Hansjörg Blöchliger
Natia Mosiashvili
OECD Economic Surveys: Iceland 2025
Abstract
Over the past two decades, the quality of foundational skills, as measured by the OECD’s Programme for International Student Assessment (PISA), has declined alarmingly, jeopardizing long-term economic growth and well-being. The gap between native and immigrant students is wider than in most OECD countries. While Iceland’s decentralized school system offers numerous benefits and should be preserved, its accountability needs to be strengthened. The government should embrace comprehensive education reform, including monitoring students and schools through standardised testing; tailoring support to individual student needs and notably better language training for immigrants; streamlining the curriculum; improving teachers’ pay against more effective teacher appraisal; and better control over digital device use in schools. Given that education reforms take considerable time to yield results, action is urgent.
Iceland’s PISA scores have fallen sharply over the past 20 years and are now far below the OECD average (Figure 2.1). The results indicate that 15-year-olds in 2022 performed at a level expected of 14-year-olds four years earlier. The Covid-19 pandemic played a relatively small role in the recent deterioration as Iceland experienced few and short school closures. The long-term consequences of falling PISA scores are significant: recent OECD research indicates that a fall of 8 points in a country's average PISA score is associated with a long-term decline in the aggregate productivity level of 1% (Andrews, Egert and de la Maisonneuve, 2024). Consequently, the more than 40-point decline in Iceland's average PISA score between 2006 and 2022 could potentially reduce aggregate productivity by over 5%. At the same time, inequalities in education outcomes between boys and girls persists, and the PISA score gap between native students and those with an immigrant background is among the largest in OECD countries.
Source: OECD, PISA 2022 database.
The government has responded to the decline in education quality by adopting a comprehensive policy document in 2021, entitled “Educational Policy 2030” (EP2030). The strategy outlines five main objectives: equality, teaching quality, high skills, wellbeing, and monitoring, encompassing all levels of education. EP2030 also highlights the importance of early childhood education and development. The first action plan, implemented between 2021 and 2024, focused on school services, teacher quality and multicultural backgrounds. A second plan to 2027, targeting educational quality, is currently underway. Additionally, a new Directorate for Education and School Services, operational since spring 2024, serves as a central service and knowledge hub, supporting pre- to upper-secondary schools and developing monitoring and assessment tools.
However, EP2030 was initially considered vague and lacking the necessary financial and governance reforms to support its stated ambitions and objectives (Magnusson and Magnúsdóttir, 2024). Additionally, the policy framework appeared to be insufficiently aligned with Iceland’s decentralized education system, particularly the crucial role of municipalities and schools (see below). In response to the 2022 PISA results, the government intensified the implementation of EP2030, notably by preparing the reintroduction of standardized tests to monitor and compare student progress and provide targeted support to struggling schools. This marks a positive step towards enhancing educational quality in Iceland. As recommended by the OECD, the government should continue to review the design of EP2030 to make educational objectives and targets more actionable and adapt the policy framework to Iceland’s decentralized context (OECD, 2021).
Girls in Iceland generally outperform boys, with the gender gap being more pronounced than the OECD average, though this dynamic has evolved over time (Figure 2.2). The gap in reading is narrowing, while it is widening in science. In mathematics, results are inconsistent, with Icelandic girls performing better than their peers in the average OECD country. Although girls are more enthusiastic readers than boys in nearly all OECD countries, the reading gender gap in Iceland is particularly large. The persistent differences in PISA scores between girls and boys - regardless of which gender excels - suggest that adapting certain teaching methods to the distinct learning patterns of boys and girls could help reduce gender gaps in skills development.
Note: Score point differences between girls and boys, a positive sign indicates better performance by girls, while a negative sign indicates better performance by boys.
Source: OECD, PISA 2022 database.
The share of immigrant students has risen to 7% from 4% a decade ago, increasing the need to address the large performance gap between native and immigrant students (Figure 2.3). Half of these students are low performers, significantly higher than the OECD average of 30%, although they do not impact native students' performance (Box 2.2). The costs to learn the Icelandic language are relatively high for immigrants (because the language is complex), while benefits are relatively low (the language is spoken in one small country only and English is widely used), contributing to the significant reading score gap.
