Actions to protect jobs

This winter will not easily fade from the memory of us Icelanders. Snowdrifts, frequent low-pressure systems, power outages, avalanches in the Westfjords, and land uplift in Grindavík. The winter has certainly reminded us of where on this globe we live. In economic matters, we were sailing into a recession after eight years of consecutive growth, and the situation in the last two weeks has greatly changed with the advent of Covid-19 (the coronavirus). The authorities are well equipped to respond, as the state of the national economy is strong.

Company revenues are drying up

There is great uncertainty in the labour market after a global pandemic has been declared due to the coronavirus. We are facing nearly a collapse in the tourism industry in the coming months, and it is clear that the effects will also be significant on other sectors, both here in the country and abroad. Direct jobs in the tourism sector number about 25 thousand in Iceland, and it can be estimated that the share of foreign tourists in the value creation of tourism is proportionally about 70%. The consequences of this can directly affect about 18 thousand jobs here in the country. If nothing is done, one can therefore expect that unemployment will grow significantly with concomitant effects on society as a whole. We have introduced the first phase of extensive measures aimed at protecting the economy as much as possible. The measures are diverse and include, among other things, special partial unemployment benefits, deferral and cancellation of public fees, special child benefit supplements for all children, and the reimbursement of value-added tax for projects.

In these circumstances, the goal is clear; to protect homes, businesses, and jobs in the country.

Partial benefits are the backbone of the action package

A few days ago, the Althingi approved my bill on the right to unemployment benefits alongside a reduced working ratio due to temporary contraction in employers' activities, the so-called partial employment allowance. The aim of the legislation is simple; to encourage employers to maintain their employment relationships with their employees as much as possible. Significant values are inherent in ensuring that as many as possible maintain active employment relationships with employers, and that we have a strong rebound when the pandemic passes. The main points of the bill are as follows:

• Up to 75% partial benefits – The employer reduces the employee's working ratio to at least 80% of a full job, but not lower than a 75% working ratio, and then there will be no reduction in unemployment benefits. Employers are forbidden to demand more work contributions beyond the new working ratio. • Up to 90% total wages – Unemployment benefit payments shall amount to a maximum of income-related unemployment benefits in proportion to the reduced working ratio. Wages from the employer and unemployment benefit payments combined can never amount to more than 90% of the average total wages of an employee based on the three-month period before the employee partially lost their job. • Cap on combined benefits and wages of 700,000 kr. – Wages from the employer for the reduced working ratio and unemployment benefits can never combine to exceed 700,000 kr. per month. • Wages of up to 400,000 kr. fully ensured – Individuals earning 400,000 kr. or less per month can receive 100% of the average wage. • Students are covered by the law – Students may be entitled to benefits according to the bill provided they meet the other requirements of the provision. I encourage students to familiarize themselves with the conditions on the website of the Department of Labour. • Employees of sports clubs and voluntary associations are covered by the law – Employees and contractors of sports clubs and voluntary associations are entitled to partial payments alongside a reduced working ratio due to temporary contraction in employers' activities. • Self-employed individuals are covered by the law – The measures of the state also apply to self-employed individuals and the same conditions apply to them as to the employees of companies.

The law is temporary and applies until May, but we are prepared to respond if the need arises. Applications for such benefits have already been opened on the website of the Department of Labour. I urge employers to temporarily reduce their employees' working ratio further instead of resorting to layoffs. We intend to protect jobs by all available means, and with the partial employment measure, we ensure that the rebound will be much stronger and sharper when the pandemic ends.

Let’s go through this crisis together!

All storms eventually pass, and when the light returns, we will need all the support we can muster to regain our previous strength and hopefully improve it. With calm, courage, and diligence, we will get through these temporary difficulties. Let’s take care of those nearest to us, utilise technology for communication, and nurture our bodies and minds as best we can. The unity of our nation has rarely been more important, and everyone must lend a hand. Together, we will get through this crisis.

Ásmundur Einar Daðason, Minister for Social Affairs and Children.

The article was first published in Morgunblaðið on 26 March 2020.