Over 24,000 foreigners were in the Icelandic labour market in June and their numbers have increased by 17 percent over the last 12 months, Fréttablaðið reports. Imported labour has prevented wage drift and driven economic growth forward.
Despite the facts that unemployment in Iceland is at a historical low, employment rates have rarely been higher, and that there have never been more foreign nationals working in the country, there is a persistent shortage of labour. The stress on the labour market is peaking and 1,000 more foreign workers will be needed to meet demand.
Katrín Ólafsdóttir, associate professor at Reykjavík University and member of the Monetary Policy Committee at the Central Bank of Iceland, believes foreign labour has had a huge impact on the Icelandic economy. “If it had not been for foreign labour we would be in a completely different position. Wage drift and inflation would have begun and we would not have been able to attend to all of the tourists that are here,” she stated.
Ingólfur Bender, economist at the Federation of Icelandic Industries, stated that slower growth is what the economy and labour market need in order to avoid overheating. “If you look at the economic indicators which can give us clues as to what the trend will be in the next six months, I expect that we will see the turning point relatively soon, in the next year or the year after, then the unemployment rate will rise again and employment rates decrease. We are reaching the peak,” he stated.