leading up to the crash, according to a report released this week by the Ministry of Welfare.
“Between 2006 and 2008, we lived 20% above the value of our production. We took loans and lived on them,” Minister Guðbjartur Hannesson told Morgunblaðið. “It will be difficult and painful for the country to realize that we need to decrease consumption by 20%, even if we get unemployment under control, with respect to government interest rates and other consequences of the economic crash.”
Guðbjartur believes that Icelandic society needs to re-evaluate its need for material goods and begin anew. “Icelanders may need to accept a new standard of living comparable to what it was between 2003 and 2005,” Guðbjartur told the Grapevine.
According to the ministry’s data, individuals spend 29% of their income on transportation and Guðbjartur sees room to cut spending there. “People have been pointing out that we need to change from fossil fuel powered cars to cars that run on other energy sources, like electricity, and also switch to cheaper cars. We use big and expensive cars. This cost is based on actual consumption. It’s not desired consumption,” Guðbjartur told Morgunblaðið.
To aid families in calculating their expected cost of living, given such factors as income, the Ministry of Welfare has provided an online calculator on their website (in Icelandic).