Bjarni Már Gylfason The economic effect of The economic effect of free movement of labour free movement of labour Intustry perspective Intustry perspective EURES mobility conference EURES mobility conference Bjarni Már Gylfason Chief Economist Federation of Icelandic Industries June 22 nd 2007

Bjarni Már Gylfason Production = Prosperity Fixed capitalHuman capital Natural resources Technological knowledge

Bjarni Már Gylfason Imigration and economic growth - A clear positive correlation

Bjarni Már Gylfason Uneymployment and imigration - A clear negative correlation

Bjarni Már Gylfason Overall economic effects of foreign labour in recent years Without the use of new foreign workers in these years: –Inflation had been 0,5-1,5% points higher –Central bank interest rates 1,5-2,5% points higher –Economic growth 1,5-2,5% points lower. –Private consumption 3,5-6% points less. –Business investments 2-3% points less. –Purchasing power 2-4,5% points less. –Household wealth 2-5% points less

Bjarni Már Gylfason Proportion of foreigners working in different sectors 1998 and 2005

Bjarni Már Gylfason Problems / Challenges in the near future Wage agreements Future wage agreements Changing economic situation in Iceland Social adjustments / changes