BONJOUR L'ESTONIE

Estonia has fallen into an unemployment benefit trap : European Commission

According to the European Commission, Estonia now has so-called unemployment trap where people can receive equal amount to minimum wage by applying to various unemployment benefits, and this is keeping them away from the labour market, writes Eesti Päevaleht.

"Such people are not motivated to work which is why the state should think what to do to attract them back to work,” said a representative of the Commission. Labour issues dominated European Commission this year’s recommendations to Estonia. It said that low wages paid in Estonia are keeping people away from the labour market, that the employers’ expectations and that actual skills of workers are in a mismatch and that areas with high unemployment have too little entrepreneurship.

Too many low-paying jobs : analyst
Marje Josing, head of the Estonian Market Research Institute EKI said in comment that Estonia’s problems are not high social benefits, but too many low-paying jobs.
„There are jobs where people are offered minimum pay for 8-hour workdays and that do not motivate people. Often such jobs are offered in remote rural areas where people have transportation costs. Not surprisingly, people are seeking jobs in Tallinn or even in Finland. The state should create jobs which pay decent wages and the European Commission has reminded us that,” said Josing.

Wage pressures build in Estonia

TALLINN - Slow economic growth has had a visible impact on the labor market, Estonia’s central bank Eesti Pank said in its latest labor market review published in April, reports LETA. In the second half of 2013, the first signs of slower economic growth having an impact on the labor market appeared.

Employment in the second half of the year was at about the level of a year earlier, but the decline in the working age population meant that the employment rate actually increased.

Despite the weak economic growth, wages grew rapidly in Estonia in the second half of 2013 and distinctly faster than productivity. Recent developments have reduced the likelihood of companies successfully increasing profitability with support from external demand. In consequence, a slowdown in the growth of labor costs can be expected soon and it is more likely to be sharper than was previously thought.

Wage growth accelerated in the second half of the year in the public sector, where wages started to rise after the crisis a bit later than those in the private sector. However, the state should not become the driver of wage growth. This is partly because it would make wage growth adjustment in the private sector, which is competing for the same supply of labor, harder, and partly because rapidly rising labor costs would make it harder for budget goals to be met.

The second main source of wage pressures was again the shortage of qualified labor and the strengthening of the position of employees in wage negotiations, which is backed in some cases by the option of going to work abroad. Behind the shortage of labor and any reduction in it stands the high structural unemployment in Estonia.

Estonia's labor costs among the lowest in EU

Average labor costs in Estonia were 9 euros per person per hour in 2013, up from 8.4 euros in 2012, according to Statistics Estonia.

In member states of the European Union a more than tenfold difference was recorded in hourly labor costs last year at 3.7 euros in Bulgaria.

The highest average labour costs were in Sweden at 40.1 euros, while the average for the EU28 was 23.7 euros.

Sweden was followed by Denmark with 38.4 euros per person per hour and Belgium with 38 euros.

Estonia posted the EU's fastest growth in average hourly labor costs per person in the final quarter of the year at 7.2 percent. In Latvia the annual rate of increase was 5.9 percent, in Lithuania 5.7 percent, in Bulgaria 4.3 percent and in Poland 3.9 percent.

Toomas Hõbemägi

Thousands Estonians pay taxes to the wrong state

Thousands of people who work both in Estonia and Finland pay social insurance taxes to both states which can cause problems in payment of state benefits, LETA/Public Broadcasting reports.

The golden rule is that employers have to pay taxes for the employee to just one state – the one where a person works more.

The majority of Estonians work in Finland in construction sphere but there are also a lot of medical workers and customer service staff. According to Finnish data, around 57,000 Estonians have accumulated pensions in Finland. These people may not receive the pensions and compensations if social tax has been paid for them at the same time in Estonia too.

Finnish Pension Board international affairs specialist Marjaana Lundqvist said that according to European Union laws, a person can have social insurance only in one state. "This is the main rule and has to be fulfilled. If a person works and pays taxes in two states, then it has to be determined which country is the right one. This has to be ascertained even after the fact."

Many Estonians work a part of the time in Estonia, a part in Finland. This concerns people like medical workers who have some shifts in one and some in the other state. An employee has to ascertain which country's social insurance he benefits from before starting to work.

According to Finnish data, hundreds of double insurance situations are currently under investigation.

Unemployment creeps upwards in Estonia

Unemployment went up in Estonia during January, new figures show.

The number of registered jobless increased by nearly 3,000 people and reached 35,817 people, which formed 5.5% of the working-age population, Äripäev Online reports.

In January, the number of registered jobless was 33,520 people, which formed 5.1% of the working-age population. In January, 7,520 new people registered as jobless.