Score-point difference in reading performance associated with immigrant background, 2022
Note: Score-point difference before accounting for students' socio-economic status and language spoken at home.
Source: OECD, PISA 2022 database.
While immigrant students' English vocabulary matches that of their native peers, their Icelandic vocabulary lags significantly (Thordardottir, 2021). Given the crucial role of language skills for school and labour market success, policies should expand and enhance language training programmes for immigrant students, as recommended in the previous Economic Survey of Iceland (OECD, 2023) and (OECD, 2024). Iceland may draw on the experience of the Polish School in Reykjavik in supporting and integrating immigrants (Box 2.1).
Polish immigrants and their children constitute the largest share of the foreign-born population in Iceland. In response to the needs of this growing community, a private association established the Polish School in Reykjavík in 2008. The school offers instruction in the Polish language, as well as in Polish history and geography, complementing the national curriculum. Classes are held on Saturdays, outside regular Icelandic school hours. Notably, with the approval of the relevant school principal, the Polish School provides academic evaluations to the Icelandic schools attended by its students.
Since the 2023/24 academic year, the City of Reykjavík is covering the tuition fees for students residing in the capital, with other municipalities considering similar support mechanisms. In 2020, the school was nominated for the Icelandic Education Prize (Íslensku menntaverðlaunin) in recognition of its contribution to bilingual education, the promotion of a multicultural society, innovative teaching practices, and strong professional development.
Source: www.szkolapolska.is; OECD, 2018.
Iceland’s compulsory education system is universal and comprehensive, ensuring equal access for all students regardless of abilities. Grade retention is rare, and socio-economic background has a smaller impact on students’ mathematics performance than in almost any OECD country, although it is rising (OECD, 2023). Performance variation between schools is very low, like in other Nordic countries, indicating little influence from geographical factors such as rural remoteness or urban distress. However, within-school variation in PISA performance is among the highest in the OECD, suggesting schools partly fail to address specific student needs (Figure 2.4). To address within-school disparities, the universal school system should be complemented by targeted approaches for specific student groups. Schools and teachers should provide pedagogical and motivational support to both high performers and underperforming students, and systematically assess performance through both standardized testing and individualized classroom assessments.
Variation in mathematics performance between and within schools, 2022
Source: OECD, PISA 2022 database.
An empirical study using Icelandic data from the 2022 PISA wave tested the hypothesis that a high share of immigrants in schools reduces native students' performance due to shifted teaching attention, among others. PISA results in reading, mathematics, and science for native students were linked to various variables. As in most analyses of this kind, the composite indicator of a student's socio-economic status (ESCS) has the largest impact. Schools with a higher student-teacher ratio (larger classes) perform worse, as well as schools with a higher curriculum independence. School size has no effect on performance, suggesting no advantage for small or large schools in providing a stimulating learning environment.
Most importantly, while being an immigrant per se is associated with lower PISA scores, particularly in reading (Figure 2.3), it seems that the share of immigrants in a school has no negative impact on the performance of native students. The underlying hypothesis that a teacher’s attention or other indicators of teaching quality is shifted between native and immigrant students cannot be confirmed for Iceland. In this context, fostering all students while strengthening the language skills of immigrants should remain a core strategy in compulsory education.
Relationship between PISA scores of native students and various explanatory variables, 2022
Note: *, **, and *** denotes significance at the 90%, 95% and 99% levels, respectively. OLS regression results are based on normalized variables of PISA scores and reflect the increase/decrease in score points if the independent variable increases/decreases by one standard deviation. Estimations are run with weighted replicate samples and plausible values, accounting for the complex PISA survey design (Avvisati and Keslair, 2014). A longer horizontal bar means a stronger impact. Female, immigrant and urban are dummy variables. Curriculum independence reflects the top quarter of the most independent schools.
Source: Statistics Iceland; OECD, PISA 2022 micro data files and own calculations.
