The following OECD assessment and recommendations summarise Chapter 5 of the Economic Survey of Iceland 2006 published on 9 August 2006.
Human resource development is essential to future economic performance
With the growing importance of sectors such as financial intermediation, demand for a skilled workforce has increased. Human capital formation is also essential for the development of technology- and knowledge-intensive industries, whose share in Iceland’s value added is still quite low. The authorities revamped the education system in the mid-1990s and further major reforms are being implemented or under consideration. They have also considerably increased education expenditure, which is now the highest in the OECD relative to GDP. Nonetheless, generating a qualified labour force across the whole skills spectrum that is able to adapt to changing market needs remains a challenge. Despite greatly increased funding, educational achievements at the end of compulsory schooling, as measured by PISA test scores, are disappointing compared to other countries, with few signs of improvement. Moreover, there is a persistent gap in between low skilled and high skilled in the labour force. While upper-secondary graduation rates have improved recently, they are still comparatively low, and other Member countries have made more progress in this respect. Thus, relative to the OECD average, attainment at the end of upper-secondary schooling is now less favourable for younger people than for older people. By contrast, the proportion of those who acquire higher education qualifications is satisfactory by international comparison.
Compulsory education needs to produce better results at lower cost
The devolution of responsibility for the funding and operation of compulsory schooling to the municipalities ten years ago reflected a general trend towards decentralisation in Iceland as well as the belief that the system should be more responsive to local needs. Outcomes have not been satisfactory so far. While per student spending has grown sharply due to a strong rise in the number of teachers, this has not been reflected in educational achievements, which are depressed by poor test scores of young males in rural areas. Policies should be directed at ensuring that children from rural areas, who perform poorly in PISA ratings, leave school with a basic set of competencies in reading, mathematics and problem-solving. The strong expansion in teaching staff has not been accompanied by a rise in average qualification and the proportion of licensed teachers is unacceptably low in some rural areas. To narrow regional differences in educational achievement, the share of qualified teachers in rural areas should be increased. More generally, the focus should be on teacher quality rather than quantity. This implies a reconsideration of the evaluation system. If schools’ self-evaluation procedures remain unsatisfactory, the central government’s quality control has to be re-enforced. The shift of some subject matter to compulsory education in the context of broader reforms should have positive effects on student achievements, provided it is accompanied by increased teaching hours. Hence, to accommodate the enrichment of the curriculum at the compulsory level, the effective teaching time -- which is an unusually low proportion of teacher’s working time -- will need to be increased.
Upper secondary attainment is still unsatisfactory
One reason for relatively low upper-secondary attainment may be the unusually long time it takes to acquire such a qualification. Most students take the university entrance examination only at the age of 20. The authorities are preparing reforms that will reduce the duration of upper-secondary education by one year, while lengthening the school year somewhat. It needs to be ensured -- via an increase in teaching time and a careful adjustment of curricula -- that the planned reduction in the duration of upper-secondary schooling does not adversely affect educational quality and outcomes. Whereas students now all tend to complete both lower and upper secondary education at about the same age, the best performing among them should be encouraged to make use of the existing flexibility and finish studies earlier. A long standing problem is the stagnation of vocational graduation rates, apparently reflecting the low reputation of this track. Potential drop-outs should be encouraged to select vocational programmes through increased counselling and a broader choice of programmes.
Higher education needs to maintain high standards in face of enormous student inflows
The major issue regarding higher education is that quality might suffer in the face of an explosion of enrolment, which has doubled over the last decade, leading to substantial spending pressures. Legislation that becomes effective in mid-2006 addresses these concerns. The new legislation governing higher education, which aims to ensure educational quality by stricter certification and evaluation requirements is welcome and should be swiftly implemented. An issue not dealt with is the introduction of tuition fees in the public sector. Given the private returns to higher education, tuition fees should be introduced for public institutions, with a view to reducing the length of education, making institutions more responsive and providing a much needed source of finance. At the same time, the income-contingent student loan programme could be improved. Another concern is the fact that the rapid expansion of higher education and development of a more comprehensive system has crowded out studies abroad. With those studying abroad stagnating, their proportion has rapidly declined. Instead of trying to offer a full range of tertiary programmes, studies abroad should be encouraged, in particular at the graduate and doctoral stages of higher education.
Expenditure on educational institutions, 2002
1. Data refer to 2001.
Source: OECD, Education at a Glance, 2005.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded. It contains the OECD assesment and recommendations but not all of the charts included on the above pages.
The complete edition of the Economic Survey of Iceland 2006 is available from:
For further information please contact the Iceland Desk at the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by Hannes Suppanz and Peter Tulip under the supervision of Patrick Lenain.