Joblessness was highest in Valgamaa (9.8%) and Ida-Virumaa (9.1%) and lowest in Viljandimaa county (4.2%) and Tartumaa (4.3%).

Unemployment Insurance Fund board chairman Meelis Paavel said that the slightly faster growth in the number of the unemployed in January was expected, mainly because many term job contracts end at the end of the year and there are also more redundancies at the end of the year.

Unemployment insurance compensation was paid in January to 25% of the jobless and jobless benefits were paid to 21% of the jobless.

Employers must regard wage costs as investments

Emigration from Estonia will stop only after employers start to regard wage costs as an investment, according to Rainer Aunpu, CEO and owner of Smart Valley OÜ. The following are excerpts from his column that was published in today’s Äripäev.

Until employers believe that it’s OK to pay 600 euros in net monthly wages to a full-time family father, wage emigration will not stop. Things would change if we were in a major crisis, but Estonia is at present in the phase of stable development that does not favour radical changes.

On the state level, ruling parties seem to lack motivation to do anything to radically stop emigration. No politician on power is not ready to commit a political suicide in the name of the country’s development even if they have ideas that they believe in.

I am not blaming politicians because they are acting as is natural and expected from them. What is important is to understand that the solutions that we need are mainly political. One problem is the old thinking of Estonia’s best-known and recognised entrepreneurs. They namely believe that costs must not be increased notably before increasing income.

Estonia sets to increase minimum salary in 2014

TALLINN - The Estonian government announced to rise the minimum salary by 35 euros (47.5 U.S. dollars) to reach 355 euros per month from Jan. 1, 2014, said the Estonian Public Broadcasting Friday.

The government said a further 35 euros will be increased one year later, making the minimum salary in Estonia to hit 390 euros per month, much higher than the current 320 euros.

The minimum hourly wage will climb from 1.90 euros to 2.13 in 2014 and to 2.34 euros a year later, the government added in its Thursday's announcement.

Since 2012, the Estonian authorities has begun to rise the minimum salary to break the frozen level of 278.02 euros monthly for four years. The salary stood at 138.05 euros about 10 years ago.

The average salary gross in Estonia for now remains 930 euros per month.

Competition with foreign employers has accelerated wage growth : Eesti Pank

Data from Statistics Estonia show that the average gross wage reached 930 euros in the third quarter and annual growth had accelerated to 8.8%. Average hourly wages didn't rise as fast, which shows that the acceleration in wage growth came from the variable components of wages. Unit labour cost growth continued at a quick pace.

Wage growth was broad-based across industries, but construction and transport and warehousing stood out where competition with foreign employers is particularly strong. Wages in companies owned by foreigners grew by 10.2%, those in Estonian-owned companies by 7.3%. Real wages adjusted for seasonal factors are close to the peak reached in the first quarter of 2008, before the crisis.

Although the acceleration in wage growth was boosted this year by both the rise in the minimum wage and collective wage agreements in the public sector, the speed of wage growth has been maintained by the shortage of available labour, particularly skilled labour. The unemployment rate is still higher than it was before the crisis, but this is largely a consequence of the level of active involvement in the labour market. If labour market participation were today at the level seen before the crisis, the unemployment rate would be 4.6%, not 8%. There has been a sharp fall in the number of unemployed for each vacancy.

Pay survey : medical doctors in Estonia make 3 times less than in Finland

A new pay survey by the Health Development Institute shows that while Estonian medical doctors earns 2.2 times more than average salary, they make about three times less than in Finland, reports Delfi.

The average gross salary in Estonia is 900 euros a month.

The annual survey showed that average gross wages of full-time medical doctors was 1,9 41 euros in 2013, an increase of 4% from last year. "Estonian doctors are making their wages thanks to overwork,” said Katrin Rehemaa, general secretary of Estonian Medical Association, commenting the findings of the survey.

Rehemaa explained that the average amount includes also additional fees that hospitals pay, for instance, for overtime or more intensive work, but it is not known how many actual working hours it includes.

"Often Estonian medical doctors work more than what is legally permitted which is why all duty hours are not registered,” said Rehemaa. She added that if one divideds the average monthly wage of medical doctors with their average fixed hourly fee, it will make up 225 workhours a month which indicates that medical doctors are working at 1.4 times the normal workload in hospitals.

Nearly half of Estonia's workers unmotivated, says job seeker portal

A survey by CV Keskus, one of the nation's two largest job seeker websites, found that 40 percent of the employed are not motivated at work, while another 25 percent are motivated mainly by the salary at their current positions.

