The crisis hit the service sector when it was at a peak
Employment was 1.3% higher in the first quarter of 2020 than a year earlier, and active participation in the labour market was increasing. The growth in employment last year and in the first quarter of this was supported mainly by the service sector, while employment in industry reflected the cooling of the economy.
Short-term indicators for the second quarter show the steps taken to stop the spread of the coronavirus affected demand for labour in the service sector strongly, but the crisis measures taken by the government have eased job losses.
The impact of the coronavirus crisis affected the labour market quickly, because demand and supply in the economy were hit simultaneously and the blow fell first of all on the labour-intensive service sector. This can be seen in the rapid rise in the number registered as unemployed in March and April. The crisis measures taken by the government have helped to preserve jobs though, and to slow the rise in unemployment. Current information says that companies received wage compensation for more than 91,000 employees in April, which is about 15% of all the waged workers in Estonia. Companies in accommodation and food service got wage compensation for around 45% of their paid staff, while manufacturing companies got it for around a fifth of their employees. Without that measure, a lot more employment contracts would certainly have been terminated.
The cost of compensating wage costs will put limits on the measure in the longer term, and it must be accepted that some jobs will not return in the areas most affected by the crisis. This makes it important that those who have lost their job can get state support for furthering their knowledge and skills, as this would help them to find employment in future in areas where there is potential for growth.
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