Estonian Human Development Report

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Figure 6.3.1. GDP, government sector costs, billions of EEK 250 200 150 100 50 0 2002 2003 2004 2005 2006 Source: Estonian Statistical Yearbook, 2007, 2008 GDP the achievement of socially desirable results (for instance, well-being) the supply side does not suffice, demand is also required. 34 Nevertheless, social services are often approached primarily from the supply side. They are treated as something that is unconditionally beneficial. The conditions and limitations predicated on the economic side are often seen as unpleasant restrictions that inhibit useful expenditures that promote societal development. At the same time, we must consider that the removal of these restrictions and the limitless expansion of social expenditures have a destabilizing effect on the economic environment that increases uncertainty, reduces investments and ultimately, reduces the future tax base from which social costs are financed. Since institutional activities, such as guaranteeing lawmaking, the judicial system and public procurement, are financed, to a great extent, from the budget, institutional development is directed in relation to the tax burden. Through taxes, the state guarantees resources to assure institutional efficiency. Therefore, the sufficiency of the tax burden is measured by the effective performance of institutions, which is not directly related to any formal percentage of the GDP. At the same time, the shortage of institutional resources also becomes a serious problem when there are insufficient resources for the protection of health and ownership, for the effective and speedy work of the courts, and for guaranteeing the security of the country. In the case of institutions, the risk of overregulation in sensitive fields, such as the labour market, must also be taken into account. As we saw in the previous subchapter, a disparity between a relatively low level of the quality of life and a relatively high subjective indicator of well-being is typical of Estonia. For a long time, it has been typical of Estonia that this disparity is objectively expressed by a weak connection between economic growth and an increase in social costs (see Figure 6.3.1.). Under conditions of rapid economic growth, in which GDP in current prices increased from 121.4 billion EEK in 2002 to 207.1 billion EEK in 2006, government costs have also increased, including the nominal costs for health care, education and social protection. At the same time, the given cost increase has been much more modest than the economic growth, which shows that their ratio of GDP decreased (see Figure 6.3.2.). Government costs decreased as a ratio of GDP from 35.7% in 2002 to 33% in 2006, education costs from 6.8% to 6.0%, and social protection costs from 10.0% to 9.6%. Health care costs remained at the same relatively low level, constituting 4% of GDP. Therefore, costs in the social field did increase, but less than GDP on the whole. This also points to the fact that a balanced budget was maintained and a surplus achieved during this period due to the relative restriction of costs in the social sphere. Keeping in mind the importance of workers’ education and health in the creation of necessary human capital in the long run, the relatively significant reduction in the percentage of educa- Government sector costs Health care Education Social protection Figure 6.3.2. Ratio of government costs, social protection, education and health care costs of GDP, % 2006 2005 2004 2003 2002 4 4 4 4 6 6 6.4 9.6 9.8 10.3 9.9 10 6.8 0 10 20 30 40 Source: Estonian Statistical Yearbook, 2007, 2008 indicators that primarily characterize economic performance, such as GDP or economic growth. By utilizing the concepts of human and social capital, on the one hand, it is possible to correlate the functioning of the economic and social spheres, and on the other hand, to provide an opportunity to analyze the policies directed at these fields of activity. The majority of social scientists maintain that investments into human capital – into health, knowledge and skills, and the policies directed at them – are just as important as investments into physical capital. At the same time, this statement is far from self-evident, because it is not simple to statistically validate this connection (El Erian and Spence, 2008, p. 37): it is easier to precisely assess the input that shapes human or social capital (education costs, years of school enrolment) than the outputs achieved thereby (ability to learn, receptivity to innovations, socialization, capacity for empathy, etc.). It is also important to consider that for 33 33.5 34.2 3.9 6.5 34.6 35.7 Government sector costs Health care Education Social protection 34 India is one of the contradictions of this type that are treated in papers on economic growth theories. World-class engineers and scientists have been educated there for decades, although its impact on economic development has been very modest. The reason was that domestic industry did not create sufficient demand for the use of this human capital and a great deal of the brain power left India. A positive impact developed with the creation of a global software industry, and the demand for the skills that resulted from this. This caused a broader impact on the entire service sector, especially though demand intermediated by the Internet. The impact of human capital on economic growth and well-being needed an impulse based on demand in addition to the supply; see The Growth Report: Strategies for Sustained Growth and Inclusive Development (2008). | 132
tion costs and essentially freezing health care costs have a negative impact on developmental prospects and the economy (see a detailed treatment thereof in Chapter 2 of this report). Education policies and the economy Education is of critical importance in the creation of human capital. It provides people with the opportunity for self-development and makes all other resources available to them that society uses to support various groups. The educational system has a strong impact on the creation of standards and value judgements, which are the basis for cohesion in the economic and social activities of a society with varied ethnic and religious backgrounds. Therefore, education has a much broader importance than just the acquisition of knowledge and skills. The indicators of various countries confirm the importance of the state’s contribution to the financing of education. According to economic theory, the reason is positive external influences, according to which social income exceeds private income and the benefit to society is greater than the amount received from the educational attainments of a single individual. The second circumstance is related to the correlation between income distribution and the availability of education. In the case of education services, from an availability standpoint, a restrictive condition may be the lack of guarantees that are necessary for the financing of education with credit. A more equal distribution of assets increases the number of people for whom loans provide availability to education. Since the educational services market presents serious difficulties, the greater future reward that accompanies the acquisition of education is an insufficient reason for acquiring it. In the case of the connection between educational policy choices and economic policies, there are significant differences between educational levels. In the case of primary and basic education, which includes everyone’s legal right to education and the state’s obligation to provide it, the socialization of young people is as important as the acquisition of knowledge. Without education, no one has the right to demand work that assumes competence and the corresponding wages. From the viewpoint of income distribution, primary and secondary education financed by the state is progressive, since statistically lower-income families have slightly more children than those with higher incomes. If we assume that