Iceland’s compulsory education system is one of the most decentralised among OECD countries, a result of the 1996 education reform (Figure 2.6). Municipalities and schools have extensive autonomy in hiring teachers, selecting teaching methods, and implementing the curriculum, significantly shaping educational outcomes. Pre-schools and compulsory schools are funded by municipalities, with an equalization fund redistributing local tax revenues to balance costs and ensure minimum standards. The small size of many Icelandic schools increases per capita costs but does not affect performance (Box 2.2). OECD-wide studies suggest that municipal and school autonomy can enhance educational outcomes, if schools are held accountable through standardized student tests or similar external assessments (Smidova, 2019) and receive targeted support (Burns, Köster and Fuster, 2016). Specifically, decentralised school systems are associated with higher PISA performance, provided performance is monitored and assessed by a higher government (state/regional or central) level (Blöchliger, Égert and Bonesmo Fredriksen, 2013).
Percentage of decisions taken at each level of government in public lower secondary education, 2017
Note: For methodological details refer to the Annex 3, indicator D6 (http://dx.doi.org/10.1787/eag-2018-36-en )
Source: OECD, Education at a Glance 2018.
Iceland’s highly decentralised school system fosters local ownership, allowing municipalities and schools to tailor curricula to children's needs. Teachers are motivated and committed to child development (OECD, 2019). However, the system places significant responsibility on boards, principals, and teachers to deliver quality education. The Ministry of Education and Children sets policies but rarely intervenes directly. A major barrier is the lack of nationwide data on policy implementation and student progress, limiting schools' ability to make necessary adjustments. School tests, including high-stakes exams for transition to the upper-secondary level, are teacher-assessed, which offers flexibility and maintains teacher autonomy but sacrifices comparability. Small and isolated municipalities have limited opportunities to learn from others, hindering the spread of best practices.
A recent governance reform is enhancing oversight of compulsory education. In spring 2024, the Ministry of Education and Children established the Directorate for Education and School Services (Miðstöð menntunar og skólaþjónustu) to support schools and teachers in implementing policies, designing curriculum guides, and disseminating best practices. The Directorate aims at monitoring each child's achievement and progress, ensuring appropriate instruction and support. It also provides data on the education system, helping policymakers assess strategies and identify areas for improvements. A key initiative is data-driven education, with a new database covering, among others, assessment results and school attendance (Ministry of Education, 2023). The database will help monitor students' progress and well-being, ensuring targeted interventions. This reform is very promising as it aligns Iceland’s education system with successful decentralized models in other countries, like the Netherlands (Box 2.3).
The division of responsibilities among national, regional, and local authorities, as well as schools, is much debated in education policy. Since the early 1990s, a key objective of education reform in many countries has been to delegate more decision-making power to lower levels of authority. Today, decisions regarding the organisation of instruction are predominantly made at the school level, while decisions concerning resources are often made at the school or local level. Concurrently, many countries have bolstered the influence of central authorities in setting standards, curricula, and assessments. As such, the decentralisation of regulatory and financial frameworks has often met with stronger central-level control over outputs.
The Netherlands' highly decentralised and high-performing education system offers valuable insights into how to maintain high accountability. Like Iceland, many decisions are made at the school level, with school boards playing a significant role. Few children leave school with low literacy and numeracy skills, and socio-economic background has less impact on performance compared to the OECD average. This success is due to the high autonomy of schools and boards, balanced with robust accountability systems, including national exams and the Netherlands Inspectorate of Education, which monitors quality and compliance with national standards. The Inspectorate also provides guidance and support to weak schools. Additionally, there is substantial support from school organizations, including "flying brigades" that assist schools identified as weak.
Source: (OECD, 2016) (Frankowski et al., 2018).
