From Iceland — New Reports On Wealth Inequality Paint Unclear Picture

Erik Pomrenke
Photo by
Markus Winkler | Unsplash

A recent report by the Icelandic Chamber of Commerce is cause for some optimism. Despite the pandemic, a 3.9% increase in disposable income was seen from 2019 to 2020. However, there may be some flaws in the Chamber’s reasoning, a prominent economist says.

The report contradicted popular talking points of rising wealth inequality in Iceland and also noted the continued narrowing the gender wage gap in Iceland, which it predicts to reach parity around 2030.

Younger and low-income workers have seen the fewest gains, variously attributed to a shrinking supply of part-time jobs, longer schooling, and fewer prospects. For the demographic 34 years old and younger, purchasing power has grown by some 1% per year since the beginning of the century, significantly less than older demographics.

However, the optimism of the Chamber of Commerce report may not be well-founded.

As Kristrún Frostadóttir an economist and candidate for the Social Democratic Alliance points out, 46% in the total increase of assets in Iceland have gone to the top 10% of earners.

Among the many effects of the coronavirus on the Icelandic economy, wealth from employment has declined, but a large increase in “other income” has been seen across the nation.

Two major aspects composing “other income” include unemployment benefits and pension funds. Many Icelanders withdrew payment early from pensions in order to compensate for the fall in income. Kjarninn reports that nearly a quarter of the year’s increase in income can be traced to such withdrawals, meaning that far from seeing a gradual equalization, Iceland may simply be displacing more serious inequality into the future.

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