Industry and labour market on the Faroe Islands

Tourism has grown in the Faroe Islands and every year, many large cruise ships call at Tórshavn and some other ports for a short stays. ÓLAVUR FREDERIKSEN, 2018

The Faroese labour market and industry are characterised by a high level of employment, a high level of organisation and a competitive, adaptable and innovative industry.

Geographically, most of the Faroe Islands are tied together by a welldeveloped road network and tunnels, which has greatly increased the population’s ability to commute between the regions.

After having had a fishing and fish processing industry as the main industry for many years, the overall picture of Faroese industry is now more diversified. The fishing and fish processing industry is still important, but salmon farming has now reached the same export value as the traditional fishing industry, and the number of employees in the salmon farming industry and the land-based fishing industry is now at the same level. In 2019, the export value of salmon was just over DKK 4 billion and the export value of other fish just under DKK 5 billion.

The gross value within the resources industry. HAGSTOVA FØROYA

The Faroe Islands have become a highly popular destination for tourists from all over the world. Tourism is therefore also an important part of Faroese industry, and it is estimated that tourism has an export value of just under DKK 0.5 billion.

Another export-generating industry is shipping, which has grown considerably in the last decade. Shipping as an industry is estimated to have an export value of approximately the same as tourism, but there are no exact figures for the export value for any of the industries.

It is worth noting that the various industries do not follow the same business cycles, and this helps to prevent major fluctuations in the Faroese economy.

A mobile farm operated by the new large wellship *Hans á Bakka* built in Turkey and commissioned in 2015. ÓLAVUR FREDERIKSEN, 2016

Fishing industry and salmon farming

Traditionally, the Faroe Islands are a fishing nation that depends on good fishing and good market conditions. The development in the fishing industry is undoubtedly decisive for the Faroese economy, even if the industry is now supplemented by the farming industry. The industry can be divided into fishing and further processing of the pelagic fish species and demersal fish.

Traditionally, demersal species, such as cod and haddock, have been fished and exported primarily to the European market. This part of the industry has been challenged for many years, but in early 2020, before the Covid-19 pandemic, the market price for demersal fish was on the rise. However, the Covid-19 pandemic created a difficult and uncertain market, which naturally affected the price. The large production, which ended up in warehouses, had an adverse impact on liquidity, and as of December 2020, there was a real danger that this would develop into an insurmountable obstacle for companies. During 2021, however, sales slowly picked up again, and the average price rose. At the same time, however, demersal fishing from the sea around the Faroe Islands fell significantly in 2021, so major challenges still remain for the part of the industry that relies on demersal fishing.

Since the end of the 19th century, fishing has been the Faroese’s most important means of livelihood, but it has now been overtaken by salmon farming. Salmon farming is a relatively new industry in the Faroe Islands, but the favourable conditions and high prices have given farming a boost. ÓLAVUR FREDERIKSEN, 2019

There are three pelagic production facilities for human consumption: Faroe Pelagic in Kollafjørð, Varðin Pelagic in Tvøroyri and Pelagos in Fuglafjørð. Compared to 2010, the export value of pelagic fish species has doubled to just over DKK 1.8 billion in 2019. The shipping company Varðin owns Varðin Pelagic together with Delta Seafood. Varðin and Varðin Pelagic thereby control both the fishing part and the processing part. With vessels such as Tróndur í Gøtu, Finnur Fríði and Gøtunes, Varðin Pelagic’s onshore facilities are guaranteed steady and reliable access to the raw materials necessary for optimal utilisation of the company in Tvøroyri.

After an organisational restructuring, the Faroese salmon farming industry has gone from being on the way to losing its importance to becoming a strong player in the international market. In addition, the industry creates more knowledge jobs at an academic level, which has not previously characterised the private business sector.

