Challenges to welfare services in Iceland in critical times

Workshop – University of Iceland, June 3, 2013
Address by Eygló Harðardóttir, Minister of Social Affairs and Housing

Ladies and gentlemen.

It is good to see that a large convention of scholars has been called to deal with the main challenges facing the welfare systems of nations in these difficult times. Let me begin with a special welcome to our foreign guests and a welcome to you all who are here to take part in a discussion of these important issues.

European nations have had to deal with difficult issues in the area of welfare in recent years due to the difficult economic situation, although the extent of the problems differ. Large unemployment has been persistent since the financial crisis hit Europe. Unemployment in the European Union is close to 11% and amongst young people about 22%. In countries where unemployment is highest, such as Greece or Spain, more than half of all young people are without work.

Unemployment among young people is a source of great concern, especially when it is persistent. It erodes society and creates a number of social problems and can in worst cases lead to a disruption of the social contract on which every society is based.

In our country, registered unemployment was 4.9% at the end of April, slightly higher amongst women, 5.3%, as against 4.5% amongst men, a total of 8,000 persons. About 18% of this group are people 16-24 years of age. The situation is worst in the Suðurnes area where unemployment is 7.6%, whereas it is lowest in the Northwest, 1.8%.

Full employment is one of the basic premises for welfare in a broad sense. Not only for the wellbeing of the people but also as an engine for economic growth and the basis for financing of the public sector. Last but not least, the participation in the labour market is important for the social and mental wellbeing of every person. When there are many people out of work, it is evident that their welfare can never be adequately assured through social assistance. It is essential that people are given the opportunity to be active participants in society so as to use their energy as possible.

On the first day of this five-day meeting, Icelandic scholars will discuss the development of the Icelandic welfare system in recent years, based on their research. It will be instructive to hear their assessment of recent developments in this country – and it will be no less instructive to hear the contributions of foreign scholars. It is good for nations to share their experiences. They can learn from each other, base their policies on successes elsewhere and use information to avoid mistakes that have been made in other countries.

Here in Iceland, we benefited from having a sound welfare system when the recession hit us. We have developed a welfare system over time with regard to Icelandic circumstances and our special needs. Our system and the rights of the people to access it is not only based on employment participation but extends to all the people, irrespective of their position. Everyone is assured of support and basic cost of living assistance for those in need through the social safety net of the welfare system.

The Icelandic welfare system has done well for us in difficult times, and we also have a well-developed pension system based on fund accumulation instead of a throughput system as is widely common in other countries.

Iceland has long been in a position where participation in the labour market has been about the highest amongst developed countries and unemployment has been low. The welfare system has been based on this fact and has undoubtedly played a role in this situation. The aim has been to assist those in need, where emphasis has been placed on encouraging people to work rather than discouraging. The difficult employment situation of recent years is relatively new for us, although unemployment here is generally lower on average than in the EU countries. We must recover our strength and stimulate our economy. At the same time, we must strengthen our education system by encouraging training of people for the needs of the economy and help young people with all means to find their way towards the labour market.

Already at the end of the last century, experts were indicating that many Western nations had reached their limit on the possible growth of their welfare regimes and needed to explore new avenue in order to ensure the welfare of the people at a lower cost.

Following the contraction and cutbacks of recent years, our nations face a number of basic questions on welfare. In this country, we must review the future of the welfare system, what kind of welfare for our people we wish to have and can afford. To my mind, it is essential that we continue to provide a tightly woven social safety system, based on the premises of cooperation, self-reliance, democracy, fairness, equality and social responsibility. The prerequisite for making this possible is to strengthen the value-creation of society, since we should not pass today's expenditure onto future generations.

The issues of welfare are important topics at present as well as for the future. It is therefore welcomed that the academic community and scholars are contributing to the debate, that they analyse the situation and create a sound basis for decisions that politicians must make over the next several years.

Thank you for listening, and I wish the participants a satisfying, instructive and successful session ahead.