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In addition to individual indicators, the European Commission has worked out a detailed system of measures for monitoring the implementation of the EU’s strategies for economic growth and employment. More than 60 different monitoring and analytical indicators are used to measure the implementation of the EU Employment Strategy approved at the Luxembourg Summit in 1997 (Employment Committee 2009a, 2009b). The list also includes the indicators used to monitor the European Commission’s innovative policy initiatives (flexibility and security, i.e. flexicurity), quality of working life, taxes and gainful employment, youth employment, etc.), which are assembled into various groups. For instance, almost 30 different indicators are used to measure flexicurity, which are combinations of input, output and process indicators. For the following analysis, the main measures that we have chosen are the ones used by the ILO, European Commission and other international organisations, which characterise both the competitiveness of a state’s economy (see also chapter 4.1) and the functioning of its labour market institutions. A comparison of the individual components with other states makes it easier to assess where Estonia lags behind the most and where it has the greatest Table 4.3.1 Rankings of the reference states in selected employment and labour market sub-indices IMD employment index IMD labour market index HF labour freedom sub-index 2008 2012 2008 2012 2013* Singapore 2 4 1 2 2 Switzerland 6 7 6 13 9 South Korea 15 8 32 24 140 Taiwan 22 18 8 12 125 Canada 20 20 23 22 18 Netherlands 8 21 13 14 103 Austria 19 23 16 29 16 Israel 24 28 11 19 79 Chile 37 31 10 9 46 New Zealand 14 36 25 35 6 Denmark 17 37 24 43 3 Czech Republic 25 38 26 33 12 Finland 33 40 33 32 148 Estonia 27 48 37 41 110 Slovenia 39 49 39 51 163 Hungary 48 50 31 37 74 Slovakia 52 53 34 44 52 Ireland 16 55 12 21 38 Source: International Management Development World Competitiveness Online; Heritage Foundation Online database Comment: The states are sorted based on the 2012 IMD employment index. The IMD index includes 59 states; the HF index includes 185 states. The HF data for 2013 is generally calculated on the basis of the data for 2012. development potential – is it the employment rate, the working hours or the labour market regulations. This also makes it possible to look into the future and to conclude how population ageing should or can be compensated by increasing the employment rate or number of working hours. The choice of reference states is based on the states that are also used for comparisons in other chapters, as well as on the availability and comparability of the data. First, we provide an overview of Estonia’s position based on the main employment indicators, and thereafter, focus on the labour market institutions. Labour productivity is dealt with in detail in chapter 4.4. 4.3.1 The employment situation in Estonia in international comparisons In the comparison of the general indicators of Estonia’s labour market with other states, the following indicators were used. • The employment index and labour market index of the International Institute for Management Development (IMD) in Lausanne. The IMD employment index includes such fields as the number and percentage of employed, the structure of employment by sector, the unemployment rate, incl. youth unemployment and long-term unemployment. The IMD labour market index includes the labour cost in the manufacturing sector and changes therein; the number of active people in the labour market, and the change and percentage in the population; part-time employment; working hours; percentage of women in employment; and the assessments of company mangers about the quality of the labour force (For a more thorough review and information about the methodology, see Estonian International Competitiveness, published regularly by the Estonian Institute of Economic Research). • Employment rate, which indicates the percentage of employed persons in the population. Employed persons are defined as those who, based on a the corresponding surveys, worked at least one hour and received compensation for this as salaried employees, as entrepreneurs or freelancers, or worked for free in a family enterprise or on their own farm, as well as those who are temporarily not working, but have a job. Increasing the employment rate among 20- to 64-year-olds is also one of the main objectives of the EU’s growth strategy. • Actual annual number of working hours per worker, which can be found either from surveys of workers or companies in different countries. In the IMD employment and labour market indices of recent years, Estonia has placed in the 40s or 50s (out of a total of 59 states). First off, the IMD indices mention the small size of Estonia’s labour market and the high rate of unemployment (especially after the economic crisis), but it is the assessment by company managers of the availability of labour, which places Estonia near the bottom of the list. 166 Estonian Human Development Report 2012/2013