“If 40 percent of survey participants work in a job where nothing motivates them, that unavoidably has an effect on productivity and the performance of the company,” Henri Auväärt, a spokesman for CK Keskus, told Äripäev today.

When asked what motivates them most at their current job, only 14 percent pointed to the job itself and 12 percent indicated agreeable colleagues. Work environment was named as the main motivating factor by 7 percent of respondents while only 2 percent said their motivation was an inspiring boss.

CV Keskus queried 1,339 people in the survey.

Estonia is no longer a cheap labor country : Juhan Parts

Discussing the country's next seven-year business strategy, Minister of Economic Affairs Juhan Parts said Estonia can no longer be framed as a destination for companies in search of cheap labor.

"Today it is important, and this is our talking point in nearly every meeting, that Estonia is no longer a country with a cheap workforce. For that reason productivity is of primary importance in the new strategy," Parts told Postimees.

"Regarding foreign investment or companies' investments, while the average gross salary today is about 1,000 euros, then the 2020 business plan budgets 2,000 euros and more. By sector and in some niche areas we can speak of other figures, but our message to all investors is that 2,000 euros plus is the level they need to take into account in investing," Parts said.

Although there has recently been concern that Estonian salaries are growing too rapidly, other experts have pointed out that Estonia is still the poorest country in the Eurozone and, according to economic expert Andres Arrak, the average Estonian family has about 10 times less wealth than the average Swedish family.

Efficiency level keeping wages low

Workers in Prisma supermarkets in Finland are paid two to three times more than their counterparts in Estonia as the number of clients they serve is far higher, Janne Lihavainen, CEO of the Estonian branch of the company, has said.

Speaking Thursday at an Äripäev-organized forum on salaries, Lihavainen said that the difference is not laziness, but various IT-solutions for such things as ordering goods for stores.

He said that such solutions need large investments, and with Estonia's lower volumes, the investments do not make sense. “In Estonia, we are trying to come up with a poor man's solution,” Lihavainen said, adding that his company is in the process of adapting Scandinavian solutions in Estonia, but not all of them can be taken on board by Estonian supermarkets.

Talking about salary increases, Lihavainen said the pressure to increase wages is very strong in Tallinn, but in Narva or Tartu, the situation is far better for the company.

Estonian employers : pay issue remains acute

Paavo Heil, CEO of CV Keskus, a job portal, says that employers should pay employees higher wages and offer better terms than the market average because it is a major competitive advantage in the long run, writes Äripäev.

“This allows to create better services or products and charge a higher price for them. In today’s Estonia, this is one of the few and most secure ways to increase productivity,” he said, speaking at the Pay Forum hosted by Äripäev. Heil also suggested that companies should hire good professionals also when they don’t have a specific job to offer at the moment.

“If you find a person who is suitable to work in your enterprises, hire him or her even if you don’t have a vacant job at the moment. You can create it and sell the employee’s resource on the market with a profit,” he said. Sami Seppänen, CEO of Elisa Eesti, said that Estonia’s advantage is flexibility in wage issues.

“The wage market is being shaped by the ratio between real offers and demand. This means that wages are determined not by trade unions, but according to the demand and supply situation, in market economy,” said Seppänen.

Toomas Hõbemägi

Estonia registers EU's steepest increase in labor costs in Q2

Average hourly labor costs in Latvia increased 4.3% in the second quarter of 2013, compared to the respective period in 2012 – the fourth steepest increase across the European Union, according to the latest data from the EU's statistical office Eurostat. The steepest increases in average hourly labor costs in the second quarter of 2013 were recorded in Estonia – 7.7%, Lithuania – 6.5%, and Romania – 6%, writes LETA.

Reductions in average hourly labor costs were registered only in Slovenia – 5.9%, Cyprus – 4.6%, Croatia – 0.6%, and Spain – 0.3%.

Overall, average hourly labor costs increased 0.9% in the EU and the eurozone in the second quarter of 2013.

In the EU, average hourly labor costs increased 1.7% in industry, 0.4% in construction and 0.9% in services.

In Latvia, average hourly labor costs grew 5% in industry, 8.5% in construction and 3.5% in services.

Estonia's employment one of the fastest growing in EU

In the second quarter, the number of employed persons in Estonia was up 3% in Estonia year on year, reported Eurostat.

The fastest employment growth was recorded in Malta at 3.6%. Latvian employment was up 1.5% in a year and Lithuania posted 1% growth. Employment declined fastest in Cyprus (6.1%), Greece (4.3%) and Portugal (4%).

Compared with the same quarter of the previous year, employment fell 1% in the euro area and 0.4% in the EU in the second quarter of 2013.