A key challenge for the new Directorate will be reintroducing standardized country-wide tests. Since the 1970s, these tests have been central to Icelandic education policy, especially for transitioning to upper secondary education, and they became mandatory with the 1995 compulsory school act. Criticism led to their modification into low-stakes formative assessments for the 4th, 7th, and 9th grades, but few schools used the results effectively. Digitalized testing introduced in 2018 faced repeated administrative failures, leading to the complete abandonment of standardised tests by 2022. Individual school exams now fully determine access to upper secondary education, raising concerns about quality, fairness, and equal opportunity. A ministerial report cited several reasons for abandoning standardized testing, including doubts about whether high-stakes tests reflected students' true abilities; resistance to publishing school-level test scores; and increased student anxiety (Ministry of Education, 2020). However, and as noted above, standardised exams are linked to better educational performance and equity, and anxiety is not correlated with the extent of standardised testing (OECD, 2016).
In response to the demise of the traditional standardized tests, the Directorate is about to establish a comprehensive student assessment profile (Matsferill in Icelandic) (Ministry of Education, 2020). Matsferill includes diagnostic and standardised progress assessments, screening tests, and other tools designed to hold schools accountable and support teaching and learning. Initially focusing on language development, literacy, and mathematics, it plans to extend to areas like foreign languages and natural sciences. Matsferill shares the same objective as the former national tests but with a stronger instructional focus, meaning that results are intended to directly inform work in the classroom. The tests will be compulsory for the 4th, 6th, and 9th grades. Matsferill results will be used to identify schools that need additional support, but will not be made publicly available. An initial test phase began in the 2024/25 school year, with full implementation expected by 2025/26. Improving school accountability through the Matsferill framework could considerably improve long-term productivity in Iceland (Egert, de la Maisonneuve and Turner, 2023).
The funding framework for compulsory education appears adequate, as exemplified by minimal differences in PISA scores across schools. Municipalities finance compulsory education primarily through the local income tax. A horizontal equalisation fund allocates funding per student, considering school size and other variables, to balance municipal tax capacities and funding needs. However, the government could improve fund allocation, including to lift education quality in urban schools and in schools with many immigrants (OECD, 2017). Current funding for language support to immigrants is opaque, based on school self-assessment and not well-targeted to their actual needs (OECD, 2024). Additional resources, based on systematic testing of Icelandic language skills, may be necessary (OECD, 2024). Extra funding for small schools discourages municipalities from merging schools, resulting in higher per-student costs. Moreover, larger schools can offer a broader curriculum, more specialized courses, and more interaction among students and teachers, generating knowledge spillovers, as seen in Lithuania (Shewbridge et al., 2016). Against this backdrop, the school size indicator should be reconsidered.
The curriculum - what students learn at school - is a key driver of educational quality. Most countries have adopted curricula that integrate content across various subjects and focus on developing skills rather than just knowledge (OECD, 2023). Additionally, curricula are increasingly aligned with broader education policy frameworks, particularly with student assessment and evaluation. A major challenge in curriculum reform is that its results only become visible after many years, once students who experienced the new curriculum complete compulsory education.
In recent years, Iceland has implemented several reforms broadening the curriculum and making it less specific. A skills-based curriculum introduced in 2011 and 2013 focused on seven fundamental pillars: health and well-being, literacy, sustainability, democracy, human rights, equality, and creativity. A 2021 reform added objectives to include cultural literacy, multilingualism, and diverse student backgrounds, diverting focus from core subjects. The curriculum was amended again in 2024 following the first phase of implementation of Education Policy 2030 (EP2030), reducing complexity to some extent. Against this backdrop, the curriculum and subject content should be refocused even more on the development of core skills, aligned with other pillars of EP2030, particularly the standardized Matsferill assessment framework. Iceland could take inspiration from Norway, which reformed primary and secondary education in 2020 (Box 2.4).
Like Iceland, Norway faces a structural decline in education quality as measured by the PISA test scores. Against this background, in 2020, the country implemented a new core curriculum in primary and secondary education, to help students better adapt to future skills needs. Generic competences like critical thinking and problem solving were integrated into the subject curricula. There now seems to be a stronger connection between the core principles of education and subject curricula, and subjects have become more practical and exploratory. In summer 2024 Norway implemented an education reform that strengthens the responsibility of the counties (level above the municipalities), notably with respect to a seamless transition to upper-secondary education; offers more career counselling; and strengthens absence control.
