Unemployment reaches eight year high

  • 2009-05-21
  • By Ashley Brettell

SPIKE: Unemployment figures have skyrocketed over the past two years as both the public and private sectors continue with rounds of layoffs.

TALLINN - Estonian unemployment reached an eight year high of 11.4 percent in the first quarter, according to Statistics Estonia.
The number of employed in the country fell by 44,000 in the first quarter, continuing a strong negative trend that began in the summer of 2008.  The current rate now stands at the worst level since 2001.

The total number of employed people in the first quarter stood at 612,000.  This represents a fall of 6.8 percent over the same period last year. The sectors most affected were manufacturing, where employment fell by 27,000, and construction, where it fell by 18,000.

Speaking to Aripaev, Martin Lindpere, an economist at Eesti Pank, confirmed that "unemployment in the manufacturing sector had fallen fast but that overall unemployment growth should slow." he also said that "an increase in productivity per head was required to improve business competitiveness."
An unusual aspect of the decrease in employment was that the vast majority of jobs lost were in blue collar trades. The number of white collar workers, including legislators, senior officials, managers, professionals and technicians, had increased compared to the previous year.

When considering employment data it is important to look at the distinction between full time and part time. The number of part time workers increased significantly to the detriment of full time. 
A key factor behind this is a lack of work as a result of a reduction of activity in the economy. The people affected by this lack of activity are known as "under employed" and are added to the part time statistics. 

In the first quarter of 2009 the number of under employed grew to 12,000. This represents a three fold increase on the same period a year ago and indicates the problems commercial business is experiencing.
The growth in unemployment was felt in all regions of the country.  The largest increase was experienced in Southern Estonia, which now has the highest level of unemployment in the country. The lowest level occurred in Western Estonia, which saw a relatively low figure of 7.3 percent compared to the national average of 11.4 percent.

The new Employment Act, which has been the subject of political debate for many weeks, is still not finalized. The act is due to come into effect on July 1, but fundamental disagreements within the coalition government are delaying its final composition and approval. 

One controversial aspect of the act is to decrease the burden upon employers for the length of time they have to continue paying staff they have released. The two major parties in the coalition, the Reform Party and IRL, are committed to making this change. The parties said they believe the current system discourages organizations from employing people for fear of the medium term costs associated with laying off staff at a later date.

The current downturn in the labor market does have some positive aspects, however.  During periods of high unemployment the availability and quality of labor tends to rise. 
Alo Naelepea, a personnel consultant, said in Aripaev "the labor market is more stable as head hunting has reduced and companies can plan knowing the majority of their management will not be leaving."

"The quality of labor also improves during these times, as employers have better options and employees become more focused and flexible," he said.