No. 37




The Structural Change of Employment in Estonia in 1989–2017 and Its Regional Specifications

04 June 2018


RiTo No. 37, 2018

Changing and developing economy has influenced the way people use their knowledge and skills and earn their living. In longer perspective, this has meant the shift of labour force first into industry, and after that, into service. How has the labour market of Estonia developed after liberation from the Soviet Union?

The article discusses the changes on the Estonian labour market after the restoration of independence, pointing out the regional differences and studying the location of Estonia on the European level to establish the context.

From the point of view of the employed, the period under observation can be divided into four main sections: decrease in the number of employed due to the change of social system (1989–1999); increase in the number of the employed during the economic boom (1999–2008); rapid decrease in the number of the employed during the economic recession (2008–2010); recovery from the economic recession and increase in the number of the employed (2010–2017).

Although the rate of employment in Estonia was lower in 2017 than in 1989, it has grown during the years following the economic recession. The employment rate in Estonia can be considered relatively high: in 2017, it was the third among the countries of the European Union in the age group of 20–64.

The location of the employed and the change of their number differ by counties. The differences between counties in the rate of employment are noticeable, therefore it may be concluded that the development of the Estonian labour market is not balanced.

The differences between counties are apparent in the structure of employment by economic sectors. During nearly three decades, the decrease of the importance of primary sector and the increase of the tertiary sector can be noticed in all counties.

Regarding more specific fields of activity, the main employers in Estonia and in the European Union on the average are the processing industry and wholesale and retail trade, and also repairing of motor vehicles and motorbikes. In the comparison of 1989 and 2017, the number of people employed in trade has increased the most in Estonia; information and communication, and administration and ancillary activities can also be pointed out as fields of activity that have developed. The number of people employed in agriculture, forestry and fishing has decreased the most, and to a large extent, also the number of employed in processing industry.

The analysis of the employment structure in the higher developed regions of the European Union showed that the strongest positive correlation between the level of GDP (per capita) and the rate of the employed was in vocational, research and technology sectors, and in administration and ancillary activities. The correlation was relatively strong also in finance and insurance and in information and communications. The strongest negative correlation was in agriculture, forestry and fishing. The authors warn that this should not be interpreted as the need to considerably reduce the role of the primary sector.

Tertiarisation, the inevitable phenomenon of open economies, has also taken place in Estonia, and in spite of different starting positions, the employment structure by economic sectors (and more specifically, by fields of activities) has become similar to that of the Western countries. Tertiarisation has taken place at the expense of the primary sector. Even if the general trends are similar, there are considerable regional differences in the employment structure of Estonia. Although it is complicated to say what the optimal employment structure should be like, it can be said that successful labour market is flexible and able to adapt.