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equires substantial capital replacement, in order to preserve the existing standard of living in the future. For sustainable growth, the states with extensive sub-soil assets and large mining sectors need institutions that enable the resource rents for sub-soil assets to be turned into investments into other sectors and into human capital. Actually, the same problem exists for states that are dependent on foreign capital. In order to increase their standard of living, they require mechanisms that would change the profits earned by foreign capital into investments into infrastructure and human capital, in the given state. Production that causes extensive emissions of hazardous substances needs to be compensated or replaced by other types of economic activity. Estonia is representative of the pattern related to states with average income, where the volume of produced capital is smaller than in the wealthier states, and therefore, the savings and investments enable the volume of capital to be partially increased due to the limited need for capital replacement. As wealth increases, accompanied by an increase in the volume of capital and capital intensity, the need to replace existing capital also increases, which in turn means smaller growth of capital in the future. The increase in Estonia’s human capital provided an estimable percentage of the increase in wealth during the previous period, and this volume will be increasingly important in the future, from the standpoint of increasing the total value of capital and national income. Figure 4.2.2 Genuine savings related to produced and human capital as a percentage of national income in 2008 (%). Ranked according to genuine savings. Savings related to produced and human capital Total genuine savings Figure 4.2.3 Net savings and education expenditures as a percentage of national income in 2010 (%). Ranked according to net savings. Education expenditures Net savings Percentage -5 0 5 10 15 20 25 30 35 Percentage -10 0 10 20 30 Netherlands Ireland Chile Hungary Lithuania Uruguay Ireland Canada Estonia Israel Denmark Czech Republic New Zealand Finland Canada Uruguay Israel Slovakia Denmark Hungary Czech Republic Slovenia Netherlands Latvia Austria Finland Chile Austria Estonia Slovenia South Korea South Korea Switzerland Singapore Singapore Percentage -5 0 5 10 15 20 25 30 35 Percentage -10 0 10 20 30 References 1. Dasgupta, P. (2001). Human Well-Being and the National Environment. Oxford, Oxford University Press. 2. de Soto, H. (2000). The Mystery of Capital. Why Capitalism Triumphs in the West and Fails Everywhere Else. Bantam Press, London and New York. 3. Doing Business in 2013. (2012). The World Bank, Washington, DC. 4. Statistics Estonia 2013. (2013). http://www.stat.ee/29957 5. Hamilton, K., M. Clemens. (1999). “Genuine Savings Rates in Developing Countries,” World Bank Economic Review, 13 (2), 333–356. 6. Hamilton, K., M. Hartwick. (2005). “Investing Exhaustible Resource Rents and the Path of Consumption,” Canadian Journal of Economics, 38 (2), 615–621. 7. Kunte, A., K. Hamilton, J. Dixon, M. Clemens. (1999). Estimating National Wealth: Methodology and Results. Environment Department Paper 57, World Bank, Washington D.C. 8. Where is the Wealth of Nations? Measuring Capital for the 21th Century. (2006). World Bank, Washington, D.C. 9. The Changing Wealth of Nations. Measuring Sustainable Development in the New Millennium. (2011). World Bank, Washington, D.C. 164 Estonian Human Development Report 2012/2013
4.3 Labour market Reelika Leetmaa, Andres Võrk From the viewpoint of economic competitiveness and development of companies, the existence of an educated and skilled labour force is important along with the ability of the labour market to adapt to changes in the economic environment, technologies and demographics. The existence of the labour force is dependent primarily on the size of the population, its aged-based structure and the ability of the working aged population to work. A person’s resources, which are comprised of the following, are a precondition of their ability to work: good health; relevant education; sufficient know-how; physical, mental and social capabilities; values, motivation and satisfaction with work; as well as the corresponding working conditions and a work environment (see also Ilmarinen 1999). If people’s resources and working conditions create the prerequisites for their employment and for the labour market’s ability to adapt, employment and social policies create the environment that affects whether, under changing conditions, people have the opportunity and motivation to provide high-quality labour, and whether it is beneficial for employers to hire people. The ability of the labour market to adapt means that employers have the opportunity to increase and reduce the number of employees, their working hours and wages. It also assumes that the people who are in danger of losing their jobs have the opportunity to constantly improve their skills and knowledge and are assured sufficient income while they are unemployed. The flexibility provided to the employers, and the employees’ opportunities for supplemental training, along with social guarantees, support structural changes in the economy, which are needed due to changes in the economic environment or long-term technological and demographic processes. An adaptable labour market creates the preconditions for the competitiveness of companies and countries, as well as an increase in productivity and employment and the reduction of poverty (Caballero et al. 204; Seifert, Tangian 2007; Muffels et al. 2008). Since the flexibility of the labour market, which forms the basis of the labour market’s adaptability, has also been dealt with in previous human development reports (Eamets and Leetmaa 2009, Eamets 2011), only a concise survey of the nature of labour market flexibility is provided in this sub-chapter. The European Union’s “flexicurity” policy stresses the importance of four institutions – flexible labour laws, efficient social protection, effective active labour market policies, and a lifelong learning system – in ensuring the adaptability of the labour market. 