In 2023, the at-risk-of-poverty rate stood at 9.0%, equating to about 35,000 individuals. This rate measures the percentage of the population whose equivalised disposable income is below the at-risk-of-poverty threshold, defined as 60% of the national median equivalised disposable income. Equivalised disposable income is calculated by adjusting the total income of all household members (including social transfers, and deducting tax) for the size and composition of the household, using an equivalence scale.
For example, the 2023 at-risk-of-poverty threshold for a single-person household was 302,000 ISK per month. For a household with two adults and two children, the threshold was 634,000 ISK per month, reflecting the greater financial needs of larger households but also the economic benefits of shared resources. These thresholds represent the total household income required to avoid being considered at risk of poverty for each respective household type.
In 2023, the proportion of individuals living in households with disposable income below the poverty threshold was nearly identical for men and women, at 9.0% for men and 8.9% for women. Over the past decade, the percentage of people living below the poverty line has fluctuated between 7.6% and 10.1%, reaching its lowest point in 2020 and peaking in 2017.
In 2023, Iceland exhibited the lowest at-risk-of-poverty rates in Europe, comparing favorably with other European countries. Iceland's rate stood at 9.0% while the average among European Union countries was 16.2%. Czechia had the second lowest rate at 9.8%, and Latvia and Estonia reported the highest, both at 22.5%. Among the Nordic countries, Norway had the second lowest rate at 11.5%, followed by Denmark at 11.8%, Finland at 12.2%, and Sweden with the highest among the Nordics at 16.1%.
Reduced impact of educational attainment on poverty risk
In 2023, the at-risk-of-poverty rate among individuals aged 25 and older showed no significant differences based on educational attainment. Since measurements began in 2004, the disparity in poverty risk by educational levels has narrowed. Particularly from 2019 onwards, there has been no significant variation in poverty rates across different educational levels. However, between 2004 and 2018, individuals with only basic or secondary and vocational education were generally more likely to fall below the low-income threshold compared to those with a university education.
Tenure status is a constistent indicator of poverty risk
Tenure status has consistently been a strong indicator of poverty risk in Iceland. Over the years, households in rented housing have been more likely to fall below the at-risk-of-poverty threshold than those in owner-occupied housing.
In 2023, the at-risk-of-poverty rate for households in rented accommodation was 18.8%, compared to 6.4% for those in owner-occupied homes. This gap has remained stable over the years, showing that tenure status is a strong factor in determining economic security.
In 2023, the at-risk-of-poverty rate for households in the capital area was 9.4%, slightly higher than the 7.9% for households outside the capital. However, these differences have not been statistically significant in this and previous years.
Key term definitions
The at-risk-of-poverty rate is the share of people with an equivalised disposable income below the at-risk-of-poverty threshold, which is set at 60 % of the national median equivalised disposable income. This indicator does not a directly measure poverty, but low income in comparison to other residents in the country.
Disposable income is the total income of a household, after tax and other deductions (transfers to other households), that is available for spending or saving. Disposable income includes all income from work (employee wages and earnings from self-employment); private income from investment and property; transfers between households; all social transfers received in cash.
Equivalised disposable income is the total income of a household , after tax and other deductions, that is available for spending or saving, divided by the number of household members converted into equalised adults; household members are equalised or made equivalent by weighting each according to their age, using the so-called modified OECD equivalence scale. The equivalised disposable income is calculated in three steps:
The total (net) household income is calculated by adding up all monetary incomes received from any source by each member of a household; these include income from work, investment and social benefits, plus any other household income. Taxes and social contributions that have been paid are deducted from this sum.
Using the OECD equivalence scale, the total household income is divided by the number of „equivalent adults“, in order to reflect differences in a household's size and composition. This scale gives a weight to each member of the household (and then adds these up to arrive at the equivalised household size): 1.0 to the first adult, 0.5 to the second and each subsequent person aged 14 and over and 0.3 to each child aged under 14. Finally, the resulting figure is called the equivalised disposable income and is attributed equally to each member of the household
The equivalised household size for a family with two adults and two children calculates to 2.1, using the modified OECD scale (1 for the first adult, 0.5 for the second adult, and 0.3 for each child). If this household earns a total income of 500,000 ISK per month, then the equivalised disposable income would be approximately 238,095 ISK (500,000 ISK divided by 2.1).
About the data
The values for the years 2021-2023 are preliminary.
The results are based on the Statistics Iceland's standard of living survey (EU-SILC). The research sample is obtained by randomly selecting individuals from the national register and thus the household to which they belong. A person who is included in the sample provides information about the circumstances of the household, his own and all other household members.
When interpreting the results, it should be kept in mind that this is a sample study, so uncertainty is expected. By considering a confidence interval, it is possible to estimate how accurately the sample value represents the true value in the population. The confidence intervals can be found in the corresponding tables on the Statistics Iceland’s website.