No. 21

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Labour market bore the brunt of the economic recession

  • Helle Ruusing

    Editor-in-Chief, Information Adviser of the Chancellery of the Riigikogu

  • Hanno Pevkur

    Minister of Social Affairs (Estonian Reform Party)

  • Ivi Proos

    Director of the Estonian Open Society Institute

  • Sten Anspal

    Senior Analyst of the Estonian Centre for Applied Research CentAR

Riigikogu Toimetised invited four experts of economy and social policy to the conversation circle on 24 May, in order to discuss the extensive unemployment in Estonia as a result of the global economic recession.

The circle was attended by the Minister of Social Affairs Hanno Pevkur (Estonian Reform Party), Director of the Estonian Open Society Institute Ivi Proos, Professor of the Institute of National Economy of Tartu University Raul Eamets and Senior Analyst of the Estonian Centre for Applied Research CentAR Sten Anspal. RiTo Editor-in-Chief Helle Ruusing acted as the moderator and compiled a summary of the discussion.

First, the participants in the circle touched upon the question where work had disappeared and why, in Estonia where for a long time there had been a great shortage of workers, extensive unemployment had appeared in a very short time. It was found that there are various reasons for that. The earlier economic rise had been based on real estate money and the loan money connected with it. When the real estate boom ended, tens of thousands of jobs disappeared in building because no new objects were built. As people stopped taking loans, the loan market also withered. Both banking and the services sector suffered because of that. When builders had no more money to spend in the services sector, service workers also lost work. The earlier hidden unemployment has also aggravated unemployment. Many of those who earlier did not worked officially were not registered as unemployed but made their living by occasional works, for example. By now, these opportunities have also disappeared. At the same time, the circle found that the extensive unemployment that has emerged shows in a way the flexibility of the Estonian economy. When economy is doing very badly, people are fired. This cannot be done in most of the old member states of the European Union where the influence of trade unions is much stronger and for example lowering of salaries is in most cases out of the question. In Estonia, enterprises reduced salaries and laid people off and the labour market bore the brunt of the economic recession. The participants in the discussion did not forecast a rapid decrease of unemployment. The state will have to decide whether to extend the period of payment of unemployment benefit or to begin to make significant changes in the subsistence benefits system because, after all, people have to live on something. Social assistance systems will have to be considered. Changes are needed for social assistance systems to function. The simplest change would be to change the subsistence benefits system so that the benefit would actually reach those who need help. In conclusion, the decisive factor will be how quickly economy, including export, will recover. When the economy will pick up, more new jobs will begin to emerge and life will become easier.

Full article in Estonian

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