Iceland is one of the most developed and productive countries in the world, with a high economic growth rate. This northern country is sparsely populated with about 360,000 people spread over its 103,000 Km2. Due to the small population, Iceland’s economy is less diversified compared to other Nordic countries. It’s also small and subject to high volatility. Expatriates seeking to work in specific economic sectors find this convenient. If you prefer to spend much while living the highest standards of living, then Iceland is the place to be. The currency used in this country is the Icelandic Krona. At the time of writing 1 US Dollar (USD) = 125.05 Icelandic Krona (ISK)
What is the average salary in Iceland in 2020? Icelandic employees make an average gross salary of $66,460 a year, $5,537.85/month, and $31.96 an hour. After deductions, the average salary comes down to around $3,278 per month, putting Iceland’s salaries among the highest in Europe. The highest average net salaries are found in the cities of Hafnarfjorour, Reykjavik, and Akranes at around $5,058, $3,240, and $3,194 per month.
Iceland’s economy is among those with the lowest rates of income imbalance and the highest level of freedom in the world. Non-residents can work in the country provided they apply for a work permit. Unlike other countries with numerous restrictions for foreigners, Iceland’s labor market is free and flexible. Despite recently being faced by the crisis of current account deficits and inflation, it continues to grow due to thriving industries such as tourism. It has since joined the list of the most stable and largest economies in the world. To help you transition smoothly into the Icelandic job market, I’ve summarized all the important information you need to know about working here. Without further ado, let’s get started:
Average Salary in Iceland in 2020
If you wish to join the Icelandic job market, it’s probably best to know the average salaries of specific professions. This will help you make an informed decision about your career choices. Here’s a list of the average monthly gross salary of common job titles in Iceland:
- Dentist – $12,659
- Accountant – $3,338
- General Manager – $9,353
- Architect – $4,506
- Attorney – $7,733
- Cashier – $2,863
- Chef – $4,047
- Civil Engineer – $4,640
- Elementary School Teacher – $3,702
- Flight Attendant – $4,362
- Journalist – $4,810
- Nurse – $4,024
- Pharmacist – $4,024
- Pilot – $5,976
- Police – $4,278
- Academic Clinician – $8,009
Although the payments are high, expenses are also high. For starters, residents have to pay more interests because they have their independent currency. Credits such as mortgages are indexed to inflation. This means that if inflation is 4%, then the principle will be increased by 4% before interest is calculated. Check out more on this under the ‘cost of living’ section.
Iceland’s economy and job market
Several sectors drive the Icelandic economy, and they all offer employment to locals and foreigners alike. Here’s an in-depth look at some of the sectors you should be focusing your job hunt on.
First off, we have a tourism and hospitality industry. This sector has contributed largely to the economy of Iceland, providing over 10% of the total income generated. In 2018, the country received over 2 million tourists; a figure that’s six times that of the country’s entire population. With Iceland’s small population, it goes without saying that expatriates can find many opportunities in this sector.
The fisheries sector is the second largest part of the economy. In fact, in the North-East Atlantic, Iceland is the second largest fishery nation after Norway. About 20% of the workforce depends on the ocean for their livelihood.
Iceland is the largest electricity producer per capita in the world. It mainly generates hydroelectric and geothermal power, which is the source of energy for the manufacturing industry. The availability of abundant green energy has attracted foreign investors into the aluminum smelting industry and boosted economic growth.
Since the island has a low population density, yet very developed, it suffers from an inadequate labor force. The ratio of workers to retired people is roughly six to one. If you are an expat who is qualified and skilled, your services are required in the areas facing a shortage of labor. Due to the long summer days where there’s sunshine for around 21 hours a day, Iceland also offers summer jobs. This is also the season when tourism and hospitality industries are thriving, increasing the demand for more employees, especially those fluent in English.
There are many more sources of employment in Iceland. The economy has diversified into service providing and manufacturing industries. Biotechnology, software production, whale watching, ecotourism, as well as financial services that offer credit have been incorporated into the economy. This has resulted in the creation of more job opportunities and diversification in the labor market.
Iceland Average Household Income
The average household income per capita is approximately $31,929/year. This figure is net-adjusted. While it’s slightly lower than the OECD average of $33,604/year, it sure is higher than in most European countries. This is due to growth in employment and an increase in wages. Wage bargaining and strong trade unions have promoted income equality, keeping poverty rates down even during a crisis. Factors that encourage income equality in Iceland include paid sick leave, funded occupational pension system, funded training, education for workers with low skills, as well as paid rehabilitation for injured workers or those with long-term illnesses. Despite having high household income, expenses like payment of the mortgage, insurance, and bank credit can leave very little amount for saving.
