Stefán Ólafsson

Welfare trends of the 1990s in Iceland

The 1990s were a time of change in Icelandic welfare, just as in some of the other Nordic countries. Unlike in Sweden and Finland the changes in Iceland were not particularly induced by economic crisis at the beginning of the decade. Iceland did, however, begin the decade with a significant recession in the economy and growing unemployment. The changes in Iceland emerged more distinctly during the upswing of the latter part of the 1990s and can partly be related to a change of ideological currents.

From unemployment to disability? Relationship between unemployment rate and new disability pensions in Iceland 1992–2007

BACKGROUND The study was carried out in order to examine the effect of unemployment on the incidence of disability pension in Iceland by examining changes in this relationship from 1992 to 2007. METHODS The annual incidence of disability pension for the period 1992-2007 was calculated. Correlations and significance tests for the relationship between unemployment rates and disability pension incidence rates were calculated. The relationship was examined for different disease groups. RESULTS Two big fluctuations occurred in the unemployment rate during the study period with an upswing in unemployment from 1993 to 1995 and in 2002 and 2003. In both cases, there were corresponding increases in the incidence of disability pension. The incidence of disability pension declined again when the level of unemployment went down, even though not to the same extent. CONCLUSIONS Health and mental and physical capability determine the overall incidence of disability pension, but marginal fluctuations over time seem to be related to environmental conditions in the labour market, especially the unemployment rate. The observed disability pension incidence pattern in the two unemployment cycles of the study period indicates mainly that people with impaired health are forced out of the labour market in times of increasing unemployment rather than pointing towards a negative effect of unemployment on health. Our findings indicate that there is a need to strengthen the vocational rehabilitation system in Iceland as well as the support system for employment and social participation.

Increased incidence of disability due to mental and behavioural disorders in Iceland 1990-2007.

Aims: To explore longitudinal changes in the importance of mental and behavioural disorders and their subgroups among people receiving disability pension in Iceland in the period 1990 to 2007. Method: Estimation of the incidence of disability pension was based on national demographic data and information from the national disability register which includes the main diagnoses causing disability. Results: The share of mental and behavioural disorders among new recipients of disability pension increased from 14 to 30% for women and 20 to 35% men. There was a marked increase in the incidence of disability due to disorders related to the use of alcohol and other psychoactive substances, mood disorders, disorders of psychological development and behavioural and emotional disorders with onset usually occurring in childhood and adolescence. The proportion of mental and behavioural disorders as the primary diagnosis among new recipients of disability pension increased. Conclusion: The most likely explanation for the changes we observe is alteration in social conditions leading to a lower threshold for seeking disability pension for mental disorders.

Family Policy in Iceland: An Overview

There are more children in Icelandic families than in the other Nordic countries. Workforce participation in Iceland is also amongst the highest in the West. The need for family support is therefore immense. While overall expenditures on families with children in Iceland have converged with those of other Nordic nations in the last few years, the expenditures per child up to age 17 are still significantly lower in Iceland. This is more marked for expenditures on benefits; expenditures on services are comparable with those found in other Nordic countries. During the 1990s, significant policy changes occurred in Iceland, which have improved the legal rights and conditions of families with children. These applied, for example, to rights to paternity and maternity leaves, children’s right to receive care from both parents, and a stronger status for joint care. The rights of same-sex couples were significantly enhanced in 2006. Day care services (pre-school) have extensively grown since the early 1990s (increased rates of use and longer care hours) and so have after-school services. On the other hand, expenditures on child benefits have fallen since 1990. It is not clear at this stage whether this has changed the extent of poverty amongst families with children.

Changes in the prevalence of disability pension in Iceland 1976-1996.

