Employers offer solutions on managing economic downturn

In September 2008, the Estonian Employers’ Confederation forwarded proposals to the government on managing the economic downturn. Over the last year, the employer confederation, the Confederation of Estonian Trade Unions and the Estonian Chamber of Commerce and Industry have made several recommendations to the government and parliament for dealing with the downturn. However, until now, no consultations have been initiated with the social partners on the issue.

Proposals of employers

At the end of October 2008, the Estonian central employer organisation, the Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETTK), compiled and issued a list of proposals to the government on how to manage the implications of the economic downturn. ETTK surveyed its member organisations and collected opinions on the bottlenecks of the current economy and on measures for improving the situation. Its proposals to the government are based on the findings of this initiative.

In general, the employers point out that the government’s plan of action is not enough to deal with the difficulties of the economic downturn. Therefore, ETTK proposes a list of actions that should be undertaken in six different areas: public sector expenditures and fiscal policy, public administration and e-government, taxation, investments, labour market and educational organisation.

Public sector expenditures

Under public sector expenditure, employers emphasise the need to reduce government expenditure and maintain a balanced state budget. In the long run, government expenses should be reduced to 33% of gross domestic product (GDP). This should support the adoption of the euro, for which a specific government plan is expected by 2012 at the latest. Currently, the draft 2009 state budget being discussed in parliament has taken specific steps to reduce government expenditure – for example, the operational expenses of ministries will be cut (EE0804019I). In addition, the draft proposes several reductions in social benefits, such as cutting full-paid paternal leave and school allowance.

Public administration

In terms of public administration, the need to undertake an administrative-territorial reform, further implement e-government and consequently reduce public sector employment have been highlighted. To create favourable conditions for entrepreneurship, employer organisations propose to restore dialogue between them and the government and to further simplify the process of setting up companies in Estonia combined with a favourable income tax environment.

Tax environment

Proposals regarding taxes include freezing and later reducing the general tax burden to 30% of GDP. In addition, the employers argue that no abrupt tax changes should be introduced to enable a stable environment for entrepreneurship. The employers also propose a reduction in the social tax burden, for example by adopting an upper limit to social tax payments. This latter proposal has previously been opposed by the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL).


Regarding investments, employers propose directing the finances of the EU structural funds to real investments such as industrial equipment and infrastructure rather than ‘soft‘ investments such as training, consultations and market research. They also propose investing in the creation of business areas, namely areas with the necessary infrastructure and production halls, additional energy sources and targeting investments to the area around the capital city Tallinn.

Labour market

With regard to the labour market, the employers propose increasing flexibility in labour relations by adopting the draft Employment Contracts Act negotiated between the social partners earlier this year (EE0805029I) and promoting the use of flexible forms of work – for example, fixed-term employment, part-time work and telework. Moreover, the employers also call on the government to support the employment of older persons and women by changing the pension system to increase incentives to take up retirement, improving the availability of childcare facilities and making the regulations on parental benefit more flexible to enable employment. The employers also support an open labour market to further include foreign labour (for some earlier steps on this issue, see EE0803019I and EE0612019I). Under this point, reform of the collective employment relationship is also proposed by specifying further the trade unions’ right to strike and liability regarding unlawful work stoppages. Furthermore, the rights and responsibilities of the national conciliator upon settlement of labour disputes should be specified. In terms of wage policy, the employers propose continuing the decentralised wage system and doing away with the national minimum wage. At the same time, however, EAKL calls for a further increase in the minimum wage level.

Education system

The employers’ proposals regarding the education system include improving the vocational education system – by increasing the number of students and funding in vocational education to achieve a balance with other educational levels – and the career counselling system. In terms of adult education, more attention should also be focused on vocational training. To meet labour market demands, the financing of those domains in higher and vocational education that are required in the labour market should be increased and training in information and communications technologies (ICT) should be further improved.

Previous actions of social partners

The chair of the council of ETTK commented in an interview to the Estonian daily newspaper Eesti Päevaleht that, although the government has responded to several proposals to tackle the current economic situation, no specific actions have been taken. Already in 2007, ETTK adopted its manifesto for 2007–2011 offering proposals to avoid the negative economic situation (EE0702019I). In May 2008, ETTK sent a letter to the Estonian Prime Minister, Andrus Ansip, reminding him of the manifesto. The employers requested that their opinions be taken into consideration and that specific steps be taken towards implementation of their proposals.

The trade unions have also made attempts to initiate dialogue – in 2008, EAKL and the Estonian Employees’ Unions’ Confederation (Teenistujate Ametiliitude Keskorganisatsioon, TALO) expressed their dissatisfaction in a letter to Prime Minister Ansip, in which they made the following claim: ‘in the conceptual issues of working life, the Estonian executive power has repeatedly tried to avoid dialogue with the employee representation bodies. Several draft acts that are significant to employees including the Employment Contracts Act, the Employees’ Representatives Act and the Public Service Act have been drafted without involving the social partners.’

Altogether, ETTK, EAKL and the Estonian Chamber of Commerce and Industry (Eesti Kaubandus- Tööstuskoda) have forwarded six letters to the government, Prime Minister Ansip and the parliament over the past year. Nonetheless, the social partners are not satisfied with their level of involvement to date.

Kirsti Nurmela and Marre Karu, PRAXIS Centre for Policy Studies

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