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Iceland is the best, but still not equal

Søkelys på Norden

PhD, assistant professor, Reykjavik University

While Iceland ranks high internationally on gender equality, it does not follow that equality has been reached. For gender equality, wages as well as possibilities for participating in the labor market should be equal, and men and women should have equal representation in positions of power. I examine where the Icelandic labor market stands on these measures and how they were affected by the crisis in 2008. There are deterrents to equal participation in the labor market, some due to stereotypes. There is a significant gender wage differential, but if effective, the new Gender Pay Standard should aid in reducing the differential. The presence of women in positions of power has improved somewhat since the act on gender quotas on corporate boards was introduced.

Keywords: gender equality, wages, labor force participation, Gender Pay Standard


Equality between women and men is not only a matter of justice; it is also a matter of economic importance. Research has shown that by increasing gender equality in the labor market and improving the situation of women, it is possible to increase economic growth and enhance economic stability (Elborgh-Woytek, Newiak, Kochhar, Fabrizio, Kpodar, Wingender, Clements, & Schwartz, 2013; Slotsky, 2006).

Iceland has ranked number one on the World Economic Forum’s Global Gender Gap Index for nine consecutive years (2009–17) (World Economic Forum, 2017, 2016, 2015, 2013, 2010). The index ranks countries by economic participation and opportunity, educational attainment, health and survival, and political empowerment. Iceland also ranks number one on the Economist’s Glass Ceiling Index 2017 (Economist, 2017) and number one on the Women, Peace and Security Index 2017–18 (Georgetown Institute for Women, Peace and Security, 2017).

Iceland has at times been groundbreaking when it comes to the advancement of women. In 1980, Iceland elected Vigdís Finnbogadóttir as President of Iceland, the first woman in the world to be democratically elected president. Jóhanna Sigurðardóttir became the first female Prime Minister of Iceland in 2009, as well as the first openly gay woman to be Prime Minister of a country. Starting in 2018, all organizations with more than 25 employees will have to fulfill the requirements of the Gender Pay Standard, which ensures that the evaluation of jobs and determination of wages does not depend on gender.

This paper will show that while Iceland ranks high on gender equality compared to other countries, there is still a way to go until gender equality is reached. Iceland suffered a deep recession in the wake of the global financial crisis that hit in the fall of 2008. While the gender wage gap narrowed during the crisis, only time will tell whether this change is permanent.

The definition of gender equality between women and men refers to the equal rights, responsibilities and opportunities of women and men, and girls and boys (UN Women, n.d.). Hence, for gender equality in the labor market, the legal environment needs to support equality. Men and women need to have the same opportunities in choosing education and seeking employment in the field of their choice. Upon entering the labor market, men and women must have the same opportunities to work and they should be paid equally for equal contribution in the labor market. Furthermore, to ensure gender equality in the labor market, women and men must have equal access to positions of power.

Educational and occupational gender gap

The reasons that have been given for occupational segregation by gender range from biological to interest and family-based reasons (Bettio & Verashchagina 2009). Although physical strength may be a reason for occupational segregation in some cases, there is not much proof of a difference in cognitive ability. In fact, when it comes to mathematics, evidence is conflicting and inconclusive (Ceci, Williams, & Barnett 2009). While women have historically received less education than men, this is no longer the case (Eurostat 2017). Hence, the reason does not lie in women investing less in human capital. However, the occupational segregation might lie in a gender-based difference in preferences. Whether this is based on true difference in preferences or whether the difference is affected by prejudices and stereotypes is hard to verify (Bettio & Verashchagina 2009).

One of the measurements used to quantify occupational gender segregation is the Dissimilarity Index (DI). The index measures how many men and women would have to change occupations in order for each occupation to have equal numbers of men and women. According to a report published by the European Commission (Bettio & Verashchagina 2009), the DI was 50 % in the EU in both 2001 and 2007. The DI for Iceland measured 59 % in 2001, compared to 55 % in 2006. Hallden (2014) analyzed occupational gender segregation in 22 European countries for 2010, using three-digit ISCO classification like the European Commission. The DI was 49 % on average in the 22 countries. Iceland’s DI for 2010 was the lowest among the Nordic countries and measured 41 %, which is a marked change from the 55 % figure measured by the EU in 2006. This indicates a large occupational shift following the crisis in 2008.

