Unions Oppose Changes To The Unemployment Insurance Ac
12. February 2026A Clear Demand: Withdraw The Bill
The Commerce Federation of Iceland (LÍV) strongly opposes the Government’s bill proposing amendments to the Unemployment Insurance Act and the Act on Labour Market Measures. The bill provides for the shortening of the benefit period from 30 months to 18 months and for a significant tightening of entitlement conditions.
In its submission to Parliament’s Welfare Committee, LÍV reiterates that unemployment insurance constitutes one of the fundamental security systems for working people. These rights are not automatic; they are earned through participation in the labour market and provide essential security when individuals lose their employment. The proposed changes amount to a serious curtailment of rights and will weaken the position of those who are most vulnerable in the labour market.
The broader context must be considered
The authorities have referred to comparisons with other Nordic countries in support of the proposed amendments. LÍV points out that such comparisons are incomplete unless they take into account total expenditure on jobseekers and the scope of active labour market measures. In its submission, LÍV notes that Iceland allocates proportionally less funding to such measures than many neighbouring countries. In LÍV’s view, it is therefore misguided to shorten the benefit period without a clear plan to strengthen labour market programmes, ensure their funding and establish a credible policy on activation and return to employment.
LÍV emphasises that the length of the benefit period must be considered in conjunction with the services, counselling and educational opportunities available to jobseekers. Without such analysis, it is difficult to assess the impact of the bill on individuals and on the labour market as a whole.
A flexible labour market requires a strong safety net
The Icelandic labour market is characterised by flexibility and relatively limited employment protection in international comparison. One of the foundations of this arrangement has been workers’ entitlement to unemployment insurance. LÍV warns against weakening that safety net. Although there are signs of cooling in the economy, unemployment remains low in international comparison, as does long-term unemployment. In LÍV’s assessment, no compelling need has been demonstrated for the far-reaching changes proposed in the bill.
Broad opposition from the trade union movement
VR has also opposed the bill, stating that it represents a serious curtailment of workers’ rights. VR criticises the fact that the changes appear to be driven primarily by fiscal retrenchment and that there is a lack of analysis of their consequences.
The Icelandic Confederation of Labour (ASÍ) has likewise called for the bill to be withdrawn and has strongly criticised the lack of consultation. According to ASÍ, the proposals run counter to decades of established practice of tripartite cooperation between labour market parties and the Government in matters concerning fundamental workers’ rights.
A clear demand: withdraw the bill
LÍV proposes that the bill be referred back to the Government for further consideration and that such work be undertaken in genuine consultation with the trade union movement. Forcing through amendments to such a significant rights-based system without consultation would set a dangerous precedent for the future.
Unemployment insurance is a cornerstone of income protection for working people and an integral part of the Icelandic labour market model. LÍV will continue to safeguard the rights of its members and insist that any changes to the system be prepared on sound grounds and in full consultation with the social partners.
LÍV Submission - Icelandic only
VR Submission - Icelandic only
ASÍ Submission - Icelandic only