1 Various indicators for measuring the flexibility and institutions of the labour market have been created, which can be used to describe the Estonian labour market and compare it to those in other countries. However, it should be taken into account that, unlike economic competitiveness and economic freedom, which are measured with the help of various indices (see 4.1) comprised of several sub-components, no yardsticks for measuring the competitiveness and flexibility of labour markets have been created. Instead, various numerical indicators are used, which may generally be divided into two groups. The first group includes measures that provide information about the human activities in the labour market, and are based primarily on surveys. Basically, these are indicators related to processes and outputs. They describe the participation of the working age population in the labour market, their working hours and employment based on sectors and occupations, as well as unemployment, poverty, income inequality, etc. Today, the main source of information for these indicators is the labour studies based on the methodology of the International Labour Organisation (ILO). This group of dimensions includes, for example, the ILO’s 18 Key Indicators of the Labour Market (KILM), as well as the indicators for employment and unemployment, as well as the assessments of the availability of skilled labour and competent top specialists included in the various sub-indices compiled by the International Institute for Management Development (IMD) in Lausanne. The second group includes dimensions that primarily characterise the labour market institutions in each country, such as expenditures for labour market services and unemployment benefits, as well as the strictness of the labour market regulations. These indicators are usually based on administrative statistics, on the regulations dealing with the labour market, or opinion polls conducted among business managers. For instance, the strictness of the legislation regulating the start and finish of the employment relationship is measured by the OECD Employment Protection Legislation Indicator (EPL), the rigidity of employment by the sub-index of the World Bank’s Doing Business Index (DB), and labour freedom by the labour market sub-index of the Heritage Foundation’s Index of Economic Freedom (HF labour freedom sub-index). In the comparison of states, the Strictness of Eligibility Criteria Index developed by the Danish Foreign Ministry and later supplemented by the OECD is also used (Venn 2012). 1 The aforementioned are also considered to be the most important institutions influencing the functioning of the labour market in labour economics, in addition, taxes on labour and the influence of labour unions are mentioned. Estonian Human Development Report 2012/2013 165
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ESTONIAN HUMAN DEVELOPMENT REPORT 2
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Table of Contents 1 Human Capital /
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Dear Reader Since the moment when E
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1Human Capital Estonian Human Devel
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the HDI’s content has also been h
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Figure 1.1.1 The human development
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Figure 1.1.7 The income sub-index:
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The results of the Princeton Projec
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the hypothetical generation. The to
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Figure 1.2.3 Life expectancy. Eston
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Table 1.2.2 also presents the most
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The new trends that are appearing i
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Figure 1.2.8 Components of populati
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New features were introduced into E
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Initiation of Voluntary Birth Contr
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Table 1.3.1 Best-known educational
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(OECD 2012b). Therefore a certain r
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The reciprocal dependence of the pr
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Figure 1.3.8 Percentage of students
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Table 1.3.4 The quality of educatio
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1.4 Health Raul-Allan Kiivet Change
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Table 1.4.1 Usage of prescription m
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allude to the fact that approximate
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promote healthy lifestyles among th
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Figure 1.5.1 The World Values Surve
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Table 1.5.2 Estonia’s participati
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Figure 1.5.3 The percentage of the
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Figure 1.5.5 Percentage of the Esto
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The fact that Estonia’s position
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Summary Mati Heidmets The global vi
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2People and Society Estonian Human
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Table 2.1.1 Structure of the Bertel
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tioning market economies (15 states
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2.2 Freedom and democracy Martin M
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Table 2.2.1 Democracy indicators Po
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Figure 2.2.2 The distribution of th
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would be something that none of the
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political participation are general
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strongest, while a very small perce
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is concerned, Estonia is one of the
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Figure 2.4.2 Average circulation of
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2.5 Corruption Jüri Saar In accord
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Lithuania, 61%; and in Russia, 69%.
