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corresponding indicators for Lithuania were used as the control group. The results confirmed that, since the new Employment Contract Act came into force, the probability of leaving employment increased in Estonia, although the movement from unemployment to employment has not increased. At the same time, it turned out that, after the implementation of the new law, the movement from unemployment to inactivity has increased, and the movement between jobs has decreased. Therefore, the new law has made it simpler for workers to leave employment, but, at the same time, the prospects of the unemployed to find jobs had not improved. The author believes that the reason is the limited availability of the other flexicurity components, primarily active labour market policies and opportunities for lifelong learning (Malk 2012). Another important labour market institution, which supports the flexibility of the labour market, is active labour market policies, i.e. labour market services, which, since 2009, have been provided in Estonia by the Unemployment Insurance Fund. Active labour market policies make it possible to support the movement of workers from less productive sectors and/or those with high unemployment rates to more productive and/or low unemployment sectors; to improve the availability of information related to available jobs and to matching jobs with job seekers, to involve disadvantaged groups in the labour market, and also to reduce the moral risk related to the payment of unemployment benefits. Usually, labour market expenditures, as a percentage of GDP, are used as an indicator for monitoring European Union flexicurity, and as a variable in studies that analyse the importance of active labour market policies in labour market policies. As we can see from Figure 4.3.3, the expenditures made for active labour market policies in Estonia have increased, but they are still considerably below the average for OECD states. This is also confirmed by Eurostat data, in which Estonia is at the bottom of the rankings compared to other EU Member States in regard to both the expenditures as a percentage of GDP, and per each job seeker (which better takes into account the differences between the labour market situations in various states). In addition, in Estonia, considerably fewer people participate actively in labour market services than in the EU Member States on average: in 2010, only 3.8 people for every 100 job seekers; while the average in the EU 27 states was 30 (Eurostat). During the last few years, a positive development that is worth highlighting is the considerable growth in the number of labour market services provided by the Estonian Unemployment Insurance Fund. Many different kinds of counselling services have been added (e.g. psychological counselling, social rehabilitation, addiction counselling, debt counselling), as well as the provision of flexible services depending on the special needs of the job seeker (individual implementation). Based on data from the Unemployment Insurance Fund, from the viewpoint of the number of participants, the most important labour market services in 2012 were labour market training (about 48,000 participants, incl. 35,000 of which participated in job-related training), career counselling (about 21,000 participants) and wage subsidies (about 6,000 participants). Figure 4.3.3 Expenditures for active labour market policies as a percentage of GDP 2008 2010 Percentage Denmark Belgium Netherlands France Sweden Finland Ireland Germany Spain Austria Portugal Poland Hungary Italy Slovenia Chile South Korea New Zealand Canada Czech Republic Slovakia Estonia Israel Percentage 0 0,25 0,5 0,75 1 1,25 1,5 1,75 OECD average 2010 0 0,25 0,5 0,75 1 1,25 1,5 1,75 Source: OECD, OECD. StatExtracts, table Public expenditure of LMP by main categories (% GDP), last viewed on 25.01.2013. The studies about the impact of labour market services in Estonia, which have been completed in the last few years, confirm that participating in services improves the prospects for people to find jobs later on. For example, Lauringson et al. (2011) concluded that the people who participated in labour market training in 2009 and 2010 had a 10% to 13% greater probability of finding a job later on than those who had not. It has been also shown that the probability of later employment is increased by the implementation of wage subsidies (Anspal et al. 2012) and participating in practical training (Estonian Unemployment Insurance Fund, Analysis Department 2013). Therefore it can be said that active labour market policies have been effective in Estonia, but they are implemented to such a small extent that the impact has not been apparent on the unemployment rate generally. The supply of labour, and thereby also the functioning of the labour market, is affected, among other things, by the benefits and allowances that are paid to people 170 Estonian Human Development Report 2012/2013
