It is not unusual for me to hear others commenting on the high salaries of the northern European countries, usually when having dinner at bars or restaurants across com European countries. “The salary you are likely to earn in Germany is way better!” They say. “Four times our median income if you go to Norway!”. But what about Iceland? What is the average salary in Iceland?
Salary in Iceland
According to Icelandic government statistics as of July 2020, the average salary in Iceland is 573,000 ISK, about € 3,500 (USD 4.136) at current exchange rates. The mode salary is 473,000 ISK or € 2,900; both figures are net. These current values represent an increase of 0.9% compared to the previous year.
There is no official minimum wage in this Nordic nation. This is something that tends to confuse many as most of my readers come from countries where there is a minimum wage law. In Iceland, Minimum wage is usually determined by collective agreements. These are negotiated within each economic sector. The lowest salary in Iceland, which is generally around € 2,000 gross, are commonly earned by people around 18 years of age with about 6 months of experience in the same company.
The population with the highest income is Garðabær, a municipality located on the outskirts of Reykjavik, the capital of Iceland. It is closely followed by Kópavogur, another city that borders directly with Reykjavik in the southern area.
Income tax in Iceland
Even though the salaries mentioned above are net and taxes were discounted, we also consider it essential to know the tax rates that apply to these earnings.
The monthly income taxes for salaries below ISK 893,713 (€ 5,489 or USD 6484) are 36.94%, and it raises to 46.24% if earnings are above that income threshold. The profits can come only from the salary or through any other source of income, such as financial assets. The first ISK 55,895 are exempt from paying taxes.
Gender Pay Gap in Iceland
Although Iceland has a population of around 337,000 people, it has been the world’s benchmark for gender equality for almost a decade. In January 2018, Iceland made it illegal for women to earn less than men if they both work in the same job, position, and have the same responsibilities. Wages in Iceland are paid according to efficiency, performance, and the skills of the worker and not by gender.
The data for this 2019 indicates that men have earned an average of 5.8 million Icelandic crowns, while women about 4 million.
The unemployment rate in Iceland
The current unemployment rate in Iceland is around 3.55%; this rate is slightly higher in men (3.7) than in women (3.3). The unemployment rate for those over 25 years of age is 9.2% for men and 5.9% for women.
The industries that generate the most employment for the Icelandic economy are the fishing, tourism, manufacturing, aluminum, and services industries.
The cost of living in Iceland
When comparing salaries, we should not only pay attention to how high or low it is. Some several circumstances and variables can tell us if the wage earned is indeed in line with the daily life cost of the country.
We have said it more than once in this blog, Iceland is not a cheap country. Any tourist who has stepped on this land knows it. And no, it is not a stretch; If we take the current economic data, Iceland ranks as the fourth most expensive country on the planet just behind Bermuda, Switzerland, and Hong Kong.
Many of you will ask yourselves, but why is it so expensive? Well, one of the main factors to take into account is the location of the country. Iceland is a somewhat remote island. Although modern airplanes take us there in a couple of hours from continental Europe, the island is isolated in the middle of the North Atlantic. Because of this, the island’s climate is harsh and severe. It isn’t easy to sow and grow things in Iceland. For this reason, fresh fruits and vegetables in supermarkets and stores are imported, with the extra cost that this entails.
To all of that, we must sum up all the taxes. We already discussed how the income or earnings tax. But you have to add other taxes such as VAT and the burden on alcoholic beverages. VAT in Iceland is currently 24%.
As in any country, the price of a house varies according to the location, type of house, size, year of construction, etc. the Renting average cost is usually around € 300 or USD 350 if it is a shared rental. If it is the entire apartment, then it can be around € 700-2100 / USD 825 – 2480 per month.
If instead of renting, you prefer to buy a house, the average price is approximately 40-50 million ISK in Reykjavik. That is, about $ 289,000 or € 362,500. Prices will be lower the more we move away from the big city.
Cost of public transport in Iceland
The price for a one-way ticket is 400 ISK for adults. About $ 2.80
In the case of taxis, they are quite expensive. A trip can range from $11 to € 35, especially if the service is requested in the city and at night.
Price of alcohol in Iceland
In the case of alcoholic beverages, taxes are proportional to the alcohol content of the drink. So you can get a rough idea, summing up taxes, recycling fees, and other charges, these can represent 80-90% of the cost of the drink. So, if you come to Iceland on a budget and go out to party, you better opt for juice.
For instance, a bottle of Beefeater of about 70cl costs about € 13 or $15 in a supermarket in Spain. In Iceland it can only be bought in the official state store “Vínbúðin” and costs 6,599 ISK, that is, about € 40 or $47 for the same 70cl bottle. Those are the official store prices. Now, in bars and restaurants, the drink will always be more expensive. On my last outing with a friend from Spain, they charged her € 29 / $34 for a glass of Baileys. It was less than 100ml. She still cries about it. You are warned. Water seems the healthiest and most natural option now, right?
Cost of food in Iceland
Like many things in Iceland, food is not cheap, as many daily products must be imported. The monthly expense can be around $300-550; it all depends on your consumption habits and, of course, the supermarket of your preference.
In a supermarket like Krónan, which is a low cost one, we have the following prices:
Orange juice 500ml: € 1.22
Pack of six eggs: € 3.20
Bacon: € 11 per kg
Red pepper: € 3 per kg
Can of beans in sauce: 0.54 cents.
Does it cost a lot to eat out in Iceland?
Here the prices can vary greatly depending on what is consumed and where. Eating in restaurants and in Reykjavik will always be more expensive. A menu in a good restaurant can cost over $120 without adding beverages. In less fancy places, the main dish can cost around $40 and the cheaper options, which are usually a fast-food type, about $ 23.
If it’s still too much for you, you can always eat Icelandic hot dogs! For about $7, you can have a combo menu.
Salary in Iceland: Average wage and Cost of Living
We hope you have a more realistic idea of what it means to have an Icelandic salary with the Nordic cost of living. And if you ever consider coming to Iceland to reside either temporarily or permanently, you already know exactly what to expect.
Those of you who come for tourism, there is always a way to save some bucks! We have a few entries with thousands of tips and tricks to make your trip more affordable.