Unemployment, Debts Drowning Icelanders

REYKJAVIK, Iceland - "For Rent" signs hang on every few storefronts on Laugavegur, Reykjavik's main shopping street, a visible reminder of all the businesses that flopped due to the unprecedented economic crash that hit Iceland hard last October. Less visible is the effect on people's lives as it suddenly changed lifestyles and careers.

Just last year, Iceland ranked first in standard of living in the world according to a United Nations’ human development report that measures standards of life expectancy and education in 179 countries. After the economy tanked, banks have been nationalized, savings have been wiped out from a stock market that lost 90 percent of its value and food prices have gone up as high as 12.7 percent. The unemployment rate which remained historically at one to two percent hit nine percent in April.

“Everything just collapsed,” said Berglind Sunna, 20, an employee at the Hitt Hussid youth center in Reykjavik that has been helping young adults find jobs and brushing up their resumes since the economy plunged.

“It used to be that you can walk into a shop and walked out with a job. Now it’s really almost impossible to get a job,” Sunna said.

Lavish lifestyles no more

Life is simply not the same in Iceland.

In the wake of the crisis, the krona dropped 50 percent in value and remains unstable despite a $10 billion loan granted from the International Monetary Fund and other European countries.

 Those who borrowed in foreign currency due to a once strong krona, now owe more on their loans than assets. Inflation continues to hover at 15 percent and the unemployment rate is expected to reach 11 percent this year.

The uncertainty of the economy has abruptly ended lavish lifestyles and put a hold on people’s career plans.

“People here are used to a very high standard of living and materialism is rampant here,” said Jonas Moody, a 30 year-old freelance journalist who was laid off earlier this year from Iceland Review, an Icelandic English-language magazine.

“We’re trying to make our own food at home. We try not to go out. The vacations we’re planning are now in the country instead of leaving the country. And if we do have to make a big expense, we do everything we can to see how we can make it and I think that’s how a lot of people are handling it,” Moody said.

Like many Icelanders, Moody also has a ballooning mortgage that is indexed to inflation. Moody’s original loan for his modest apartment in Reykjavik grew from ten million kronur to 13 million krona ($77,600 to $101,000 USD) although Moody has been regularly paying on time for three years.

Mortgages ballooning

“It’s just devastating when you look at your debt growing exponentially. We pay into it every month. We’re trying to pay it down and it keeps going up. I mean mentally it’s really hard to see that. And we have it microscopically compared to some people,” Moody said, adding that some of his friends has had to move in together to save money.

Hildigunnur Hauksdottir, a 43-year-old mother of four children, had worked at Landsbanki for two years before getting laid-off last October.

“Life was quite hard after I got laid off. It’s really nasty to be laid off…and I loved my job and I loved the people around me . . . I really missed it,” Hauksdottir said.

Hauksdottir’s husband was laid off from Kaupthing, Iceland’s largest bank that was nationalized, leaving them without an income for a few weeks until he found work at another firm. While Hauksdottir lost her job and some of her retirement savings in a fund that was run by Landsbanki, she considers herself fortunate that at least her family did not take out new loans to buy new things. Hauksdottir’s 60 year-old home never had any renovations and the furniture in the dining room does not match. “It’s really, really lame. It’s not shiny and new. But we like it and now we are really happy we have old, crummy furniture," Hauksdottir said chuckling.

Food prices high

Still, she has had to economize and watch her budget due to rising food prices. “They say that purchasing power has diminished by 20 percent. It has to be more. Many things that I buy in food have doubled,” Hauksdottir said, who now pays 200 kronur for a can of tomatoes instead of 90.

“I definitely buy less fruit because fruit is all imported,” Hauksdottir said.

A kilo of grapes now costs her 800 krona instead of 300 to 400 hundred kronur. For now Hauksdottir is taking economics classes at the University of Iceland for her master’s in economics to improve her chances of getting the kind of job she wants in the future.

“I’m trying to gather enough information under my belt to understand and be able to advise on mergers and acquisitions, for instance, so I have been filling in the parts that are needed. But I still have some areas where I really need to add to my knowledge,” Hauksdottir said.

Ari Eyberg, a consultant at Hagvangur, a job recruiting agency, said while many young adults have gone back to school, middle-aged adults are also taking the opportunity to go back to school during this economic lull “to refresh themselves” and be stronger candidates for jobs by the time they graduate.

Unemployed go back to school

“Many of them decided to use the opportunity to take a master’s degree in some field or area of study,” Eyberg said.

Eyberg didn’t see an increase in the number of applicants on the scale he expected during the economic crisis. While some have gone abroad for work, Eyberg said the bigger trend among the unemployed was returning to school.

Margeir Asgeirsson, a 23-year old student at Reykjavik University in engineering management, hopes to find a job after graduating in May but like many of his classmates, he has not received any job offers from any of his applications to two dozen Icelandic companies. Asgeirsson has not heard of any companies hiring within the past five months and will most likely go straight into a master’s degree after graduation, which may not be a bad option for his career.

“A lot of people are just deciding . . . to go straight into taking the master’s degree instead of working for a year, even if they had planned to work for a year or two. They’re not seeing that they will get a decent job for one or two years so they’re just applying for a master’s program now.”

While waiting for the economy to turn around, some Icelanders are taking any jobs they can find to help make ends meet. Gerdur Bjork is a 39-year-old mother who was laid off from her marketing position at Hekla car dealership in January. Bjork now works at Thorvaldsen, a bistro and bar in Reykjavik and also works part-time at Sjalfstaedisflokkurinn, the Icelandic Independence party, to pay for mounting car and house loans. Bjork said she does not think the job market looks promising at the moment and is taking classes in international business at Reykjavik University.

If Bjork still can’t find a marketing job by this fall, she plans to go back to school. Denis Wootton, a 27-year-old British citizen who has worked in Iceland for the past five years, was laid off from a construction company last October and has also taken a plunge in the restaurant industry since then. The financial crisis' impact on the construction industry is apparent throughout Reykjavik, where construction cranes stand motionless over unfinished buildings including the National Conference and Concert Center.

Construction jobs disappear

The $34.3 million project on the East Harbor includes an 1800-seat concert hall, a restaurant, shops and conference rooms. Plans to open the center by Sept. 2009 have been delayed until 2011, leaving the center as a colossal monument of Iceland’s financial fallout.

“When the economy was booming, people were getting very good wages in the construction industry; it was better than back home. Now since the . . . recession is here, you’re getting the same wages if you’re working in construction and in the kitchen; it’s pretty much the same,” Wootton said.

“I definitely cut down on my spending, work more for less, haven’t bought clothes in the last six months,” Wootton said.

Wootton now works at his third restaurant job at Café Cultura, a restaurant in the Intercultural Center that serves international cuisine. With the summer coming, Wootton said his employment will be more stable as more tourists come to visit.

“You just have to take every day as it comes...it’s not easy,” Wootton said.

With the initial shock of the crisis largely over, Icelanders are now waiting to see how the Social Democratic party elected to Parliament last month will help to stabilize the economy.

“I think that what’s weighing heaviest on people here is just uncertainty,” said Moody, the freelance journalist. “Plain and simple it’s just the uncertainty of what’s going to happen in the future - that’s economically, in the job markets, politically and socially as well.”