Renewed: 02.05.2012, 14:25

Goals

Estonia set two main and central goals for the reform plan in the context of further growth prospects:
- to achieve strong growth of productivity through products and services with greater capital intensity and higher value added;
- to restore the high employment rate observed before the economic crisis.

In addition, Estonia 2020 comprises 17 challenges divided into four fields:

• ­educated population and cohesive society: the quality and availability of education and labour force supply;
• competitive business environment: policy that supports the improvement of the long-term competitiveness of businesses, creative industry, international competitiveness of research and development and business-supporting infrastructure;
• environmentally friendly economy and energy: energy savings and resource savings;
• sustainable and adaptive state: sustainability of public finances, ability to react to changing circumstances and imbalances, tax policy supporting the development of the economy and modernisation of the government sector.

Increasing the employment rate in the 20-64 age group

In 2011, the employment rate of the age group 20-64 rose, reaching the level of 70.1%. The main reasons for the rise of the employment rate include the positive impact of the overall economic situation on the labour market and the improved exports. The average number of employed persons in 2011 amounted to 609 000, i.e. 38 000 persons (6.7%) more than the year before. Year-on-year, the employment rate increased the most in manufacturing (13 000 people), construction (11 000 people), and transportation and warehousing (5000 people).

The growth in the economy and employment have been fuelled mainly by exports, thus improving the labour market structure and virtually abolishing the pre-crises imbalances. Although the employment rate is beginning to reach the pre-crisis level, the number of people working in manufacturing is much higher than in 2007 and much smaller in sectors aimed at the domestic market (construction, trade). Owing to the increase of employment, the number of the unemployed as well as economically inactive people has decreased.

Presumably, the employment rate will not fall back to its recent lowest levels observed in 2010. In the age group 20-64 the number of employed persons rose by 34 700 in 2011, which is much more than expected. Since in the coming years the population aged 20-64 is expected to decrease, then approx. 4000 people must be added to the ranks of the employed in comparison with the age group’s indicator of 2011 if the goal set for 2015 is to be achieved.

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Increasing productivity per employed person compared to the European Union average

Raising the productivity of Estonian businesses is one of the main tasks in improving competitiveness, especially in a situation where the production costs of businesses are approaching the level of developed countries. As for the attainment of the target level, it has been assumed that the EU productivity per employed person will rise by over 1% per year on average and the goal is to increase Estonia’s productivity by approx. 2 percentage points faster than the EU average.

In 2000, Estonia’s productivity per employee was merely 47.2% of the EU average. From this low level Estonia’s productivity indicator per employed person has grown faster than the EU average. Due to the economic crisis, which struck in 2008, productivity remained at the same level in comparison with the EU average both in 2008 and 2009, slightly falling with regard to the EU average in both years. In 2010, Estonia’s productivity demonstrated strong growth (incl. with regard to the EU average). This happened in a situation where GDP growth once again outpaced employment growth in Estonia as well as in the EU as a whole.

Based on the economic indicators of Estonian companies, the growth of productivity as well as profitability was strong in 2011. The total profit of the business sector was 40% higher than the year before and the hourly productivity based on net value added rose by 15%. Corporate investments rose by a half year-on-year.

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