The effects of the economic recession on the Estonian labour market remain high. An analysis by Statistics Estonia has reviewed the impact of the current economic situation and changes in the economy on the labour market. The analysis paid special attention to unemployment and identified sectors and groups that are most vulnerable to potential unemployment. Some recommendations have been outlined to tackle these effects on the labour market.
An analysis on Changes in the labour market caused by the economic recession (in Estonian, 971Kb, PDF) by Statistics Estonia (Statistikaamet) examines the current labour market situation. The analysis is based on quarterly data from the Labour Force Survey (LFS) to give an updated overview.
Trends in unemployment
Following a steep increase in unemployment since the second quarter of 2008, the unemployment rate reached 19.8% in the first quarter of 2010 among persons aged 15–74 years. In addition, the employment rate fell by 2.4 percentage points from the end of 2009 to reach a total of 53.5% in the first quarter of 2010.
Differences in unemployment rates between men and women have also increased, with men being more affected by the rise in unemployment. The difference between male and female unemployment increased from 1.2 percentage points in the third quarter of 2008 to 8.6 percentage points in the fourth quarter of 2009, when male unemployment rate reached 19.8% compared with 11.2% among women (see also EE0911019I).
Another concern is the growing number of people who are long-term unemployed – that is, those who are looking for a job for at least 12 months. While in the third quarter of 2008, the number of long-term unemployed persons reached 12,900, a year later this number had more than doubled, reaching 28,700 persons. Despite the increase in absolute terms, the proportion of long-term unemployed persons among the total unemployed population has decreased due to the rapid rise in unemployment. However, it is expected that, in the future, the proportion of long-term unemployed people will increase significantly as the share of unemployed persons looking for a job for six to 11 months has grown most rapidly.
Most affected groups and sectors
Gender and education
The regression model based on the average unemployment indicators for the first three quarters of 2009 confirms the assumption that men are more vulnerable to unemployment. Men have almost twice the probability of becoming unemployed compared with women. Education has also proved to be an essential factor influencing the risk of becoming unemployed. However, according to the analysis, substantial unemployment risk exists in all educational levels as differences are not very large. Nonetheless, persons with basic or general secondary education have been the most vulnerable in this regard.
Nationality
Non-Estonians usually experience higher unemployment rates than Estonians. However, knowledge of the Estonian language considerably reduces the probability of being unemployed. The probability of unemployment is almost the same for non-Estonians with a knowledge of the Estonian language and for Estonians.
Occupation and sector
The analysis also found that managers, professionals and clerks are less likely to be unemployed than representatives of other occupations. Differences are smaller compared with technicians and associate professionals, but larger in comparison to crafts and related trades workers and to workers in elementary occupations.
From a sectoral perspective, the economic recession has affected the construction sector the most. The analysis shows that people who are employed in construction have the highest probability of becoming unemployed. On the other hand, persons working in mining and quarrying, agriculture or education appear to have a substantially lower probability of becoming unemployed. The same is true about those engaged in other economic activities including, for instance, communications or social work activities.
Recommendations
The research concludes that in order to tackle the current situation, it is essential to determine which factors could facilitate a rapid rise in employment and decrease in unemployment, taking into account the desired economic growth cycle. Furthermore, in order to avoid potential work-related migration leading to a reduction in qualified workers, it is important to ensure that the recovery of Estonia’s economy will not fall behind the recovery pace of other EU countries.
In particular, good education, including continuing adult education, has been highlighted as a precondition for long-term development and as an important element for securing reorientation to a higher added value in the economy.
The importance of a positive business climate and need for persons engaged in entrepreneurship were also highlighted. At the same time, social cohesion, the capacity to cooperate and actual cooperation between different partners of society were underlined as the cornerstones for long-term economic development.
Liina Osila and Kirsti Nurmela, PRAXIS Centre for Policy Studies