Source: (OECD, 2024).
“Curriculum overload” is often seen as a driver of declining educational quality (OECD, 2020). Overload may result from adding new content without adjusting other parts of the curriculum, impeding effective learning and skills development. Observers have expressed concern that the broad Icelandic curriculum could dilute the focus on fundamental skills like literacy and numeracy. Iceland allocates less instruction time to core subjects such as reading, writing, and literature than most other countries (OECD, 2021). Teachers are challenged to cover all topics and subject areas, often remaining superficial and neglecting topics that require deepening (Ministry of Education, 2023). Additionally, an overly broad curriculum risks misalignment with the subjects assessed in standardized tests like the Matsferill. The 2024 curriculum revision aimed at simplifying the curriculum, establishing clearer learning objectives, and harmonizing them across subject areas, which is welcome. Further streamlining should follow a few key principles to avoid overload (Box 2.5).
Countries face various challenges when reforming compulsory education curricula. Curriculum overload can result from overly ambitious reforms, especially in Iceland, where teachers, schools, and municipal boards have significant autonomy in implementing guidelines. Five key recommendations have emerged from countries when tackling overload:
Balance breadth and depth: Ensure a holistic approach to learning and skills without leading to superficial knowledge and disengagement.
Use focus, rigor, and coherence: Concentrate on a few topics to improve learning standards while ensuring each student learns at an appropriate level.
Avoid homework overload: Prevent excessive homework, which disproportionately affects disadvantaged students and increases teachers' workloads.
Mind local decisions: Balance detailed guidance and flexibility to avoid content overload, ensuring teachers have the support they need.
Redefine success and well-being: Center curriculum reform on student well-being to foster an inclusive, sustainable, and creative society.
Source: OECD, 2020.
Enhancing the quality of teaching is fundamental to educational success (Hanushek, Piopiunik and Wiederhold, 2019). While measuring teaching quality is challenging, it often results from a combination of solid subject knowledge, effective teaching methods, and positive classroom management. Teaching quality seems to be a stronger driver of PISA scores than any other educational policy in Iceland (Egert, de la Maisonneuve and Turner, 2023). Against this background, improving teaching quality should involve a comprehensive set of financial and regulatory measures and incentives, better teacher education and a well-functioning appraisal system.
Teaching quality in Icelandic schools is influenced by certain idiosyncrasies that could affect students' ability to succeed in exams (Ministry of Education, 2023):
Teachers rank lowest in the OECD regarding clarity of instructions (Figure 2.7). Icelandic teachers summarize classroom content less frequently, rarely provide feedback to students, are unclear about their expectations, and seldom challenge students intellectually (Svanbjörnsdottir, Zophoniasdottir and Gisladottir, 2023) (Gisladottir and Sigurjonsson, 2021).
Teachers devote more time to administrative tasks and less to teaching than their counterparts in most other OECD countries. This is despite Icelandic schools boasting one of the highest proportions of non-teaching staff in the OECD, prompting questions about their role and activities.
Principals in lower secondary schools seem to spend less time on the curriculum and teaching-related activities than principals in the average OECD country (OECD, 2019).
The share of teachers who say that they are less-well prepared for teaching students with different ability levels and needs is relatively high, which could partly explain the high within-school variation of PISA scores, among others.
There is a shortage of qualified teachers, with the percentage of uncertified teachers increasing from 6% in 2016 to 18% in 2023. Few teachers are qualified in specialized science teaching, despite evidence suggesting that certification in subject areas like mathematics and science is crucial for teaching quality (Coenen et al., 2018).
To increase teaching quality, the Ministry of Education and Children points at the need to establish a clearer and more focused curriculum; better and more varied teaching material, notably to teach Icelandic to students with an immigrant background; and a need for quality professional training programmes. The government has published a new competency framework for teachers and school principals, which is welcome as it tackles the above-mentioned needs.
Percentage of lower secondary teachers using teaching practices pertaining to instruction clarity
Note: Canada refers to the results from the province of Alberta, Belgium refers to the results from the Flemish community.
Source: OECD, Talis 2018 Results (Volume I).
