Employers want more flexibility and a reduced tax burden

Ideas to improve the competitiveness of the Estonian economy have been suggested by the country’s employers. Some of the proposals, which appear in their confederation’s manifesto for 2011–2015, were also in their 2007 manifesto. However, heated debate has been sparked by their calls for partial tuition fees and a higher education scholarship system, welcoming non-EU migrant workers and shifting the burden of social security tax to employees from employers.

Background

On 30 August 2010, the Estonian Employers’ Confederatio n (ETTK) published its second manifesto (164Kb PDF) on key economic policy aims. The new manifesto was launched, like the one in 2007, before parliamentary elections. It aims to inform political parties of employers’ objectives in five areas: administration and macroeconomics, the labour market, taxes, education and social insurance. Parliamentary elections in Estonia are scheduled to take place in March 2011.

Proposals from previous manifesto

Many suggestions were already highlighted in the previous manifesto (EE0702019I). These include the need to encourage the use of flexible forms of work and reduce personal income tax (currently 21%) to increase employment, and to abolish fringe benefit tax on expenses paid by employers on human capital, adult education and health care. The proposal to raise the statutory retirement age to 67 years was implemented earlier this year (EE1004019I).

In 2007, employers called for the use of solidarity strikes to be limited. Now they insist these strikes should be disallowed altogether, with strike action in some occupations restricted or banned. They also previously suggested that the burden for social security tax should be shared by employers and employees; now they want it paid entirely by employees.

Content of new manifesto

The proposals related to the labour market are mostly driven by the employers’ wish to increase flexibility. They want to be allowed, in a recession, to reduce working time as well as wages. They also want the labour market opened to non-EU workers, mostly for highly qualified workers, but also if necessary for low-paid short-term seasonal work.

As for their proposals on industrial relations, employers want to be released from having to abide by a collective agreement after that agreement expires. At the moment, employers must adhere to an agreement’s conditions even if it has ended. The manifesto also suggests arbitration as an alternative to labour dispute committees, in the case of both individual and collective labour disputes.

They also want a reduced tax burden – for example, a further decline in labour costs, and an upper limit on social security tax calculated on three average monthly wages to support employers in creating qualitative and so-called ‘smart’ jobs. The education proposals are prompted by the need to raise the number of students in science and technology, as well as to increase the competitiveness of the educational system. In higher education, employers want the introduction of a partial tuition fee together with a scholarship system to support talented or poor students. They also want scholarships to be offered to foreign students, and the state to pay for the training of unemployed people.

Employers also suggest a health insurance tax for employees, and say that exceptionally generous pensions for certain categories of public employees should be abolished to avoid raising social tax in the context of the ageing population.

Commentary

The manifesto was not very popular, particularly with the Prime Minister, Andrus Ansip, the trade unions and the media. According to the Chair of the Estonian Trade Union Confederation (EAKL), Harri Taliga, the manifesto shifts responsibility from employers to employees and could have a negative impact on unemployment instead of creating new jobs. However, many political parties agreed with the recommendation to determine the upper limit of social tax. Students’ organisations have criticised the idea of abolishing free higher education and challenged ETTK to a public debate on the matter. ETTK emphasised that their objective was to highlight important problems and encourage discussion on issues that influence the future of Estonia.

Liina Osila and Kirsti Nurmela, PRAXIS Centre for Policy Studies