Wages in Iceland among Europe’s highest
In 2008, Icelandic wages were the 15th-highest in the EU/EEA, when measured in euros, and since 2016 they have been the fourth- or fifth-highest. In 2012, they were roughly equal to the European average.
According to the Landsbankinn economics department, the figures are very heavily reliant on the exchange rate of the króna.
As Iceland is a small, open economy with an independent currency, exchange rates are a very important factor when making direct comparisons with other countries; whether it be wage costs or the cost of imported goods. During the 2008-2019 time period, the exchange rate swung between 120 krónur for one euro up to 173 krónur. The average was 147 krónur to the euro. That equates to a swing of 20 percent in either direction.
From 2007 to 2019, the wage index in Iceland rose by 99.6 percent, which equates to six percent per year. The smallest increase in wages was 3.9 percent, in 2009, and the biggest was 11.4 percent in 2016. Between 2008 and 2019, purchasing power increased by 30 percent—all of which has come since 2014, following the significant drop in purchasing power in the years following the banking crash.
Between 2008 and 2019, wages in EU member states increased by an average of 28.7 percent, in euros, or by around 2.1 percent a year. This compares to 84.4 percent in Iceland, again in euros, or 5.2 percent a year. 79 percent of the EU increase came after 2012.
During this period, Germany’s wages went up by 17 percent, while wages in Norway and Sweden went down by 11 percent and 3 percent. The change is mostly a result of Norwegian krone and Swedish krona exchange rates; especially the former.
According to Landsbankinn, it is clear that the development in Iceland is rather contrasting to those in Norway and Sweden, and is a mark of the nearly-unprecedented purchasing power development the country experienced.
“Wages here in this country have clearly increased markedly in the past years in comparison with other European countries, measured in the same currency. Therefore, our purchasing power towards these countries has increased a lot. The other side of the same coin is that European countries’ purchasing power towards us has reduced, which would usually have an effect on Europeans’ purchase of goods and services from us; including tourism,” the Landsbankinn report adds.