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OECD Reviews of Labour Market and Social Policies: Estonia 2010

image of OECD Reviews of Labour Market and Social Policies: Estonia 2010

OECD's comprehensive 2010 review of labour market and social policies in Estonia. It finds that since Estonia regained its independence in 1991, its labour and social policies have been marked by a strong commitment to fiscal prudence, flexible markets, and work incentives. Labour market performance steadily improved during the mid-1990s and beyond, until the advent of the global economic crisis in 2008. Estonia was not well prepared for the slowdown and its economy has been hit especially hard. The downturn has required painful policy adjustments. Today, Estonia’s public social spending remains among the lowest in the OECD; its social programmes support persons in need, but the benefits they receive are usually modest and some of the jobless receive no benefits. However, the country offers one of the world's most generous parental-benefit programmes and has begun to phase in a three-tier pension system. 

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Challenges of Social Policy

Estonia’s social protection system is well developed but not very generous. It has been designed to keep costs at a moderate level and to preserve work incentives. Social spending relative to GDP is lower than in any OECD country except Korea and Mexico. Some increase in spending has been foreseen for the near future, but several planned reforms were postponed or cancelled in 2009 in order to give budgetary room for supporting the rising numbers of unemployed people during the economic downturn. The latter challenge was considered to exclude improvements of the generosity of various benefits in the short term.

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