The significance of estonian language for the immigrants on the labour market in Estonia

Immigrants with the command of the Estonian language are more successful on the labour market in Estonia. The Immigrant Population Survey reveals that in case of immigrant occupational career the skill of the Estonian language is more important than the immigrant background, Estonian Statistics announced.

In spite of the rapid changes on the labour market recently, which have been mainly expressed through the growth of unemployment big differences of occupational division remained comparing immigrants with and without the Estonian language skill.

The comparison of native Estonians and Estonian-speaking immigrants indicates that there are some differences between the distribution of occupations in the groups, but they do not amount to a confirmation of occupational division. However, signs of division can be detected in the distribution of occupations among immigrants with the skill of the Estonian language and immigrants without the skill of the Estonian language. More than a half of immigrants without the skill of the Estonian language were employed as skilled workers or operators. The share of unskilled workers was also rather high in this group (13%). The share of persons employed as managers, specialists of different levels or officials was 21%.

The group of employed native Estonians and immigrants with the skill of the Estonian language included the highest number of top specialists, mid-level specialists and officials. These occupation categories were also dominant among the immigrants with the skill of the Estonian language — top specialists, mid-level specialists and officials even accounted for more than a half of the employed persons in this group (54%), this indicator was even larger than that among the native Estonians (37%). The percentage of managers, senior officials or legislators was the highest among the native population of the Estonian nationality — 17%. Among immigrants with the skill of the Estonian language there were 11% of managers, senior officials or legislators. Another characteristic in the distribution of occupations among native Estonians and immigrants with the skill of the Estonian language was the relatively small percentage of unskilled workers (less than 5%).

The Immigrant Population Survey was conducted by Statistics Estonia for the first time in 2008. Immigrant population has been defined as the people living in Estonia whose parents were born in a foreign state. In addition, if only one non-Estonian-born parent is known, the respondent is considered as a part of immigrant population. In 2008, the share of immigrant population among the permanent residents of Estonia was 24%. Native Estonians are the residents of the Estonian ethnic nationality whose both or one parent was born in Estonia.


Labour market flexibility in Estonia: what more can be done?

In  mid-2008,  high  employment  and  low  unemployment  rates  characterised  the  Estonian  labour  market  in
comparison  with  the  average  of  the  EU15 countries. While  aggregate  outcomes  improved  during 2000-07,  large
inequalities  persisted  across  regions,  ethnic  groups,  and  workers  with  different  skill  levels.  As  Estonia  entered
recession in 2008, the unemployment rate almost doubled between the 2nd and the 4th quarter, and is expected to rise
further in 2009 and 2010.
More flexible labour markets will be a key adjustment mechanism during the recession as well as in the medium
term  if  Estonia  is  to  become  a  knowledge-based  economy.  Given  the  currency  board  arrangement  and  low
synchronisation  with  the  euro  area,  flexibility  is  also  needed  to  cushion  asymmetric  shocks.  In  December 2008,
parliament adopted the new Employment Contract Act, deregulating employment protection while increasing income
security of  the  unemployed. This paper discusses options  for  removing  the  remaining  barriers  that  impede worker
reallocation across jobs, sectors, and regions into more productive activities.

What will the world be like after the economic crisis? #2

In my previous post I introduced you four possible future developments that may be ahead after the economic crisis is over, taking into consideration Jeffrey Scott Saunders’ predictions, the professor of Copenhagen Institute of Futures Researches.

Now I would like to write how may these possible ways of developments influence on Estonia.

In the first case, if we deal with a “typical cyclical crisis or hangover after the boom”, Estonia’s economy will continue in structure and way as before the crisis. The stops of economic development are the same as before (development based on foreign capital, especially loan money, lack of qualified workforce, structural problems etc). Recovery on the foreign markets will bring short relief. Weaker companies will bankrupt. That will free resources, including workforce to new and more efficient companies. Opening of the credit canals and restarting financial markets will bring a wave of mergers-acquisitions. Investors and investment recipients will be the biggest winners.

Second possibility, when the recession continues in western countries, Estonia’s challenges are the same as elsewhere in Europe: approaching new leaders, going to new distant markets in condition of strong currency peg. Estonia has an opportunity to try cooperating with new partners and bring foreign investments by offering Asian companies a favourable location to enter European market. The competition on emerging markets is stronger than experienced on the European markets. Estonian producers are able to keep their export markets only in specific niches and with strong competitive advantages.

It would be the worst of these possible four developments for Estonia, if the crisis is followed by deep economic downturn and stagnation in the whole world, as the third case say. Although closing to areas brings Estonia new opportunities to be subcontractor or make end products to Europe, there are no big chances to break to foreign markets. The economic recession, influenced by protectionism, would limit market demand in Europe for which Estonia would struggle for a long time.

The last scenario may have either positive or negative scenario depending on how Estonia can change direction and use new business opportunities on areas of environment and sustainable energy. Estonia will be a bystander of new global growth when continuing its old ways.

Estonia is fifth for unemployment in EU

The average unemployment in the European Union (EU) is 7.9 pct according to Eurostat information, and the unemployment is highest in Spain, Ireland and all three Baltic countries (Latvia, Lithuania and Estonia).

In Spain the unemployment was 15.5 pct, Latvia 14.4 pct, Lithuania 13.7 pct, Ireland 10 pct and in Estonia 9.9 pct.

