One of the key issues facing the Estonian government – whichever parties may be in it – in the near future, is the dwindling size of the labor force. Analysts say that none of the parties running for Parliament have managed to come out with a comprehensive plan on how to tackle the problem. A problem that could soon halt Estonia’s economic development.

According to the estimations, the currently 867,000-strong labor force, consisting of 15 to 64-year-olds, will shrink to about 702,000 by 2040. That is a loss of more people than live in Estonia’s second largest city Tartu.

Around 278,000 working-age people are believed to be off the job market at present. “In order to offset the increasing loss of workers, we must deal with all the non-active population groups. Yet the election platforms lack a suitable comprehensive approach,” said Reelika Leetmaa, chairman of the board at think tank Praxis.

“It’s true that the parties have put a few ideas forward in their campaigns,” she added. “For instance, there are proposals for how to get people with limited work capacity into the job market, generalized promises to work on adult education, and to deal with the lack of daycare places. Alas, these plans are all too general, they provide no clear answers to how and what kind of further education the state has to provide, and whether it must proceed from the needs of an individual or a specific industry.”

There is a lot of unused potential in up-to 29-year-olds, about 40,000 of whom are currently neither working nor studying. “Unfortunately the parties make no mention of this group, although they are an important labor resource,” said Laura Kirss from Praxis. “The high school drop-out issue has also received very little attention, regardless of the fact that it has a direct impact on the addition of low-skilled workers to the labor market,” she added.

Experts have put forward a number of measures that could help to alleviate the impending labor shortage. In a situation where the birth-rate cannot be influenced, three other means should be applied simultaneously, they say – bringing more people back to the labor market, increasing productivity, and taking advantage of migration.

The analysis that Praxis conducted shows that several parties promise to make the labor market more flexible to allow various under-exploited population groups to be part of it, and to make the market reflect the real needs of both the employers and the employees.

“The question of migration has also received only passing mention, with promises to continue the current conservative immigration policies, and that despite the fact that there is already a lack of workers on all levels and the pressure to ease the immigration rules is mounting,” said Kirss.

Concerning low-income earners, parties are trying to help them by promising a higher minimum wage. “However, we first have to bear in mind that the decision to raise the minimum wage is a bilateral decision made by the employers and trade unions, and then approved by the government. So it’s not entirely a political decision,” said Mari Rell, an analyst at Praxis. The employers too recently draw attention to this fact.

“It does, on the other hand, have a strong effect on the labor market. Too high a rise will first mean more expenses to employers, followed by cost-cutting and downsizing, which in turn will increase the number of the unemployed,” Rell explained, adding that it will take a lot of time and further training to bring those people back to the job market.

Source: Praxis: parties lack a solution to looming labor shortage, ERR