The higher unemployment figure does not mean a deterioration in the economy

Orsolya Soosaar
Economist at Eesti Pank
  • The growth in employment has been boosted by a rise in the number of entrepreneurs
  • The Work Ability Reform raised unemployment by less than forecast as demand for labour is strong
  • The number of people of working age rose for the first time in more than 20 years

The Estonian labour force survey found that the unemployment rate in Estonia rose in the first quarter of 2018 to 6.8%, as people engage more actively in the labour force. Employment rose at the same time, though at a slower rate than previously. The state of the labour market has not deteriorated from the second half of last year. Registry data suggest that the wide volatility in labour market indicators can largely be explained by the variability in the quarterly assessments of the labour force survey.

Employment was raised strongly both last year and at the start of this year by a rise in the number of one-person businesses and businesses with employees. The labour force survey shows the number of waged employees to be slightly lower than it was a year earlier. Registry data from the Tax and Customs Board show that 1.6% more people received a declared wage in the first quarter of 2018 than in the same quarter of the previous year. There was a rise in the number of employees in the private sector and a fall in the number in government institutions.

Without the Work Ability Reform, participation in the labour force would have increased more slowly and the number unemployed would have fallen. The number registered as unemployed has risen since the Work Ability Reform was launched. Now around one third of the 33,000 registered unemployed in Estonia have reduced ability to work. Leaving out random fluctuations from quarter to quarter, there has been no clear upward trend in the total unemployment rate in recent years. This is because the reform was well timed, as people with reduced ability to work can find a job more quickly at times of labour shortages than otherwise.

The updated estimate by Statistics Estonia is that the number of people aged 15-74 did not fall in 2017, but in fact rose by 0.1%. This is partly because Estonia has become a more attractive place to work for foreign labour, and partly because residents of Estonia who had previously gone to work abroad temporarily are returning. The improved migration balance means there is a larger supply of labour in the Estonian labour market and the wage pressures caused by labour shortages have been eased. The experience and skills of workers coming from abroad offer opportunities for businesses to develop.

Additional information:
Hanna Jürgenson
Public Relations Division
Tel: 668 0959, 5692 0930
Email: hanna.jyrgenson [at] eestipank.ee