The largest falls were observed in Bulgaria (6.2 pct to 5.5 pct) and Slovakia (10.2 pct to 9.8 pct), and the highest increases in Lithuania (4.4 pct to 13.7 pct), Latvia (6.1 pct to 14.4 pct) and Spain (9.3 pct to 15.5 pct).

The lowest unemployment was in the Netherlands, 2.7 pct.

By the end of march 54 979 unemployed had registered in the Estonian Labour Market Board, this is 18,5 pct increase from February. In a year unemployment has increased by 220 pct, writes.

According to the Labour Market Board 58 093 unemployed were looking for a job in March and out of that 1528 people found a job. 11 898 new unemployed people were registered.

At the end of March 9445 young people in the ages of 16-24 and 14 188 older people of 50 and older registered themselves on the Labour Market Board. 53,6 pct of the people registered were men.

During March the Labour Market Board had 3131 job offers for passing on and around April 1st there were 1459 job offers.

How the Baltics “melted down”

Eastern Europe is in economic turmoil. Among the countries where the bite has been the largest are the three former communist states of Estonia, Latvia and Lithuania, which joined the European Union and NATO in 2004. Just a few years ago, they registered some of Europe’s highest growth figures, earning the moniker the “Baltic Tigers.” Now they are again setting new records — but this time in the loss column.

The causes of the implosion are many and include a confluence of external and internal factors. EU membership opened up the Baltics’ markets to foreign investment and banks, while providing them outlets to export to. When the going was good, banks lent readily, governments ran huge deficits and a number of economic bubbles emerged — most prominently in the real estate, retail and construction sectors. Even at the height of the boom, analysts were warning that the growth was unsustainable. Now, however, with the global downturn, external markets have disappeared, while banks — a large number being local affiliates of Scandinavian ones — have cut off credit lines.

“Money was available, credit was cheap and people thought that the honeymoon would go on forever,” said Kestutis Sadauskas, the EU’s representation head in Lithuania. “The market was totally unsaturated.”

“The money went into business, but often not into the right ones. There was no value added,” he continued.

Latvia’s economy will contract this year by a heart-stopping 12 percent, says the country’s finance ministry — the largest potential drop in the 27-member EU. Others say it could be even more. Paul Krugman, the American Nobel Prize economist and New York Times columnist, called Latvia “the new Argentina” in a December online discussion.

Estonia is better placed economically to weather the storm, analysts say, having socked away financial reserves during the fat years. Nevertheless, its gross domestic product may shrink between 5 and 9 percent, while unemployment will rise considerably. Lithuania’s economic figures will drop somewhere between those of Latvia and Estonia.

Throughout the Baltics, the gloom is manifest. Nearly all of the region’s seven million inhabitants seem to have been affected by the crisis one way or another — either directly through a job loss or salary reduction, or something similar within their immediate circle. In Riga, empty shop fronts dot the main streets, their dirty, grey windows with “For Rent” signs gaping into the darkened streets.

Some believe that worse is yet to come. Though their dread may be exaggerated, the threat is nevertheless there. Devaluation of the local currencies is the first concern. All three countries pegged their currencies’ exchange rates to the euro, in hopes of entering the EU’s euro zone in just a few years’ time. Now, however, as their economies plummet, central banks are coming under increasing pressure to abandon the pegs and let their currencies float at will — de facto devaluation — so not to use up all their reserves.

Latvia, with its incredible shrinking economy, is the most likely candidate for a worst-case scenario. The effect on the population could be devastating. Locals are paid in lats, the national currency, but financed their cars, homes and businesses in dollar and euro-denominated loans. (Ninety percent of loans were in foreign currency last year.) Devaluation would mean that untold numbers would not be able to meet their payments.

Next is the risk of default. All three Baltic countries have seen their credit worthiness downgraded by international ratings agencies, with Latvia being relegated to junk bond status. The price of credit default swaps — the bet that investors make that a country or its institutions will default on their loans — are increasing, with Latvia leading the pack.

And then there is destabilization. Should any of the Baltic economies collapse, the others could very well be brought under as well. Devaluation in Latvia for instance would most certainly lead to a similar scenario in Estonia and Lithuania, who would not be able to compete with their neighbor’s cheaper currency. Default would most certainly affect them in the same way, and probably jolt other European nations, especially in Scandinavia.

Not least among possible consequences is the political fallout. Latvia and Lithuania have already witnessed major demonstrations, which descended into violence, against the austerity programs that their governments introduced to deal with the crisis. Latvia’s center-right coalition government fell last month, and Estonia’s recently survived a no-confidence vote. Anger and frustration is rising among the populace. Those guiding their governments are viewed as corrupt, incompetent or indifferent.

“It’s clear that sharp falls in living standards are inevitable this year — I just hope that people accept it,” said Peteris Strautins, chief economist for Swedbank in Riga.

But any doomsday scenario still may be a long way off, even if the Baltics undergo considerable pain in the near future. Latvia has received a 7.5 billion euro rescue package from the IMF and other institutions, while Sweden and Estonia’s central banks late last month agreed to a $1.1 billion currency swap to help bolster the Estonian kroon. Most importantly, the Baltic governments, though slow in reacting initially, are now on the right track, some analysts say.

“It’s been a real roller coaster ride, but I’m not scared,” said Strautins.