Causes of Inequality and Poverty

    Absolute poverty in Iceland is very low. According to World Bank Data, the percentage of Iceland residents living below the international poverty line (the equivalent of $1.90 per day) from 2004 to 2011 was level at 0.1%. ("Poverty Gap at $1.90 a Day (2011 PPP) (%)") But there is still relative poverty in Iceland. According to RÚV, Iceland’s state-sponsored news outlet, about 9 percent of Icelanders live below the low-income threshold, defined as 170,000 ISK per month in disposable income. The Welfare Watch, an Icelandic government subsidiary, has assessed that to alleviate poverty, the government should pay base child benefits untied from income, and reduce housing costs for poor Icelanders. ("Over Six Thousand Icelanders Live in Severe Poverty") If we take this agency’s position at face value, austerity policies in government benefits are a cause of poverty in Iceland, i.e. the government isn’t spending enough on welfare to keep all of its citizens out of poverty.

    Income inequality in Iceland is also very low. In 2016, Iceland had the lowest Gini Coefficient in Europe, at 24.1. (Eliason) This can be attributed to multiple factors. Union participation in Iceland is extremely high, (“Inequality Is the Lowest in Iceland and Has Decreased since 2007”) meaning lower-income workers are more likely to have negotiating power over their wages and benefits. In 2018, Iceland became the first country in the world to legally enforce equal pay. Income inequality between genders is a major component in general income inequality, so this measure is likely to improve income equality. (Henley) However, inequality in capital ownership is increasing, with 5 percent of Icelanders owning half of the countries wealth as of 2018. (Fontaine) Without a doubt, this contributes, and will continue to contribute to, income inequality in Iceland. 

Works Cited

“Poverty Gap at $1.90 a Day (2011 PPP) (%).” Data, data.worldbank.org/indicator/SI.POV.GAPS?end=2011.

“Over Six Thousand Icelanders Live in Severe Poverty.” Iceland Review, Iceland Review, 29 Jan. 2015, www.icelandreview.com/news/over-six-thousand-icelanders-live-severe-poverty/.

Eliason, Matt, et al. “Iceland Had Lowest Income Inequality in Europe in 2016.” Icelandmag, icelandmag.is/article/iceland-had-lowest-income-inequality-europe-2016.

“Inequality Is the Lowest in Iceland and Has Decreased since 2007.” OECD Instance, www.oecd-ilibrary.org/economics/oecd-economic-surveys-iceland-2017/inequality-is-the-lowest-in-iceland-and-has-decreased-since-2007_eco_surveys-isl-2017-graph65-en.

Henley, Jon. “'Equality Won't Happen by Itself': How Iceland Got Tough on Gender Pay Gap.” The Guardian, Guardian News and Media, 20 Feb. 2018, www.theguardian.com/world/2018/feb/20/iceland-equal-pay-law-gender-gap-women-jobs-equality.

Fontaine, Andie Sophia. “From Iceland - Iceland's Richest 5% Own About Half The Country's Wealth.” The Reykjavik Grapevine, 11 Apr. 2018, grapevine.is/news/2018/04/11/icelands-richest-5-own-about-half-the-countrys-wealth/.




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