In-work poverty and labour market segmentation

Transcription

1 Estonia In-work poverty and labour market segmentation A Study of National Policies Mare Viies Tallinn University of Technology Disclaimer: This report reflects the views of its May 2010 author(s) and these are not necessarily those of either the European Commission or the Member States. The original language of the report is English. On behalf of the European Commission DG Employment, Social Affairs and Equal Opportunities

2 Contents 1. Statistical overview of the current situation In-work at-risk-of-poverty rate by gender, age, educational level, household type and occupational factors Tax rate on low wage workers: low wage traps Gender pay gap Gender segmentation Inactivity and part-time work due to lack of care services for children and other dependants Transition by pay level Transition by type of contract Diversity and reasons for contractual and working arrangements Undeclared work Overtime work and hours of overtime Access to flexitime National indicators and data to monitor in-work poverty and labour market segmentation, the definitions used at national level (incl. "low wage employment"), trends over time Main causes of in-work poverty and labour market segmentation: literature review Review of national studies The political debate at national level Presentation and analysis of policies In-work poverty Low net wage Low work intensity Labour market segmentation Job retention and advancement (e.g. UK and AT schemes) Working conditions and employees' friendly flexibility: voluntary part-time, parental leave, atypical hours Life-long learning, in particular specific on-the-job schemes for the low-skilled Non-discrimination policies and inclusive work environments, including through awareness raising campaigns The role of social partners Other forms of in-work support, including health and safety Social security rights (e.g. sick/ holiday leaves) References

3 Summary Estonia is among the four EU countries where the in-work at-risk-of-poverty rate (7%) decreased in 2008 and was even one percentage points smaller than that of EU25 or EU27. The patterns of several characteristics of in-work poverty differ from EU25 average, e.g. in Estonia the in-work atrisk-of-poverty rate is higher for women than for men; the in-work at-risk-of-poverty rate did not decrease with age of workers; the risk for being among working poor is the same for low and medium-educated workers; working part-time increases the in-work poverty risk in Estonia more than in EU25. The current situation is characterised as follows: The gender pay gap in Estonia is the biggest in EU25 (30.3% as of June 2009), which is caused by the men s and women s different behaviour on the labour market, the differences in the human capital and personal characteristics; Gender segregation in occupations has been constantly the highest among EU27 (in %), the same has been with gender segregation across sectors (25.8%); Tax rates on low wage earners: low wage traps in Estonia diminished in the years of economic growth; Inactivity and part-time work due to the lack of care services for children and other dependants in Estonia has decreased significantly; Transitions by pay level in Estonia do not show any big changes over ; those with a high pay level have stayed there while the share of those in decile 1 has increased; No big changes have occurred in transition by type of contract over the years (approximately 2/3 of the persons aged years have had permanent contracts and a very little (and diminishing) share of contracts has been temporary; self-employed accounted for 5%); Assessments of the proportion of undeclared work in GDP vary largely; it is obvious that the decline tendency in the years of economic growth has been replaced by a new growth in the economic crisis; The share of total employees in part-time and/or fixed-term contracts plus total self-employed in employment decreased over the period from 16.5% to 15.4% (among men more than among women); The share of overtime work in Estonia is very small (0.6%) compared to EU27. The access to the flexitime is very low in Estonia compared to EU27, nearly 2 times lower. In Estonia there has been no political debate whatsoever over in-work poverty as such. It may be said that the public lacks awareness of such phenomenon. During the economic crisis, rise of the minimum wage was not even touched upon. Although there is awareness of the large labour market segregation, no policies have been developed to reduce it. 3