The pattern of gender segregation in the Icelandic labor market follows a similar pattern as the other Nordic countries. As shown in figure 1, there are more men than women working in the Fishing industry and the same holds for Manufacturing and Construction. However, there are more women than men in Education, and Health and social work.

Figure 1.

Employed persons by economic activity, 2016


Source: Statistics Iceland (n.d.-a).

In Iceland, similar to most industrial countries, a majority of those enrolled at university are women (Eurostat 2017). Women comprise 64 % of university students in Iceland and are a majority in most fields of study, as shown in figure 2. Men still comprise the majority of students in STEM (Science, technology, engineering and mathematics).

Figure 2.

University students by field of study, 2015


Source: Statistics Iceland (n.d.-b).

When women choose occupations, they often look towards choosing education and a career based both on their interests and on the chance to make a meaningful contribution to society. Having the support of family members is also important to many women. Women prefer their job to be family-friendly, and they are more likely than men to take into account that they might take a break from the labor market for family reasons (Jonsdottir 2013). When men choose their occupation, income possibilities often influence their choices (Edvardsson & Oskarsson 2010; Jonsdottir 2013).

Although women increasingly enter previously male-dominated fields, they seem to find it harder than men to enter these fields and require more encouragement and support than their male counterparts (Gudmundsdottir 2014). In studies on women working in typically male-dominated fields, women stated family connections for their choice. Some mentioned flexible work hours and some career and income opportunities. Most had had a positive reaction from their family and friends for their choice of occupation. Others mentioned male role models and interest in the occupation from an early age (Gudmundsdottir 2014; Rikhardsdottir & Johannesson 2012). However, not all women had had a positive experience from working in male-dominated fields. Some women found that projects were assigned according to gender, to some extent. Some found that coarse humor that could be classified as sexual harassment was part of the work culture, and women were expected to adjust to that work culture (Rikhardsdottir & Johannesson 2012; Snæfridar- Gunnarsdottir & Einarsdottir 2011). Furthermore, a study among female police officers found that a third of all female police officers had suffered sexual harassment at work and some female officers had left the police for this reason (Steinthorsdottir 2013).

Men entering typically female-dominated occupations had also experienced prejudice (Axelsdottir & Petursdottir 2014; Birgisdottir 2011; Kristinsson 2005). When trying to shed light on why so few men study nursing, Kristinsson (2005) found that a possible reason is the lack of role models. Male nursing students tended to experience uncomfortable attention from other students and their professors. Men in women’s occupations found that it was a threat to their manhood (Birgisdottir 2011), and men working in preschools experienced that people didn’t believe they chose to work there out of genuine interest in working with children (Axelsdottir & Petursdottir 2014).

Participation in the labor market

A sign of a gender-equal labor market should be that both men and women are active participants in the labor market, while they should have the flexibility to adjust work hours to make room for other activities, such as studying or raising a family.

A high share of both men and women of working age are active in the Icelandic labor market, and both men and women tend to work long hours. The labor force participation rate in Iceland measured 84 % in 2016 for people aged 16–74. Men’s labor force participation rate in Iceland was 87 % in 2016 and women‘s labor force participation rate was 80 %. The crisis of 2008 affected mostly men’s labor force participation rate. After reaching a high of 88 % in 2007, it fell to 83 % in 2012, but has now recovered to the pre-crisis level. Women’s labor force participation rate fell by only 2 percentage points, from 79 % in 2007 to 77 % in 2011, and is now higher than the pre-crisis level, as figure 3 shows (Statistics Iceland, n.d.-c).

Figure 3.

Labor force participation rates (age 16-74), 2005–16


Source: Statistics Iceland (n.d.-c).

