From Iceland — Long Summer Holiday, Short Work Week Increase Inflation, Says Trade Minister

Long Summer Holiday, Short Work Week Increase Inflation, Says Trade Minister

Published June 16, 2022

Photo by
Gígja Einars

The International Institute for Management Development puts Iceland in the 16th spot on a worldwide competitiveness ranking—below Denmark at first, Sweden at fourth, Finland at eighth, and Norway at ninth—prompting officials to consider how to make the nation stand out on a global scale.

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Lilja Alfreðsdóttir, Minister of Culture and Trade, said in a meeting of the Iceland Chamber of Commerce and Arion Bank that a long summer holiday and shortened work week push up inflation, reports Vísir. There aren’t enough workers to meet the demands of inflationary pressure, Lilja said.

She also compared the Icelandic and American economies. “Inflationary pressures are similar. They are experiencing the same thing as us because there is a shortage of labor. This will be a persistent problem in Western economies for the next two to five years. If economies do not see a two percent growth in labor, then long-term economic growth cannot be expected. Japan is a good example of that: they fell asleep at the price of population growth.”

Lilja wants to abolish restrictions on age-related retirement and increase freedom of choice for employment. She says it is “wrong” to force people to leave the labor market due to age.

When it comes to the competitiveness and direct investment of foreign parties, Lilja believes restrictions on foreign investment need to be reduced. In this context, the tourism industry has changed the economy a lot in recent years.

“Suddenly we have an economy that creates a larger surplus than we are using,” said Lilja, referring to the fact that the tourism industry has generated so much foreign exchange earnings that the foreign exchange reserves have become large.

She believes the next step is to screen where the state should receive direct investment. “It’s about going into a sector where things are going well and helping. It has worked for a lot of economies.”

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