the financing per student is the same for everyone, then there are slightly more children from lower income families whose education is supported by the state. As an absolute amount, the same-size contribution received from governmental financing of education has greater weight in the budgets of lower-income families than in the budgets of wealthier families. These are very strong arguments for the financing of primary and secondary education from national or local budgets. The situation in higher education is more diverse in the sense that one must consider both individual- and society-based circumstances, such as which is more important – the benefit to the individual with a better education in the form of a higher position or higher salary or the benefit to society based on the greater contribution that better educated people can be expected to make to the wealth of the society? In the first case, the question develops – why should people not partially or totally pay for their education? One counterargument is related to the income that is not earned during the study period. However, from the perspective of an entire life span, the amount of income unearned during the study period is small compared to the additional income that may be earned as a result of education, which would not be earned if the person had a job that does not require higher education. This fact supports the argument that people themselves should contribute, by covering at least some of the costs related to the acquisition of higher education. To avoid or reduce working while studying, one’s contribution should probably be made with credit and combined with governmental support either through the financing of student places (as currently) or by some other means. Estonia is currently implementing an education financing model whereby the state charges higher education institutions with the task of providing a certain number of graduates by speciality and educational level, while the higher education schools also have the opportunity to admit students at their discretion to non-budgetary places. This provides young people with more opportunities for choosing specialties and higher education institutions, but this is accompanied by a large number of questions and conflicts of interest. Without breaking these down in detail, we should highlight the issue most often presented by student organizations regarding social guarantees during studies, which belong to the field of social assistance. To date, this issue has stood apart from issues related to the direct financing of higher education, although it is definitely an estimable circumstance when dealing with social guarantees generally. In this field, under conditions of low taxes and limited budgetary resources, the traditional family-centred aspect has forcefully predominated and the indirect costs related to the acquisition of education have not been considered at all. A topic of political discussion that is constantly on the table is the relationship between the state-commission education and labour market needs. There are many sides to this issue, the first is definitely the fact that in Estonia, as elsewhere in the world, the number of students studying “soft” subjects has increased as the freedom of choice has expanded, while the interest in engineering and natural sciences has not increased to the same degree, but has even decreased. At the same time, the state procurement has generally taken the disparity between demand and market supply into account. For instance, in the business and legal fields, the state procurement covers only a small part of the higher-education financing. One of the indicators of the economic effectiveness of education is the ratio of employed people with different educational levels (see Figure 6.3.3.). Moreover, special attention should be paid to the correlations between the levels of education and the probability of becoming unemployed. Employment and unemployment indicators confirm that compared to unemployed people with tertiary education, there are twice as many with secondary education and three times as many with primary education (see Figure 6.3.4.). 133 |
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Estonian Human Development Report
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Estonian Human Development Report T
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4.2. Ethnic differentiations in sat
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Preface This year, the Estonian Hum
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CHAPTER 1 Estonian Human Developmen
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Figure 1.1.3. Life expectancy in co
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Figure 1.2.2. Life expectancy at bi
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to reality. The greatest inaccuracy
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Figure 1.2.9. Internal migration ev
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12. Marksoo, A. 1992. “Dynamics o
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Table 1.3.1. PISA 2006 study result
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Table 1.3.2. Number of students in
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1.4. The gross domestic product and
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Figure 1.4.3. Estonian GDP (right a
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1.5. Changes in the Estonian Human
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2.2. Health of Estonian residents i
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Table 2.2.4. Differences in life ex
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Figure 2.4.1. Healthy life years of
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Figure 2.4.4. Various accidents, tr
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2.5. Lifestyle and behaviour as a s
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Figure 2.5.5. Smoking in Estonia in
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Figure 2.6.1. Overview of the compo
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Table 2.6.2. Use of specialized med
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dren. The majority of services are
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Figure 2.8.2. How much a health dis
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2.10. Policy recommendations aimed
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CHAPTER 3 Quality of life and life
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Table 3.2.1. Characteristics of liv
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Table 3.2.4. An assessment of the e
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Figure 3.2.4. Difference in the job
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Table 3.2.6. Agreement with stateme
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Figure 3.3.1. Satisfaction with lif
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Figure 3.3.4. Percentage of people
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Figure 3.4.1. Types of quality of l
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Figure 3.5.1. Percentage of teenage
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Figure 3.5.4. Percentage of respond
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Arieh A., Conti C., Kutsar D., Nicg
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Figure 3.6.2. Subjective quality of
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Pieper, A. Sixsmith, Care related q
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Figure 3.7.1. The placement of Euro
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Page 160 and 161: Authors Chapter 1 Ene-Margit Tiit,
Page 162 and 163: Margit Keller (PhD) is a Senior Res
Page 164 and 165: Special prizes Estonian Human Devel
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Page 172 and 173: Honorable mentions Estonian Human D
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