The working week in Iceland was on average 40 hours per week in 2016, with men working 44 hours and women working 36 hours as measured by the Labor Force Survey. While this was the longest work week among the Nordic countries for both men and women, Iceland was also the country with the largest difference in working hours between men and women, with men working 8 hours more than women on average. The average work week for women has not changed much in the last couple of decades, while men’s average work week has fallen from 48 hours to 44 hours after the crisis hit in 2008, where it has stayed since 2009, as shown in figure 4 (Statistics Iceland, n.d.-c). As a member of the European Economic Area, Iceland has adopted the EU’s Working Time Directive, which limits the weekly working hours to 48 hours (European Commission, n.d.).

Figure 4.

Average hours worked per week, 2005–16


Source: Statistics Iceland (n.d.-c).

When women work on average fewer hours per week than men, it indicates that women are more likely to be working part-time. In the Nordic countries, one in four individuals works part-time, about one in three women and about one in seven men. The share of women working part-time in Iceland is 37 % while 12 % of Icelandic men work part-time (Eurostat, n.d.-a).

Research has shown that where part-time jobs are offered, the labor force participation rate of women is higher (Blau & Kahn 2013). In the Nordic countries it is more common that women with little formal education have part-time jobs, while more educated women are more likely to have full-time jobs (Wennemo Lanninger & Sundström 2014). Some sectors offer more part-time jobs than others, such as the service sector, health care, care for the elderly and infirm, in addition to education (Palsdottir 2012). For instance, 57 % of the women working for Landspitali, the national hospital, work part-time, while 35 % of the men work part-time (Landspitali 2013).

It is important that individuals have the choice of working part-time if they choose. However, if individuals are working part-time while they would prefer to work full-time they are considered underemployed. According to Wennemo Lanninger and Sundström (2014) there is not a large gender difference in those who have a part-time job and would prefer a full-time job. Around 15 % of women and 8 % of men working part-time in Iceland stated that they could not find a full-time job (Eurostat, n.d.-b). A common reason both men and women in Iceland give for working part-time is education. In 2016, 30 % of women and 57 % of men working part-time gave this as the main reason. Over 20 % of women give family reasons as the main reason they work part-time, while no man gave that response (Eurostat, n.d.-b).

Before the recession that started in 2008, the unemployment rate was similar among men and women. When the recession hit, unemployment rose sharply and reached a high of 11.9 % in May 2010. When western countries are hit by recessions, it is more common that men rather than women lose their jobs (ITUC Report 2009). Men are more likely to work in fields that depend on the economic cycle, such as construction, while women are more likely to work in services, such as the health care sector, which is much less dependent on the economic cycle (Olafsdottir 2009). In Iceland, the unemployment rate rose faster for men than women and reached a high of 13.0 % in May 2009, as many men working in construction and the banking sector lost their jobs. The unemployment rate for women reached a high of 11.8 % for women two years later, in May 2011, after cuts had been made in the public sector. Since then unemployment has fallen again and is now similar for men and women, as shown in Figure 5 (Statistics Iceland, n.d.-c).

Figure 5.

The unemployment rate, % of labor force, 2005–16


Source: Statistics Iceland (n.d.-c).

Looking at the level of education among unemployed men and women, the largest group are those with basic education. However, there is a growing share of unemployed people with tertiary education, especially among women. Of women unemployed in 2016, 30 % had tertiary education, compared to 22 % of unemployed men.

Taking leave due to childbirth

The most common reason women take a break from the labor market is due to childbirth. In a gender equal labor market, the right to take a break from the labor market due the birth of a child should be universal, and both parents should have equal rights. Iceland took an important step towards gender equality with the law on parental leave that came into effect in 2000 (Act on Maternity/Paternity Leave and Parental Leave no. 95/2000). The parental leave is nine months in total, where the mother has the right to three months’ leave and the father to another three months’ leave; additionally, they can choose how three months are divided between them. Iceland is the first country to implement a parental leave system in three parts with equal division between parts (Gislason 2007). The income parents receive during parental leave is 80 % of the average income before the parental leave started. Initially, there was no upper limit on the amount parents could receive during parental leave, but in 2005 a roof on the amount payable was introduced. In the beginning the roof was only binding for individuals with high income, but during the crisis of 2008 the roof was lowered significantly and went below median income for men in 2009 and for women in 2010 (Olafsdottir & Rognvaldsdottir 2015).