Minimum Wage in Iceland
Iceland is one of the countries with no statutory minimum wage, meaning there’s no mandatory minimum wage that applies to all Icelandic workers. Each profession, however, sets minimum wage through collective bargaining agreements. This is then applied to every employee in that occupation regardless of their union membership. Agreements are often based on the industry, some of the firms, and others on the sector. For example, a labor union named Efling was joined by its allied unions such as VLFA to reach a collective bargaining agreement in April 2019. They agreed to pay their workers a minimum wage of $3119.50 per month. The minimum wage is inclusive of all bonuses and commissions awarded during the working period.
While there’s no NMW, it’s safe to say that most set minimum wages range between $2,060 and $2,400 per month for full-time employees. These figures apply to most classes of workers, including those who are 18 years and above and have worked for a minimum of six months in one company.
In addition to minimum wage, workers in Iceland are entitled to 13 public holidays and 24 days of fully paid leave every year. Generally speaking, working hours should not exceed 48 hours per week, inclusive of overtime.
For expats looking for a job in Iceland, it is advisable to use employment agencies. The agencies match those with specific expertise with their dream jobs. Another option is to contact a local branch of a trade union or make a speculative application to a company directly. Expatriates are required to apply for a resident and work permit to be allowed to work in Iceland. These permits application requires a non-resident to have specialized skills and a long-term employment contract. Those seeking to stay for a short while can apply for a short-term permit.
Average Wage in Reykjavik
Reykjavik is Iceland’s capital city, as well as the country’s educational, economic, governmental and cultural hub. It’s also the most populous region in Iceland, housing 63% of the country’s population. Most employees in Iceland are posted in Reykjavik, apart from those dealing with fisheries, tour guides, or agricultural. It hosts Iceland’s major corporations and is highly concentrated with service companies and financial banks.
The average gross salary in Reykjavik is $33.67 per hour, $5,835.56 per month and $70,030.69 per year. This is just an estimate since the figures vary between different professions, skills, level of experience, and so on. The average gross salary in Reykjavik has increased by 3% compared to that of 2018, which was $67,729.40. This trend predicts a steady increase in wages in future years.
The average wage is calculated before deductions like income tax. Income tax is charged depending on the amount of salary one receives. For most people, income tax is about 37.3% of the monthly salary. This brings the average net salary down to about $3,240/month
Salaries in Reykjavik range from $728.79/month (minimum) to $3,234,182/month (maximum). The median salary is $5,776.28/month, meaning 50% of the population is earning less than $5,776.28/month while the other 50% earns above that.
The average and median wages act as salary indicators. This means that one can rate their salary using these figures. If your salary is higher than both the average and median wages, then you can lead a comfortable life in the capital. When compared to Iceland as a whole, Reykjavik’s salaries are about 5% more.
Cost Of Living in Iceland
The cost of living in Iceland is generally high. But thanks to the high salaries, as discussed above, residents can afford high quality and expensive life. Generally, a single expat will spend about $2,500 on monthly expenses, while a family of four should expect to spend $6,900/month. Here’s a breakdown of common monthly expenses:
Housing in the capital is slightly higher than outside the capital. Renting a one-bedroom apartment costs $1,495.61 in the capital and $1,228.97 outside the city. For those who want to buy, expect to spend about $4,699.46/square meter for an apartment in the city center. The monthly mortgage interest rate is 6.36% yearly, for a fixed rate of 20 years.
General products used in daily consumption are relatively costly when compared to other countries. For instance, a loaf of bread (500g) costs $2.81, a liter of milk is $1.28, a kg of tomatoes is $4.13, a dozen of eggs is $5.05, and a kg of the local cheese is $13.20. It is advisable to prepare meals at home as often as possible since restaurants can be very expensive. A basic meal in an inexpensive restaurant costs about $20 while a combo meal in a fast-food restaurant is $13.
Public transport is more efficient and reliable in the capital region. A one-way ticket costs $3.76 while a monthly travel pass is $102.38. Alternatively, you can get an average car for about $30,000. In that case, you have to budget for gas at $1.76/litre, as well as auto insurance, repairs, and maintenance costs.
The government of Iceland imposes heavy taxes on its citizens, which raises the price of products such as gas. Income tax is also high, resulting in a high cost of labor and a hike in prices.
While these are the common expenses in every household, there are several others you may have to budget for depending on your needs and lifestyle. Check out my post on ‘The cost of living in Iceland’, to have an in-depth look at the costs associated with living in Iceland.