There are three salmon farming companies: Hiddenfjord (formerly Luna), Mowi and Bakkafrost, of which Bakkafrost is the largest. With its some 1,000 employees, it is also by far the largest private company in the Faroe Islands. Bakkafrost expanded at the end of 2019 by buying the Scottish salmon farming company The Scottish Salmon Company. In addition, Bakkafrost also owns FÖRKA, which will convert residual waste from the farming industry into biogas.

The trawler *Steintór* pulls the trawl in the waters off the Faroe Islands. Trawlers of this size mainly operate in the deep waters. ERIK CHRISTENSEN/CREATIVE COMMONS/WIKIMEDIA, 2011

Annual exports of fish products in the period 1993‑2021. UH01050

Building and construction industry

In 2022, the Faroe Islands are booming. Several large school buildings are under construction and large infrastructure projects are underway. As a result of the great demand in the building and construction industry, a shortage of labour is seen in the sector. The two largest companies are Articon and J&K Petersen.

The pressure in the construction industry has generally affected the trades in the form of labour shortages and wage inflation. In the mid-2000s, the situation was roughly the same as today. Legislation was therefore changed, making it easier to hire foreign labour from the EU, although the Faroe Islands are outside the EU and therefore not part of the European labour market. The result is that the trades now have a relatively high proportion of foreign employees. However, an upcoming period of low activity and standstill is feared.

Trade, service, tourism and shipping

Tourism is a growing industry in the Faroese Islands. Here, the Visit Tórshavn office is getting new advertising streamers installed on the facade. ÓLAVUR FREDERIKSEN, 2017

The trade and service sector has also grown during the boom. The sector has many small players, but especially the grocery stores have seen a development and two large players dominate the market: The SMS group with the stores Miklagarður, Bónus and Mylnan and the wholesale company Poul Hansen with the stores Á, Inn and Samkeyp. Added to these is Føroya Keypsamtøka (FK) or Coop in the Faroe Islands which started in 1952.

Tourism has also undergone rapid development following several successful international advertising campaigns, for which Visit Faroe Islands together with the affiliated advertising agencies have won a number of awards. The number of overnight stays increased by 25 % from almost 160,000 in 2015 to almost 200,000 in 2019. However, it has caused some unrest, because the small, picturesque villages have felt flooded by tourists. This has led to an increased focus on internal control of tourism and on its negative consequences for nature. For example, Visit Faroe Islands has developed the campaign Closed for Maintenance, which is based on the concept of voluntourism. It means that selected tourist attractions close to incoming tourists on a certain weekend, but that a limited number of volunteers can apply to participate in the work to restore the balance of nature.

A fourth industry that has grown in recent years is shipping. Around 320,000 gross tonnages are registered in FAS (Faroese International Shipping Register). The register mainly includes traditional cargo ships, tourist ships and service ships in the oil and farming industry. It is estimated that about 1,800 Faroese are employed in the shipping sector.

Commuting

The extensive infrastructure has given the Faroese much flexibility when it comes to choosing a place of residence in relation to their workplace. The newest undersea tunnel, the Eysturoy Tunnel, was commissioned in December 2020, and in 2023, the undersea tunnel between the islands of Sandoy and Streymoy will be completed. Today, just under 90 % of the population is able to commute from home to work without having to take a ferry, and when the tunnel between Sandoy and Streymoy is commissioned, over 92 % of the population will be able to do so.

In addition, the preliminary studies for an undersea tunnel from Sandoy to Suðuroy are planned, and if it becomes a reality, less than 1 % of the Faroese population will still rely on a regular ferry service for commuting. In addition, the Faroese labour market is characterised by the fact that a relatively large part of the workforce works outside the country. Some are employed on foreign fishing vessels, others in the oil industry, while still others solve tasks abroad for Faroese employers. In times of boom, it can be felt that a large proportion of the workforce is not available in the domestic labour market. At the same time, it is an advantage that a part of the workforce is not necessarily affected by unemployment at the same time as the Faroese labour market during periods of recession. The Faroese labour market is vulnerable due to its modest size, but the extensive commuting abroad creates the necessary flexibility. The same applies to the foreign labour: In times of boom, many foreigners are hired, and in times of recession, they are no longer on the Faroese labour market.