The time parents are allowed to share usually becomes time the mother uses (Gislason 2005; Jacobsen, Heegard Klynge & Holt 2013). A study from 2007 found that 98 % of mothers in Iceland took their full three months’ parental leave, compared to 75 % of fathers. A total of 83 % of fathers did not use any of the three-month period parents were allowed to share, and 8 % of fathers did not take any parental leave (Arnardottir, Hafsteinsson, & Hreinsson 2007). The share of fathers taking parental leave has fallen since the roof on payments was introduced. In 2008, 91 % of fathers took parental leave, but only 78 % did so in 2013 (Olafsdottir & Rognvaldsdottir 2015).

There is conflicting evidence on what determines whether a father takes parental leave. Arnardottir (2008) found that the higher the level of education the fathers had attained, the less time they took for parental leave. Eydal (2008), however, found that among fathers who did not take any leave were those with lower family income, and Gislason (2007) showed that fathers who use the shared time have higher income than other fathers who took parental leave.

Steingrimsdottir and Vardardottir (2015) examined the effects of the changes to the Parental Leave Act in 2000 during the initiation phase. Parents who had a child in 2001 were given the option to add one month of parental leave to the allotted six months if the additional month was used by the father. The take-up rate in that first year was 82 %. Fathers of children born before January 1, 2001 had no such right to parental leave. The authors compared the marital stability of couples who had children just before and just after the reform and found that parents who were entitled to paternity leave were less likely to divorce during the first ten years of their child’s life, the time in a relationship when the probability of a divorce is the highest.

While the act on parental leave in Iceland is firmly based on ideas of gender equality, the same cannot be said for what happens at the end of the parental leave. All the Nordic countries except Iceland have legalized the right of a child to attend preschool (Eydal & Rostgaard 2010). Children in Iceland are expected to start preschool in the year they turn 2 years old. Hence, there is a gap from the age of nine months to around two years when the child does not have access to state-subsidized daycare. During this time, parents need to find other options, either staying at home or employing private daycare services. In 2013, 95 % of children two years of age were admitted to preschool, but only 45 % of children one year of age. Ingolfsdottir (2013 & 2014) found that mothers were more likely to stay at home after the parental leave had ended and organized their life around the family, while fathers were more likely to organize their parental role around conditions at work.

The gender gap

Over the long term, there has been a trend towards a substantial reduction in the gender gap worldwide, although it has stalled in recent years (Blau & Kahn 2016). While for decades Iceland has had laws requiring equal wages for both men and women, there is still a significant gender wage gap (Olafsdottir & Rognvaldsdottir 2015). The unadjusted gender wage gap in Iceland is slightly higher than in the other Nordic countries, which is not unexpected as the correlation coefficient between the female employment rate and the unadjusted gender wage differential among European countries calculated from 2006 to 2015 is around 0.45. Hence, the higher the female employment rate, the higher the gender wage differential (Eurostat, n.d.-c, Eurostat, n.d.-d, and author’s calculations).

Figure 6.

The unadjusted gender wage gap, %, 2008–16


Source: Statistics Iceland (n.d.-d).

A study conducted by Statistics Iceland (Snævarr, 2015) showed that the unadjusted gender wage differential in the private labor market using regular wages, while falling from 2000 to 2008, remained relatively unchanged from 2009 to 2016. The unadjusted gender wage differential for the private sector fell, as a consequence of the crisis in 2008, from 22.4 % in 2008 to 16.4 % in 2016 as shown in figure 6 (Statistics Iceland, n.d.-d). The gender wage differential in the public sector was slightly lower and went from 21.2 % in 2008 to 15.9 % in 2016. The study also found that the gender wage differential was increasing with age. Among people aged 18–27 in the private labor market, men had 5 % higher wages than women in 2013, while the differential was 23 % in the age group 58–67. Women in the public sector aged 18–27 had 3 % higher wages than men, while in the oldest age group men’s wages were 22 % higher than women’s in the public sector (Snævarr 2015).