Toomas Hõbemägi

Minimum wage in Estonia to increase by almost a quarter over 2 years

Estonian employers and trade unions have reached an agreement that the minimum wage, which is currently at 320 euros a month, will be increased by 35 euros a month both in 2014 and 2015, LETA/Public Broadcasting reports.

The employers organisations and trade unions will sign the corresponding agreement on Thursday.

Unusually, the agreement will this time be signed for two years, during which the incomes of the most vulnerable part of the labour market should increase by almost a quarter, from 320 euros this year to 355 euros next year and 390 euros in 2015.

The government has to approve of the agreement for it to come in force.

Estonia in the middle of a wage boom

Wages in Estonia are going through the roof as Estonian enterprises today are prepared to pay almost 25% higher wages than a year earlier, writes Äripäev.

"Because of unemployment, more and more enterprises have been forced to raise wages to keep existing employees, to say nothing of hiring new ones. A sharp rise in average gross wages in the second quarter and accelerating wage offers show that there is a major wage boom going on," said Paavo Heil, CEO of CV Keskus.

A survey of job ads made in the second quarter by CV Keskus shows that in average, enterprises offered employees EUR 963 a month, an increase of 24% year on year. It’s also 13% higher than in the first quarter.

Toomas Hõbemägi

 

Riigikogu mulls increasing income tax free minimum in Estonia

All Riigikogu parties are on the common opinion that income tax free minimum, i.e. the income on which income tax doesn’t have to be paid, should be increased in the near future while opinions differ on how much and where the financing should come from, Public Broadcasting reports.

Although the coalition agreement prescribes cutting income tax by 1 percent starting 2015, opposition parties think that this plan should be abandoned in the name of increasing income tax free minimum, reported LETA.

Banker and entrepreneur Indrek Neivelt proposed at the Opinions Festival in Paide last week that the income tax free minimum should be raised from 144 euros a month to the level of minimum wage, i.e. 320 euros a month. He proposed restoring corporate income tax, introducing property tax and raising income tax as the ways to cover the holes in the state budget.

Coalition parties have reached an in principle consensus that the income tax free minimum has to be increased but haven’t yet reached an agreement on how much. "Minimum wage could be the level we could aspire for. Pro Patria and Res Publica Union (PRU) has even said that the income tax free minimum could reach up to 500 euros," said Riigikogu finance committee chairman Sven Sester (PRU).

Reform Party MP, member of the committee Aivar Sõerd said that such a step is not very realistic. "The need for raising the income tax free minimum exists though. This would also be a step among the measures that lower the salary taxes burden," he said. Sester said that the possible increase should be financed from possible economic growth, not playing with other taxes. The matter will have to be decided upon the next few months when the state budget for the next year will be compiled.

Thousands applied for jobs in H&M stores in Tallinn

Scandinavian clothing retailer H&M that is recruiting employees for new first store in Tallinn to be opened this autun was flooded with thousands of job applications, Tiina Miettinen, marketing manager of H&M in Baltic states, told Postimees.

The company has already hired 150 people to work in Estonia. One unsuccessful applicant, a 23-year-old woman who preferred to remain anonymous, said that competition for the job was extremely tough. 

“But they pay a decent wage, starting from 4.40 euros a hour,” she added.

H&M does not dislose its wages, but pays competitive salaries and offers good benefits, said Mietttinen. The recruitment had three stages: a group interview made by Manpower, an individual interview and, finally, the team challenge prepared by H&M.

According to one applicant, the team challenge meant that ten people … and they were divided into two groups.“Either group had to solve two tasks: one was decorating a shopping window and another was price-tagging clothes, while someone keeps disturbing them and asking questions.”

Average gross wages up 5.7% in a year in Estonia

Average monthly gross wages and salaries amounted to 887 euros last year, according to Statistics Estonia.  Average hourly gross wages were 5.34 euros. In annual terms, average monthly gross wages grew 5.7% and the average hourly gross wages were up 6%.

Real wages, which take into account the influence of the change in the consumer price index, increased 1.7% in 2012. After the fall in 2009 and 2010, the real wages increased for the second year in succession compared to the previous year.

In 2012, the employer’s average monthly labour costs per employee were 1,203 euros and the average hourly labour costs were 7.98 euros. Compared to 2011, the average monthly labour costs per employee increased by 5.8% and the average hourly labour costs by 5.7%.

In 2012, the average monthly labour costs per employee and the average hourly labour costs increased the most in professional, science and technical activities (10.6% and 10.7%, respectively). The average monthly labour costs per employee and the hourly labour costs increased the less in transportation and storage (1.7% and 2.3%, respectively).