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1. Labour market situation in the country

2. Main concepts

Labour market situation in the country

OSKA's research report "Overview of the situation of the Estonian labor market, labor needs and the resulting training needs" reflects the so-called OSKA's general forecast, i.e. comprehensive labor demand forecast, giving an overall view of both today's and the near future's labor demand and supply.

According to the report, there are fewer young people entering the labor market than those leaving the labor market due to age, as the natural birth rate has remained negative for decades. In recent years, instead of decreasing, Estonia's population has grown, because the positive migration balance exceeds the negative natural increase.

The past few years have seen a lot of uncertainty in the economy and severe difficulties in several sectors such as tourism, accommodation and catering, transport and logistics, agriculture and manufacturing. The economy recovered relatively quickly from the COVID-19 virus crisis. The average gross salary has grown strongly over the past nearly five years, but the growth of consumer prices has also been rapid. Labor productivity grew faster than wages in the last five years, which means that relatively fast wage growth has been sustainable. Estonian labor productivity per employee approached the average of the European Union.

The labor market also recovered relatively quickly from the virus crisis, and the employment rate in 2022 was at a record high. In the near future, the number of young people potentially entering the labor market and people in prime working age (20‒64) will be smaller, and maintaining or increasing the number of employed people at the current level will prove to be a test. Although the situation may (temporarily) be changed by war refugees, it is necessary to adapt business models to the availability of limited labor, to take into account the needs of different age groups when creating working conditions as the working life lengthens, and to ensure good further training and retraining opportunities.

Youth employment

In Estonia, after reaching one of the highest levels of youth unemployment rate in Europe during the financial crisis (32.9% in Estonia vs 21.5% in EU-28 in 2010), the situation stabilized fast and the share of youth searching for a job is lower in comparison with most other European countries (11.1% in Estonia and 15.0% in EU in 2019) The level of youth unemployment in Estonia still remains higher compared to the prime-age population, indicating the presence of barriers for youth in their entry to the labour market. 

Similar, to other European Union countries, there is a high risk of unemployment in Estonia among young people who have a lower level of education and do not have professional education. The proportion of young people who are neither in employment nor in education (NEET youngsters) has dropped almost by half in five years (in 2014, it was 11.7% of all young people, in 2019, it was 6.9%). NEET youth have less experience in employment or practical work and they are not competitive in the labour market, but different measures have improved the situation. The obstacles for young people entering the labour market include the restrictions of labour and tax regulation and the fact that young people are at a higher risk of suffering from work accidents.

Also, youth tend to turn less to the local employment office for support in case of unemployment, for example, in 2015 only 34% of the unemployed youth (age 15-24) turned to the Estonian Unemployment Insurance Fund, while out of the prime-age group 47% turned to the Fund.

Main concepts

The Welfare Development Plan (Heaolu arengukava 2016-2023) states, that employment gives people an opportunity for self-realisation and financial security and is, therefore, one of the main prerequisites for socio-economic development, and a basis for a high-quality life. The approaches and recurrent principles of the plan arise from the principles of a social and welfare state, the framework of fundamental and social rights, and social protection principles. On the one hand, the principle of a social state is ensuring that the strengthening of the state’s economic development and competitive ability takes into account the needs of different social groups. On the other hand, the adherence to the principle of a social state is a premise for the state's economic development and competitive ability, as it prevents and reduces the exclusion of parts of the population from the social and economic life. The document points out, that it is necessary to find solutions in accordance with the general shift of welfare state policies: transferring from the policy that compensates social risks and repairs their consequences, to the policy that empowers and prepares people to cope with the risks. In addition to traditional social protection, increasing people's self-sufficiency and their social and professional activity has become more and more important.

In economic affairs and entrepreneurship, the Government considers important to focus both on raising the ambition of entrepreneurs as well as on enhancing research and development activities, innovation and investments and export. In terms of employment, the focus is on bringing about the structural changes in the labour market by increasing the share of jobs creating higher added value.

Definitions in use

• Economically active population/labour force – persons who wish and are able to work (total of employed and unemployed persons).
• Economically passive/inactive population – persons who do not wish or are not able to work.
• Employed – a person who during the reference period worked and was paid as a wage earner, entrepreneur or a free-lancer; worked without direct payment in a family enterprise or on his / her own farm; was temporarily absent from work.
• Unemployed – a person who fulfils the following three conditions: he or she is without work (does not work anywhere at the moment and is not temporarily absent from work); he or she is currently (in the course of two weeks) available for work if there should be work; he or she is actively seeking work.
• Entrepreneurship – attitude based on personality, characterised by creative and innovative thinking, need for accomplishment and capability to implement thoughts and ideas
• Entrepreneurship education – education developing entrepreneurship and preparing to be an entrepreneur, that deals with the complexity of creating and developing an enterprise.