Aims: The objectives were to determine changes in the prevalence of disability pension in Iceland and its distribution according to gender, age, and main diagnoses. Methods : The study includes all persons receiving either full or partial disability pension in 1976 and 1996. The age-standardized risk ratio between the years 1976 and 1996 was calculated for all disability pensions and for full disability pension only. Results: The prevalence of all disability pensions decreased significantly among both men and women in 1996 as compared with 1976. When the figures were disaggregated, however, they revealed an increased risk of full disability pension and a decreased risk of partial disability pension. The prevalence of full disability pension had increased in most disease categories. Conclusion: The decreased prevalence of disability pension in 1996 as compared with 1976 is noteworthy, as unemployment was increasing during the years immediately preceding 1996. It seems likely, however, that the decrease of partial disability pension and increase of full disability pension is a reflection of increased competition for work in the labour market as well as increased attractiveness of full disability pension due to new supplementary sickness insurance benefits linked to full disability pension.

The Rise or Decline of Work in the Welfare State? Equality and Efficiency Revisited

There are two basic positions on the question of how work fares in the modern welfare state: one emphasizing the rise of work and the other predicting its decline. The first sees the mixed-economy welfare state as striving, in the spirit of John Maynard Keynes and William Bever idge, toward the goal of full employment in a free society. The welfare state is assumed to cherish this goal to a greater extent than more market-oriented societies. It is also assumed by many to succeed better in its task of alleviating the problem of unemployment and giving all able and willing citizens opportunities to find suitable employment. The other position warns against negative effects of the welfare state on the economy in general and on work in particular. The welfare state is in this perspective assumed to infiltrate the self-regulating market mechanism and thereby disturb and distort its beneficent functioning. The programs of the welfare state and the means of financing them are also seen as imposing disincentive effects on individuals, eroding their incentive to work.

Iceland: Welfare in a Deep Economic Crisis

The chapter aims at investigating how the Icelandic welfare system was used to tackle the effects of the financial and economic crisis in 2007/2008. The chapter asks what main challenges the Icelandic welfare system had to face and how they have been met during the aftermath of the crisis that started in the autumn of 2008. The main challenges that Iceland faced in the aftermath of the financial collapse was increased unemployment, reduced real earnings, higher debt burden of households and businesses and collapsed governmental finances. The chapter primarily focuses on the welfare strategy part of the responses to the crisis and explains how Iceland managed to promote a welfare strategy despite the serious financial constraints. That strategy was primarily characterized by redistribution of welfare expenditures, with increased transfers to households and cuts in expenditures on services (healthcare and education) and on administration. Targeting of transfers on lower income groups was also increased and that helped to avert a significant increase in severe poverty during the crisis years.

The Nordic Welfare Watch : Final report

The Nordic Welfare Watch was a leadership programme during the Icelandic presidency of the Nordic Council of Ministers in 2014 and consisted three main projects: Nordic Welfare Watch – in Response ...

Explaining Iceland’s Excessive Boom and Bust: a Political Economy Approach

We explain the Icelandic bubble economy and the financial crisis of 2008 with lessons from classical political economy theories (Keynes, Minsky, Kindleberger, Reinhart and Rogoff). We ask why and how the Icelandic bubble came about? Why it went so far off track? Who were the main actors? And why they did it? At the base of these developments were changes in the policy environment and institutional changes in finance and economy, which produced both new opportunities and new risks, as well as paving the way for new powers to rise in the society, not least with the full privatization of the state banks in 2003. An overextended belief in the virtues of the free market of the private sector led to a laissez-faire attitude towards the new risks, while the new opportunities were pursued with great efforts. This produced a classical but unusually large financial bubble, culminating in 2003-2008, with massive and risky growth of banks. The main characteristic of the Icelandic bubble was extensive business speculation with borrowed money. The consequence was excessive accumulation of foreign debt, which tends to be the ultimate cause of financial crises. The main actors were the top ten percent of income earners, who gained tremendously during the decade leading up to the collapse. Their incomes grew way beyond all others, not least their financial earnings, which sprang mainly from the activities of the unsustainable bubble economy.