The problems include the very limited availability of skilled labour (58th position in 2012); lack of labour with financial knowledge (57th); the lack of competent managers (57th); risk of a brain drain (51st); and very limited attractiveness for foreign skilled labour (51st). One of the possible reasons for the scarcity of skilled labour is the non-conformity of the workers’ educational levels to the demands of the labour market and the insufficient training of workers, which is alluded to by the positions that Estonia achieved in the Global Competitiveness Index (Table 1.3.4 in sub-chapter 1.3, which deals with education.) Based on the labour market indicators used for the IMD ranking, one of Estonia’s relative strengths is the high participation of women in the labour market (1st in 2011, and also in a leading position in previous years). As far as labour costs are concerned, Estonia ranks in the middle of the IMD sub-index (23rd); and also in the middle of company managers’ assessment of constructive employment relationships (21st) and the employment rate (32nd.) In the IMD indices related to employment, the Asian states rank at the top. In the employment sub-indices from 2008 to 2011, China, Thailand, Qatar and Singapore headed up the rankings. This reflects the size of the labour markets and high employment rates in these countries. The states that appeared at the top of the labour market sub-index in various years included Singapore, Thailand, the Philippines and Hong Kong. Of the other Asian states, which were chosen as reference states for Estonia (Table 4.3.1), Taiwan, South Korea have also been ranked higher than Estonia in competitiveness; while among the European reference states, Switzerland and the Netherlands, which have higher employment rates and highly qualified labour according to the assessments of employers, are at the forefront. A more detailed comparison of the employment indicators of the European Union and OECD states alludes to the fact that Estonia lags behind many states due to the percentage of employed persons in the population, although the ones who are employed work long hours. In 2011, Estonia’s employment rate for 15- to 64-year-olds (the most commonly used age group in international comparisons) was 65.1% according to Eurostat data, while the rate was 79.3% in Switzerland, 74.1% in the Netherlands, and 74.1% in Sweden (see Figure 4.3.1). A large number of part-time employees are the reason for the high employment rates in Europe, and therefore, the average annual number of working hours per employed person in these states is not high. If part-time employees in Estonia comprise 9.3% of all employment (2011), in Switzerland it is 33.9%, in the Netherlands, 48.5% and in Sweden, 24.7%. As a result, the number of working hours per employed person in Estonia is significantly higher than in these states. (Based on OECD data, it was even 1,924 hours in Estonia in 2011 2 ; 1,632 in Switzerland, 1,379 in the Netherlands, and 1,644 in Sweden). The combined impact of the hours worked and the employment rate gives us the number of annual working hours per working-age person, which, among the states under observation, is highest in Switzerland, Figure 4.3.1 Employment rate for 15- to 64-year olds, and the annual working hours per worker and person, 2011 Annual working hours per worker Annual working hours per person Working hours Switzerland New Zealand Chile Estonia Canada Sweden Czech Republic Finland Austria OECD Israel Greece Denmark Slovenia Slovakia Luxembourg Netherlands Germany Italy Belgium Spain France Ireland Employment rate 0 500 1000 1500 2000 Percentage 0 20 40 60 80 Source: Eurostat, table, Employment rates by sex, age and nationality (%); OECD, OECD.StatExtracts, table “Average annual hours actually worked per worker”, last viewed on 01.02.13; the authors’ computations. New Zealand, Chile and Estonia. In Estonia, this totalled 1,253 hours in 2011, which is significantly higher than the average for the OECD states (1,151 hours). Therefore, based on the example of other states, Estonia does not need to increase the number of working hours per person, as much as it needs to reduce the number of unemployed and inactive people, including by increasing part-time work. The change in the age structure of the population has a long-term impact on the labour market. While, at the beginning of 2011, 62% of Estonia’s population 2 At the same time, in the IMD Index, only 1,762 working hours per year are used for Estonia in 2011. Estonian Human Development Report 2012/2013 167
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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
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References 1. Aidukaite, J. (2006).
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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 and 166: Basing the total and net savings re
Page 167: 4.3 Labour market Reelika Leetmaa,
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
Page 191 and 192: It is characteristic of the South K
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
Page 216 and 217: EDR 2012/2013 authors Alari Purju i
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Editor-in-Chief: Mati Heidmets Prod
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