4 Against the background of one of the highest at-risk-of-poverty rates (19% in 2008) in EU27, no sufficient attention has been paid to in-work poverty in Estonia so far. Although national studies identified labour market segmentation already in the 1990s, there are no systematic measures and activities that would cover different spheres (starting from child care and education to employment relations etc.) to solve the problem. Neither direct national policies nor measures have been developed to reduce in-work poverty and labour market segmentation that would focus just on these two problems. Still, in-work poverty is reduced by policy measures for the general combat against poverty and labour market policy for the labour market segmentation etc. Raising public awareness, involvement of employers and employees in development of policies would help to increase the efficiency of implementing these policies. 1. Statistical overview of the current situation 1.1. In-work at-risk-of-poverty rate by gender, age, educational level, household type and occupational factors According to the EU Statistics on Income and Living Conditions (EU-SILC), the in-work at-risk-ofpoverty rate in Estonia has decreased since 2004 (especially for females); however, although working some of the working population live under the poverty threshold. Over , the inwork at-risk-of-poverty rate in Estonia stabilised at 8%, including for women 6% and for men 9% (Table 1). 1 According to the last update by Eurostat (March 2010), the in-work at-risk-of-poverty rate in Estonia decreased to 7% in 2008 (Estonia was among four countries where this indicator decreased). Table 1. In-work at-risk-of-poverty rate by gender in in Estonia, % Total women : men : Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis, On the basis of 2007 data, the in-work at-risk-of-poverty rate in Estonia was equal with EU25 and NMS10 (8%) (Table 2), but on the basis of 2008 data this indicator for Estonia is even 1 percentage point smaller than that of EU25 or EU27 (7%, 8% and 8%, respectively). Compared to other Baltic countries, the in-work at-risk-of-poverty rate in Estonia was significantly lower (in Latvia 11% and Lithuania 9% in 2008). To characterise the in-work at-risk-of-poverty rate by gender, age, educational level, household type and labour status in Estonia, the only available data source is the study by the European Foundation for the Improvement of Living and Working Conditions. 3 Patterns of several abovementioned characteristics differ in Estonia (in 2007) from EU25 and some characteristics 1 According to the Statistics Estonia, in-work at-risk-of-poverty rate (only by gender and labour status) for 2008 will be published by (Release calender Statistics Estonia &type=all&display=2&area=all. 2 Last update by Eurostat (March 2010). 3 Working poor in Europe European Foundation for the Improvement of Living and Working Conditions. 4

5 also from NMS10. Starting from that Estonia is among five countries where the in-work at-risk-ofpoverty rate is higher for women than for men, whereas the difference is bigger than the opposite difference in EU25 and NMS10 (Table 2). This is probably due to the highest gender pay gap in EU25 (in 2007, 30.9% in Estonia and 17.8% in EU25). Table 2. In-work at-risk-of-poverty rate by gender in 2007 in Estonia, EU25 and NMS10, % Estonia EU25 NMS10 Total Gender Women Men Source: Working poor in Europe European Foundation for the Improvement of Living and Working Conditions. The second difference compared to EU25 pattern is that the in-work at-risk-of-poverty rate did not decrease with the age of workers (Table 3). The same pattern is apparent also in NMS10 where it does not appear so sharply as in Estonia. In Estonia, compared to other age groups, the in-work at-risk-of-poverty rate was lowest for young workers (4% both for women and men), hence 2.3 times lower than in EU25 and twice lower than in NMS10. The main reason for this was definitely the fast economic growth in Estonia in the reference period. Table 3. In-work at-risk-of-poverty rate by age in 2007 in Estonia, EU25 and NMS10, % Estonia EU25 NMS10 Age years years years women, by age years years years men, by age years years years Source: Working poor in Europe European Foundation for the Improvement of Living and Working Conditions. In Estonia, the in-work at-risk-of-poverty rate was highest among workers aged years (9%) and the rate for women (10%) was much higher than for men (7%), which may be explained by the gender segregation of the labour market. Older workers faced in-work poverty less than middle age group of workers (the in-work at-risk-of-poverty rate for workers aged years was 6%, for both women and men). In EU25 older workers faced higher in-work poverty than people of the same age in Estonia and in NMS10, both for women and men. This is due to that the Estonian pension insurance system does not prohibit pension payments during employment and in 2007 eligible to old-age pension were at least 63 years old men and 60 years old women, which increased incomes of older population. The trend of the in-work at-risk-of-poverty rate in Estonia differs also by educational level from the EU25 and NMS10 trend (Table 4). In EU25 and NMS10, the low educational level is strongly associated with a higher in-work at-risk-of-poverty rate (in NMS10, the in-work at-risk-of-poverty 5