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2.6.2 Intentional homicides in Esto
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crime. And thirdly, there was a wis
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References 1. Ahven, A. & Tabur, L.
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states included in the EU Kids Onli
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2.8 Public assessments of the state
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Figure 2.8.4 Changes releated to tr
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of the state’s development are en
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Table 2.9.1 The positions of Estoni
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3. IEP (2011). Structures of Peace.
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3Welfare and the Quality of Life Es
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choices made, not what people say t
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Figure 3.1.5 Public social spending
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tion agreed upon the social contrac
Page 115 and 116: References 1. Aidukaite, J. (2006).
Page 117 and 118: hand, to the “inequality of acces
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Page 121 and 122: 5- much more than I deserve. Some d
Page 123 and 124: people in Estonia consider the inco
Page 125 and 126: Table 3.3.1 Experienced Well-Being
Page 127 and 128: at about 70%. In Latvia and Lithuan
Page 129 and 130: sign. It seems that the usual view
Page 131 and 132: 3.4 Quality of life Anu Toots 3.4.1
Page 133 and 134: a uniform composite indicator has n
Page 135 and 136: 3.4.6 The components of life qualit
Page 137 and 138: Figure 3.4.4c Perceived quality of
Page 139 and 140: Figure 3.4.5 Changes in the depriva
Page 141 and 142: 3.5 Environment dimension of well-b
Page 143 and 144: Figure 3.5.1.b Estonia’s position
Page 145 and 146: 3.5.4 Energy intensity The energy i
Page 147 and 148: productivity, which is defined as t
Page 149 and 150: perceive themselves as worse off th
Page 151 and 152: 4The Economy Estonian Human Develop
Page 153 and 154: vide a valuable connection for maki
Page 155 and 156: Figure 4.1.3 Components of economic
Page 157 and 158: ule of law, the sub-indicators for
Page 159 and 160: References 1. Acemoglu, D.; Robinso
Page 161 and 162: Development Report employs generali
Page 163 and 164: and pasture land, and this was capi
Page 165: Basing the total and net savings re
Page 169 and 170: The problems include the very limit
Page 171 and 172: • Expenditures for active labour
Page 173 and 174: who lose their jobs. These ensure i
Page 175 and 176: 4.4 Productivity and the economic s
Page 177 and 178: labour costs at the company level r
Page 179 and 180: Table 4.4.4 Comparison of the produ
Page 181 and 182: Figure 4.4.1 Annual average increas
Page 183 and 184: 4.5 Innovation Erik Terk, Katrin M
Page 185 and 186: Table 4.5.2 Comparison of innovatio
Page 187 and 188: Table 4.5.4 Comparison of the indic
Page 189 and 190: in order to make the R&D potential
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Page 193 and 194: mechanisms for increasing their sta
Page 195 and 196: Globalisation and Policy Patterns 5
Page 197 and 198: When Estonia regained its independe
Page 199 and 200: 5.2 The impacts of globalisation an
Page 201 and 202: Table 5.2.2 Support of the differen
Page 203 and 204: 5.3 Development policies Erik Terk,
Page 205 and 206: • C -the “Estonia-centred” su
Page 207 and 208: Figure 5.4.1 Support for the possib
Page 209: Summary Erik Terk Estonia is part o
Page 212 and 213: ehavioural patterns. Therefore, it
Page 214 and 215: EDR 2012/2013 authors Clemens Buche
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EDR 2012/2013 authors Alari Purju i
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Editor-in-Chief: Mati Heidmets Prod
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