Estimating the wage differential using the Oaxaca-Blinder decomposition showed that in 2008–10, while the total gender wage gap was 14.6 %, the unexplained gender wage differential was 5.8 %. The gender wage gap fell gradually from 2008–10 to 2011–13, when the total gender wage gap measured 12.5 %, and the unexplained gap thereof was 5.0 %. The development can be seen in table 1. While the total gender wage gap is larger in the private sector than the public sector, the size of the unexplained gender wage gap is comparable in the two sectors.

Table 1.

The total gender wage gap and the unexplained gender wage gap, %, 2008–13

Labor marketPrivate sectorPublic sector

Source: Snævarr, 2015

Estimating wage equations separately for men and women showed that university education had a similar effect on wages for both genders. Having subordinates gave men more of a wage advantage than women. A wage advantage was also given to men working in the private sector compared to the public sector. Having a spouse had a positive effect on the wages of both men and women, but the effect is much larger for men than for women. The same applied for having children in the home.

Comparing this study to studies from the other Nordic countries shows that the gender wage differential was largest in Denmark, but smallest in Iceland for the economy as a whole. In the private sector, the wage differential is largest in Iceland and in Norway, and it was smallest in the public sector in Iceland. Just as wage studies in other countries have shown, the largest explanation for the gender wage differential is that men and women work in different sectors of the economy and in different occupations (Snævarr 2015).

The Great Recession that started in 2008 affected the development of wages. According to a study done by the OECD (2014), almost half of all workers in the 21 OECD countries in the study saw the real value of their earnings fall in 2010 and a third of all workers experienced a fall in nominal earnings. However, from the data it was not possible to determine whether this was due to a cut in hourly wages, or due to reduced hours of overtime or lower bonuses. The effects on wages in Iceland were even more dramatic. From 2008 to 2009, nominal hourly wages for regular work fell by 4.1 % on average. Men’s wages fell more than women’s, with the mean change of -5.7 % for men and -3.0 % for women. Conditioning the change on those having experienced a nominal wage cut from 2008 to 2009, the mean nominal wage change was -8.2 %, -9.4 % for men and -7.3 % for women (Olafsdottir 2017).

This change in nominal hourly wages was not uniform across the wage distribution. Figure 7 shows the nominal wage change from 2008 to 2009 for each wage decile, from 1 being the lowest wage group to 10 being the highest. The lowest wage group received on average a nominal wage increase of 5 % and is the only wage group that received an increase in nominal wages, while the second wage group did not see a change in wages. All the other wage groups received a decrease in nominal wages from 2 % for the third wage group, up to an 11 % cut for the highest wage group. Hence, not only did the mean wage level fall, the dispersion of wages fell as well. Furthermore, the wages of women fell less than the wages received by men, leading to a fall in the unadjusted gender wage gap (Olafsdottir 2017).

Figure 7.

Nominal wage changes by deciles, 2008–09


Source: Olafsdottir, 2017.

Research has shown that men are generally considered more qualified than women, even if the only difference is the name on a CV (Moss-Racusin, Dovidio, Brescoll, Graham & Handelsman 2012). This type of result has been supported through an Icelandic experiment where the man was generally offered higher wages—by both men and women—than an equally qualified woman. Furthermore, the wages women were recommended to ask for were lower than the wages men were recommended to ask for (Karlsson, Jonsdottir, & Vilhjalmsdottir 2007).

In Spring of 2017 the Act on Equal Status and Equal Rights of Women and Men (Act No. 10/2008) was amended to require all organizations with 25 or more employees to adhere to the Gender Pay Standard, and the first organizations have already been certified. While the gender pay standard is an important tool to move towards closing the gender pay gap, it does not by itself ensure gender wage equality. The main purpose of the standard is to ensure that the evaluation of work and awarding of wages within each workplace is gender-neutral. This also holds for hiring and promotion methods within the workplace. The standard, hence, ensures that equal wages are paid for equally valued work, but there might still be a gender pay gap within the organization based on horizontal gender segregation (Icelandic Women’s Rights Association, n.d.; Velferdarraduneytid, n.d.).