6 rate for low-educated workers is 10 times higher than for workers with higher education). In Estonia, the risk for being among working poor is the same for low and medium-educated workers and the high educational level decreases the in-work poverty 2.5 times. Table 4. In-work at-risk-of-poverty rate by educational level in 2007 in Estonia, EU25 and NMS10, % Estonia EU25 NMS10 Education... low medium high Source: Working poor in Europe European Foundation for the Improvement of Living and Working Conditions. Like in EU25 and NMS10, the highest in-work at-risk-of-poverty rate in Estonia concerns single parents with dependent children, but in Estonia it was much higher (18%, 18% and 27%, respectively) (Table 5). The second household type, single persons, face higher in-work-poverty in Estonia compared with EU25 and NMS10 (11%, 10% and 10%, respectively). The in-work atrisk-of-poverty rate was the lowest in the households with two or more adults without dependent children in Estonia (4%). Table 5. In-work at-risk-of-poverty rate by household type in 2007 in Estonia, EU25 and NMS10, % Estonia EU25 NMS10 Household characteristics... single person single parent with dependent children two or more adults with dependent children two or more adults without dependent children household with dependent children household without dependent children Source: Working poor in Europe European Foundation for the Improvement of Living and Working Conditions. The highest in-work-poverty risk by occupational factors is connected with the professional status in Estonia (the same applies to EU25 and NMS10) (Table 6). The in-work at-risk-of-poverty rate for self-employed persons is 4.5 times and for family workers even 6.5 times higher than for employees. Working part-time increases the in-work poverty risk in Estonia more than in EU25 (2.3 times and 1.7 times, respectively). Having a job for less than a full fear and having a temporary employment contract does not increase the risk of in-work poverty in Estonia as sharply as in EU25 (1.7 and 1.9 times, respectively; 1.5 and 2.6 times, respectively). 6

7 Table 6. In-work at-risk-of-poverty rate by occupational factors in 2007 in Estonia, EU25 and NMS10, % Estonia EU25 NMS10 Months worked in a year... full year less than full year Professional status... employee self-employed family worker Full-time or part-time... full-time part-time Type of contract... permanent contract temporary contract Source: Working poor in Europe European Foundation for the Improvement of Living and Working Conditions Tax rate on low wage workers: low wage traps Estonian payroll taxes consist of proportional income tax, social contributions and unemployment insurance contributions, which account for approximately half of the tax revenue. Analysis of the labour supply incentives 4, especially for low-wage earners in the Estonian tax-benefit system (based on 2004 data) showed that for a household with two adults and two children there is no incentive to work for the minimum wage when the other adult is active, since the final income of the household does not increase. The same holds true for a household with a single parent and two children. Based on 2004 data, it has been noted also that the subsistence benefit system hides in itself an inactivity or low wage trap (people may lack motivation to increase their work effort). 5 The situation has changed, however in 2004, the low wage trap for one earner couple with two children in Estonia was much bigger than in EU27, but the 2008 data show the opposite (Table 7). Table 7. Tax rate on low wage earners: low wage traps in EU27, NMS10 and Estonia, in One earner couple with two children EU NMS : Estonia Single person with no children EU NMS : Estonia Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis, Võrk, A., Paulus, A Eesti sotsiaaltoetuste ja maksude mõju inimeste tööjõupakkumise stiimulitele (Analysis of labor supply incentives in the Estonia tax-benefit system). Research Report. Praxis Center for Policy Studies. 5 Võrk, A Labour supply incentives and income support systems in Estonia. Institute for Labour Market Policy Evaluation. Working Paper, 2009/31. 7

8 The impact of taxes on the activity rate has not been directly analysed in Estonia, since the payroll taxes vary very little. 6 On the basis of an econometrical analysis 7 it was identified that average wage groups have higher elasticities of participation in the labour market than people who earn lower and higher wages; on the basis of what it was identified that the impact of raising the income tax exempt minimum on efficiency is bigger than that of lowering the personal income tax rate. International organisations have suggested that Estonia should lower payroll taxes primarily for low wage earners Gender pay gap Recent data say that the Estonian gender pay gap is the biggest in EU % in 2007, excluding Austria, whereas the gender pay gap in all countries was smaller than 25%. 9 Also as of June 2009, the gender pay gap in Estonia was the highest among EU27 (30.3%) and in addition to Estonia, the gender pay gap was 20% or higher in ten countries in EU27 (Table 8). Table 8. Gender pay gap in Estonia and EU27, % EU Estonia Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis, According to data of the Statistics Estonia, 10 the gender pay gap has increased since In 2006, average monthly net wage for women was 69% of that of men and median wage 75%. The gender pay gap was smaller if to take into account part-time employment. Full time working women earn 71% of the men s wages and women employed part time 94% (part-time employees earn smaller wages than full-time employees and part-time employed women are more numerous than men). The gender pay gap by age was smaller for young and old people. The biggest gender pay gap was among year old employees, where women earned only 66% of men s wages. The smaller pay gap for younger employees is probably caused by entering to the labour market by new groups who are better prepared and have experienced less discrimination. