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. 



High Employment but an Unequal Society

Before the present economic downturn, Estonia registered a long period of economic growth which resulted in a rapid increase of employment notably for youth, women and elderly persons. Living standards rose more than in most transition countries, even though they remain significantly lower than the OECD average. During 2006 and 2007, a boom in construction and investment activity led to distortions in resource allocations and relative wages in large parts of the economy. The labour force is mostly well-educated, but employment remains too concentrated in low-skilled activities. Important regional disparities persist and the integration of ethnic non-Estonians continues to be a difficult challenge. Despite the recent long period of rising incomes for almost all groups, the income distribution remains less equal than average for OECD countries and many residents are at risk of relative poverty.


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