As a response to the crisis of 2008, and in order to increase the share of women in the corporate world, in 2013 Iceland followed in the footsteps of Norway by introducing a gender quota law. The law requires that the boards of companies with more than 50 employees consist of at least 40 % of each gender (Olafsdottir & Rognvaldsdottir 2015). The Icelandic gender quota law is more extensive than the Norwegian law in that it applies to both public limited companies and private limited companies, as well as pension funds, while the Norwegian law only applies to public limited companies (Rafnsdottir & Thorvaldsdottir 2012). However, in the Icelandic gender quota law, unlike the Norwegian law, there are no sanctions if the board does not fulfill the minimum of at least 40 % of each gender. In 2016, 26 % of all board members were female, compared to 22 % in 1999. The biggest change can be seen in larger companies. In 1999, 7 % of board members in companies with at least 250 employees were female, while that ratio had risen to 39 % by 2016. Although the share of women on company boards has increased, the average ratio has not reached the legal minimum.

Discussion and conclusion

The definition of gender equality between women and men refers to the equal rights, responsibilities and opportunities of women and men, and girls and boys (UN Women, n.d.). In Iceland, the equal rights of women and men are guaranteed by law and big strides have been made towards gender equality in the labor market in recent decades. Iceland is considered the best country in the world in terms of gender equality.

For gender equality, men and women should have the same opportunities in choosing education and seeking employment in their field of choice. The fact that women and men tend to work in different fields is not in itself a sign of inequality, as long as women and men have equal opportunity to enter every occupation. The fall in the Dissimilarity Index for Iceland after the crisis of 2008 suggests that there is currently less gender segregation through occupations than before. Still, while there are more women than men enrolled at university, men are the majority of students enrolled in science, technology, engineering, and mathematics (STEM). Even though women are increasingly entering male-dominated fields of study and occupation, they face adverse gender stereotypes, workplace culture is often gendered and, in the worst-case scenario, workplaces are ripe with sexual harassment. It can also be hard for men to enter female-dominated fields, as they are often faced with prejudice. For instance, men who like to work with children are often viewed with suspicion. Hence, it seems that there is not equal opportunity in entering the field of choice.

In the labor market, women and men should have the same opportunities to work. Both women and men work long hours in Iceland. However, men’s working hours fell during the crisis and have remained at that lower level, thereby reducing the difference in the working hours of women and men. Women are more likely to work part-time, and when asked why, one in five women cited family reasons, while not a single man gave that reason. While women and men have the same right to parental leave in Iceland, it is generally the mother who takes longer parental leave. It is also the mother who more often bridges the childcare gap between parental leave and preschool. The system is equal on paper, but not in practice.

In a gender-equal world, men and women are paid equally for equal contribution to the labor market. A part of the gender wage differential can be explained by women and men working in different occupations. However, even when controlling for occupation, education and work hours, there is a significant unexplained wage differential between men and women. The wage differential fell during the crisis as men’s wages were cut more than women’s wages, as higher wages were cut more than lower wages. The Equal Pay Standard, if effective, could prove a valuable tool to reduce the gender wage differential further.

In addition, to ensure gender equality in the labor market, men and women must have equal access to positions of power. Introducing gender quotas on the boards of companies in 2013 increased the share of women on boards in larger companies, but has not improved the number of female board members in small companies exempt from the law or in executive positions within companies.

The status of women in the Icelandic labor market has improved in the last decade, both due to changes in the legal environment as well as due to the effects of the crisis of 2008. The gender wage differential fell as a result of the crisis, while the law on gender quotas on corporate boards was introduced in the wake of the crisis. Most recently, a law on the Gender Pay Standard was introduced. Still, as there is still a significant gender wage gap, the contribution of women in the labor market is valued less than men’s contribution. Furthermore, women are more likely to take a break from the labor market due to child-rearing; they also work shorter hours, and are less likely to serve on corporate boards. Hence, while Iceland is considered at the forefront of gender equality in the world, there is still some way to go before gender equality is reached in the Icelandic labor market.


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