Participation rate, employment and unemployment

(30) Employees in the private and public sector, respectively, as well as in various areas in 2020. AM03031

Unemployment has long been low. Even after the first wave of the Covid-19 pandemic, the unemployment rate in September 2020 was 1.6 %. The workforce is made up of 91 % of the population, and of these, 89.5 % are in active employment.

Of the people in active employment, 37 % are employed in the public sector, and 63 % are in the private sector.

Average income is more or less the same across the country. However, average income on Norðoyggjar is about DKK 100,000 above average income on Suðuroy. This can partly be explained by the fact that fishing is particularly dominant on Norðoyggjar and that some of the incomes are exceptionally high. At the same time, Suðuroy is the most isolated of the large islands, and there are few highincome jobs.

Social partners

Selected trade union years. J.P. STRØM, 1998 AND HELGI EIDESGAARD, 2021

The Faroe Islands has a rich tradition of employees organising in the numerous trade unions, while employers organise in employers’ associations. The degree of organisation is estimated to be among the highest in the world, especially in the public sector. But while a few years ago it was unthinkable not to be organised, this is no longer the case, especially after the closed shop agreements were no longer legal.

Most workers and builders are members of a trade union. There is or has been a trade union for the unskilled in many of the villages, which was especially important in the past, when the lack of infrastructure necessitated such a structure. Trade union organisation has therefore historically been determined by geography rather than trade. The Faroese Workers’ Association, Føroya Arbeiðarafelag, has 33 local units (3,899 active members as of 1 October 2020). Outside the association are the workers in Tórshavn and Klaksvík, who in both places are divided into associations for male and female workers. Although they are not united under a main organisation, there is a certain tradition for the five associations to negotiate collective agreements together. S&K, which organises employees in the clerical and commerce sector, and the trade guilds are also large in the private labour market. The white-collar union Starvsfelagið (before 2021 Starvsmannafelagið) is the largest trade union for public-sector employees and organises employees in the Faroese state, intermunicipal organisations and municipalities. However, Starvsfelagið has also signed a few collective agreements with Føroya Arbeiðsgevarafelag. These are mainly for employees in former public institutions, e.g. Føroya Tele and Posta.

The degree of unionisation of the working population (15‑64 years) in 2011. MANNTAL, 2011

Most employers, i.e. about 500, are organised in an employers’ association. The entire private labour market, with the exception of owners of fishing vessels, is brought together under Føroya Arbeiðsgevarafelag, which is responsible for around 40 collective agreements. Føroya Arbeiðsgevarafelag and its member associations are housed in Vinnuhúsið, which is also home to the Shipowners’ Association.

Historically, Faroese sailors have been good at organising themselves. Already in 1896, Føroya Skiparafelag (the Faroese Shipmasters’ Union) was founded, making it the country’s oldest still existing trade union. Later, navigators also joined this association. Together with Føroya Maskinmeistarafelag (Faroese Engineers’ Association) and Føroya Fiskimannafelag (Faroese Fishermen’s Association), these unions look after the interests of seafarers. Their collective bargaining parties are Føroya Reiðarafelag for the fisheries sector and Reiðarafelagið fyri Handilskip for employees on merchant ships.

There is no tradition of central organisations on the employee side, as is known in, for example, Denmark. The idea of a Faroese confederation of trade unions has often been put forward, but it has not come to fruition. When Covid-19 broke out in the spring of 2020 and the Faroese government had to start making crisis packages, a number of Faroese trade unions and confederations founded the Fakfelagsráði (Trade Union Council), which had to decide on issues of an general political nature. There are advocates for a Faroese confederation of trade unions, especially in order to stand stronger against the employers, who have organised themselves under one common umbrella organisation. However, these ideas have not yet gained traction among the trade unions.