This review of the skills and labour market integration of immigrants and their children in Iceland is the fifth in a series conducted by the International Migration Division in the OECD Directorate for Employment, Labour and Social Affairs.
Relative to its population, Iceland experienced the largest inflow of immigrants over the past decade of any OECD country. Four out of five immigrants in Iceland have come from EU and EFTA countries, although there has been a recent increase in humanitarian arrivals. Employment rates are the highest in the OECD, for both men and women, reflecting the recent and labour market-oriented nature of most immigration to Iceland. However, immigrants’ skills are often not well used, as witnessed by the high rate of formal overqualification. A particular challenge is the poor language skills of immigrants in Iceland, which can have a detrimental effect on their integration into society. There is also evidence of the growing settlement of migrants in the country, making integration a particularly pertinent topic.
In response to these challenges, Iceland’s Ministry of Social Affairs and Labour has since 2022 been developing Iceland’s first comprehensive integration policy. The policy covers the years 2024‑38 and is to be accompanied by a National Action Plan intended to achieve the targets outlined in the policy. The targets are along three main pillars: participation, equality and diversity; information, access and services; and communication and language. Alongside the drafting of the policy, the OECD conducted this independent review, providing input to the ministry where possible.
Against this backdrop, this report provides an in-depth analysis of the Icelandic integration system. The report is structured as follows. Chapter 1 provides a general assessment along with a set of recommendations. Chapter 2 presents an overview of the context in which integration in Iceland takes place – providing a demographic overview of the migrant population, the social and labour market context, along with the key stakeholders and policy instruments. Chapter 3 examines the skills needed to effectively integrate into Icelandic society, with a focus on language and ways to tackle overqualification. Chapter 4 turns to the labour market situation of migrants in Iceland, highlighting their high employability but also areas for improvement, pertaining to activation efforts, job quality and discrimination. Chapter 5 provides a detailed look at the challenges that youth with migrant parents face in the Icelandic education system and their first steps towards employment.
The evidence presented in this report builds on cross-country survey data, notably the harmonised European Union Labour Force Survey (EU-LFS), as well as the national Labour Force Survey (Vinnumarkaðsrannsóknin). Other surveys used include the Programme for International Student Assessment (PISA), the European Union Survey on Income and Living Conditions (EU-SILC), and the European Social Survey (ESS). Due to the absence of data on integration outcomes, the OECD entered into a co‑operation with Varða – Rannsóknastofnun vinnumarkaðarins, a labour market research institute, on a survey to measure the integration outcomes of migrants in Iceland. The survey included questions on language, skills recognition, perceived discrimination, in addition to more basic variables on employment, education and living conditions. Outside of survey data, register-based data was used where possible, in addition to ad hoc requests from various stakeholders in the integration framework.