who lose their jobs. These ensure income protection in the case of social risk (e.g. unemployment, illness, age) or need. In the context of labour market flexibility, the benefits and allowances paid in case of unemployment, i.e. “passive labour market policies,” are the most important. The expenditures onpassive labour market policies, as a percentage of GDP, are increasingly being employed as an indicator to assess the impact of labour market institutions and to monitor the EU’s concept of flexicurity. As is clear from figure 4.3.4, the expenditures for unemployment benefits in Estonia, considering the differences in the unemployment rates, are among the lowest in comparison to the other OECD states. The small size of the unemployment benefits also points to the low net replacement rate of unemployment benefits 6 in case of both short- and longterm unemployment (see Leetmaa et al. 2012). Low compensation levels are accompanied, in turn, by a high risk of poverty for the unemployed (Leetmaa et al. 2012). In addition to the small size of the benefits, only half of the registered unemployed received unemployment insurance benefits or unemployment allowances in 2011 according to the Unemployment Insurance Fund data. Therefore, Estonia’s unemployment benefits are generally lower, access to them is more limited and unemployment is accompanied by a higher risk of poverty. Many empirical studies have confirmed that higher unemployment benefits are usually accompanied by greater unemployment, but this link does not apply if the precondition for receiving more generous unemployment benefits is involvement in active labour market policies; if the job-seeking activities of the benefit recipients are monitored and sanctions are enacted if job searches are abandoned (OECD 2012). Although Estonia’s unemployment benefits are small, an analysis based on Estonian data (Lauringson 2012) confirms that the receipt of unemployment insurance benefits lengthened the duration of the unemployment period before and also during the economic crisis. At the same time, it was found that people who received unemployment insurance benefits for a longer period worked longer at the jobs that they did find. Therefore, the receipt of unemployment insurance benefits enables people to find jobs that suited them better and did not force them to accept the first jobs that they were offered. Therefore, the jobs found by the people who received unemployment benefits for a longer period were of better quality (Lauringson 2012). However, it should still be considered that the data used in the study does not allow for an assessment of how much the more efficient control of the job-seeking activities and, if necessary, implementation of sanctions, would reduce the negative impact of getting unemployment benefits. During the period under examination, the control of job-seeking activities in Estonia was superficial, and sanctions were seldom implemented (Lauringson 2012). Leetmaa et al. (2012) also recognised that, in certain cases in Estonia, it is not beneficial to get a job instead of collecting unemployment insurance benefits. For instance, it was found that in a household with two children it does not pay for one parent to work at Figure 4.3.4 Expenditures for unemployment benefits as a percentage of GDP (divided by the unemployment rate multiplied by 10) 2008 2010 Netherlands Austria Belgium Ireland Finland Denmark Italy Spain Norway Portugal Canada Slovenia South Korea Sweden New Zealand Hungary Czech Republic Estonia Slovakia Poland 0 0,5 1 1,5 2 2,5 3 3,5 4 OECD average 2010 0 0,5 1 1,5 2 2,5 3 3,5 4 Source: OECD, OECD. StatExtracts, table Public expenditure of LMP by main categories (% GDP), last viewed on 25.01.2013; authors’ calculations. minimum wage, if the other does not work, since the amount gained by working is less than the potential loss in subsistence benefits and the additional transport or kindergarten costs. It is also not profitable to take a job that pays much less (or is part-time) than the job seeker was paid before receiving unemployment insurance benefits, or if the household has the right to simultaneously receive several social protection benefits (e.g. old-age pension under favourable conditions, an early retirement pension, disability pension or parental benefit simultaneously with the unemployment insurance benefits). The motivation to work is also reduced by the simultaneous payment of several social protection benefits (Leetmaa et al. 2012). Therefore, getting a job might not always be profitable, and therefore, stimuli should be increased that make working more profitable even at low wages. 6 Defines how large a segment of an unemployed person’s income is in comparison to their income when employed. Estonian Human Development Report 2012/2013 171
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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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hand, to the “inequality of acces
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and explanations of the extent of i
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 and 168: 4.3 Labour market Reelika Leetmaa,
Page 169 and 170: The problems include the very limit
Page 171: • Expenditures for active labour
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
Page 218: Editor-in-Chief: Mati Heidmets Prod
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