Wage progression is very limited, even more so than in other Nordic countries, reducing the attractiveness of teaching (Figure 2.8). The top salary of a lower-secondary teacher is only about 7% higher than the starting salary, compared to an average of 25% across OECD countries. Salaries are the same for pre-primary, primary, and lower-secondary school despite increasing teaching complexity. Head teachers earn around 28% more, less than the 35% OECD average. There are no allowances for performance or challenging circumstances. Earnings and their growth strongly influence graduates' decisions to become teachers and affect teaching quality (OECD, 2019) (Nagler, Piopiunik and West, 2020). Despite a recent surge in new teachers following the introduction of students grants and differentiated grades as well as increased entry salaries following the 2024 wage agreements, many teachers in Iceland leave the profession after a few years, and career switchers transitioning from other professions into teaching remain rare.
Statutory salaries at different points in teachers' careers, 2023
Note: Annual salaries of full-time teachers in public institutions, in equivalent USD converted using PPPs for private consumption.
Source: OECD, Education at a Glance 2024.
The teacher appraisal system remains underdeveloped, despite teacher appraisal being part of the competency framework since 2017 and its 2022 revision. Few teachers have their classrooms directly observed for assessment, even though high-performing countries extensively use classroom observations and teacher interviews to evaluate teaching quality (OECD, 2019). More importantly, the current appraisal process has only a weak impact on teachers' skill development and practices, underscoring the need for stronger evaluation and feedback mechanisms. An OECD in-depth review of teacher appraisal systems offers several policy options for improving evaluation frameworks (OECD, 2019). The review concludes that the design of the teacher-appraisal mechanism is crucial; it is the quality of the appraisal process, rather than its mere existence, that makes evaluation effective and enhances teaching quality.
The school and learning environment is considered quite positive, even more so than in most other OECD countries, and it has slightly improved since the last PISA wave in 2018 (OECD, 2023). Icelandic students like their schools, feel a strong sense of belonging, and have a positive view of their teachers. Absenteeism is low, and bullying is among the lowest reported across the OECD. Teachers seem to manage disruptive behaviour relatively well. These findings highlight Iceland's commitment to prioritizing student well-being as a core principle of its educational policy. However, students with an immigrant background - especially first-generation immigrants - feel less happy. Moreover, 17% of students report being dissatisfied with their lives, which is higher than the OECD average and has increased since 2018.
A specific issue is the ubiquitous use of digital devices at school, particularly smartphones. The digitalisation of schools offers many benefits for teaching and learning, including fostering creative thinking. As such, the relationship between device use and educational outcomes is non-linear. Moderate use of digital devices - around one hour per day – seems to have beneficial effects, with students using them scoring 14 PISA points higher in mathematics than those who do not use them at all. Beyond one hour, the relationship turns negative, as excessive use leads to distraction, both for the user and others, and deteriorates the disciplinary climate (OECD, 2021). On average, students who report being distracted score 15 points lower in PISA. In Iceland, distraction is more prevalent than in the average OECD country (Figure 2.9). Moreover, an Icelandic study using data from 120 schools and 15 000 students suggests that the use of digital devices and interest in reading are negatively associated (Larimer et al., 2023).
Share of students who say they feel distracted by others using digital devices, in % of all students, 2022
Source: OECD, PISA 2022 database.
Rules on the use of digital devices are set by the schools and school boards, unlike in a number of other OECD countries (Table 2.1). The national health authorities have issued general guidelines for parents, and around 60% of Icelandic schools have issued specific rules. However, the effectiveness of these rules depends on their content, design, and the capacity of teachers to enforce them. While banning digital devices at school could reduce distractions, some studies suggest that bans may increase night-time smartphone use and reduce students' intrinsic motivation to limit device use. Against this background, the Icelandic Directorate for Education and School Services should develop guidelines to restrict non-educational use of digital devices during school time, while allowing beneficial uses that support educational objectives and leaving the design and enforcement of rules to teachers and schools.
Source: Andrews, Egert and de la Maisonneuve, 2024 and internet research.
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