2011 OECD Economic Surveys: Iceland 2011

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The 2011 edition of OECD's periodic economic review of Iceland's economy.  This edition includes chapters covering restoring the financial sector, securing sustainable public finances, returning to work in Iceland, and ensuring a sustainable and efficient fishery.

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Returning to work in Iceland

Prior to the recession Iceland had one of the strongest labour markets in the OECD. High labour force participation rates and extremely low unemployment, particularly long-term unemployment and youth unemployment, were fostered by a quickly growing economy, relatively low labour taxes, and a flexible labour force. The deep recession of the past couple of years has, however, significantly impaired Iceland’s labour market. Even so, this has only moved the Icelandic labour market performance to around the OECD average in terms of unemployment. The Icelandic government has increased programmes targeted at youth and long-term unemployment, groups which otherwise would have a high likelihood of remaining without work. Further, outside of the hard hit construction sector, it appears there is little sectoral shift in the demand for labour. These features, along with continued low taxes and a flexible labour force, suggest that the Icelandic labour market is well placed to pick up strongly as economic growth resumes. Nonetheless, adjustments to labour market policies through revising courses for the unemployed to better address the needs of the labour market, increasing the size of on-the-job training programmes, and revising the structure of unemployment benefits would reduce the likelihood of an increase in structural unemployment and promote a return to work in Iceland.

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