The Reasons Why Iceland Is So Expensive

iStock.com/Leopatrizi
iStock.com/Leopatrizi

More Americans are taking vacations to Iceland, and many are returning home with sticker shock. According to Iceland Magazine, “consumer prices in Iceland are on average 66 percent higher than in Europe,” with costs in the land of fire and ice outpacing famously expensive countries such as Switzerland, Norway, and Denmark.

Just look at the prices for food in Iceland’s capital of Reykjavík: A pre-made sandwich at a grocery store can cost more than $10, while a single teabag (with “free” hot water) can run you $4. A meal for two at a casual restaurant regularly costs in the ballpark of $80 to $100 while a beer at a pub downtown goes for about $12 during regular hours. In other words: Visiting Iceland is sort of like being trapped in an airport ... except this airport has volcanoes.

As for what makes the country so expensive, there’s no single explanation. It’s a combination of politics, economics, and geography.

Let’s start with geography. Since Iceland nearly tickles the Arctic Circle, its climate is not conducive to farming. There are few native crops and the growing season is short. According to a report from the European Consortium for Political Research [PDF], Icelanders produced “64.9 percent of their own food and beverages in 2010.” The rest of that food was imported. The same goes for most other goods.

The cost of importing those products—usually from the UK, Germany, the U.S., and Norway—gets passed on to the consumer. In Iceland, imported sweets and alcohol are slapped with an extra cargo fee and all wheat products are subject to a relatively high tariff. So prepare to shell out for that bread.

The country’s currency also keeps costs high. In 2008, Iceland was plagued by a financial crisis that saw the country’s three banks fail and the value of the national currency, the króna, plummet. But the country has seen a miraculous recovery. Since 2009, the króna has strengthened by a whopping 40 percent against the euro. In 2017, it was deemed the world's best-performing currency. That has caused the purchasing power of the U.S. dollar to decrease.

Taxes also add to the cost. Like most countries, Iceland has a valued-added tax, or VAT. (In the United States, a close equivalent would be the state sales tax.) The VAT for goods in Iceland is 24 percent, while the VAT for foodstuffs is taxed at a discounted rate of 11 percent. For Americans, these tax rates are very high. Most states don’t even charge a sales tax on food at all.

(However, while taxes are a contributor, they are not the cause of high costs in Iceland. Many countries have similarly high VAT rates and are not as expensive. Germany, for example, has a 19 percent VAT—and a 7 percent VAT on foodstuffs—but is home to significantly cheaper groceries than those sold in the United States. It’s also important to know that, as an international visitor, you can get some of your VAT refunded.)

Rather, the biggest contributor to costs in Iceland is the country’s high standard of living. In Iceland, the average pre-tax income is about $60,000, with a median income of about $47,000. (In the U.S., the average income is about $48,150 with a median of around $31,000.)

In Iceland, approximately 92 percent of the country’s working population is part of a labor union. Consequently, people who work jobs that Americans might consider “low-wage”—especially jobs in the service industry—earn much higher wages and enjoy more benefits. In fact, the national monthly minimum wage for most industries is 300,000 ISK, or about $2500 per month. That’s equivalent to $15 an hour. But since employees earn more, customers generally pay more for goods.

And, of course, any tourist complaining about high prices should take a moment to point a finger at the mirror. Since 2010, Iceland has seen tourism multiply fivefold. With a growing number of people competing for a limited supply of goods, prices have continued to rise; the dastardly supply and demand curve strikes again!

Australian Accounting Firm Offers Employees 12 Weeks of ‘Life Leave’ to Strike the Perfect Work-Life Balance

iStock.com/karenfoleyphotography
iStock.com/karenfoleyphotography

What would you do if you could take a three-month vacation each year? Would you book a flight to Hawaii, catch up on your favorite Netflix shows, or simply spend some quality time with your partner, kids, or dogs? The employees at one Australian accounting firm undoubtedly have a few ideas about how to spend the six to 12 weeks of “life leave” they will soon be granted.

As Travel + Leisure reports, Ernst & Young Oceania decided to introduce more flexible work hours in an attempt to attract and retain top talent. “We’re innovating so we don’t lose these people while they pursue passions outside of work,” company official Kate Hillman told The Independent. Hillman went on to cite volunteer experiences, training programs, and even a trekking trip to Nepal as different ways that employees might take advantage of the new policy, which goes into effect April 1.

Employees can either use their leave all at once or split it into two smaller vacations. The only catch is that the leave is self-funded—so it’s essentially an unpaid vacation. Still, if someone has the burning desire to backpack through Europe for a couple of months, or work on a project, it’s a safer option than quitting their job only to return unemployed and broke.

In addition to this policy, employees can choose to reduce their hours to a part-time schedule for up to three months each year. Parents may also choose to take advantage of a term-time arrangement, which lets them work regular hours when school is in session, then take time off during school holidays.

According to the firm’s research, flexibility at work boosts employee engagement by 11 percent. There are plenty of other reasons to take a vacation, too—not the least of which is evidence that time off may help you lead a longer, healthier, and happier life. Plus, you’ll come back refreshed and motivated, so your boss will be happy, too.

[h/t Travel + Leisure]

The World's 10 Most Expensive Cities

An apartment complex in Hong Kong
An apartment complex in Hong Kong
iStock.com/Nikada

If you think San Francisco is pricey, you should see some of the other metropolises that appear in a new ranking of the 10 most expensive cities in the world. As The Real Deal reports, Singapore, Paris, and Hong Kong have been jointly named as the three cities with the highest cost of living in a new analysis by The Economist Intelligence Unit (EIU).

It was the first time in the history of the Intelligence Unit’s Worldwide Cost of Living report that three cities have tied for first place. Billing itself as a global business intelligence group, the EIU takes the prices of more than 400 items into consideration for its annual list, including food, clothing, household supplies, private school fees, and recreation.

Singapore's appearance on the list is no surprise, considering that it has been crowned the world’s most expensive city for the past five years in a row, and Paris has consistently made the top 10 since 2003. Hong Kong, meanwhile, rose three places in the newest ranking, while Osaka, Japan rose six places.

New York City and Los Angeles also made the top 10 list this year, tying with other cities for fourth and fifth place, respectively. This is partly due to exchange rates.

“A stronger U.S. dollar last year has meant that cities in the U.S. generally became more expensive globally, especially relative to last year’s ranking,” the report notes. “New York has moved up six places in the ranking this year, while Los Angeles has moved up four spots.”

Check out the 10 most expensive cities below, and visit the EIU’s website to download a full copy of the report.

  1. Singapore; Hong Kong; and Paris, france (tied)

  1. Zurich, Switzerland

  1. Geneva, Switzerland; and Osaka, Japan (tied)

  1. Seoul, South Korea; Copenhagen, Denmark; and New York City (tied)

  1. Tel Aviv, Israel and Los Angeles (tied)

SECTIONS

arrow
LIVE SMARTER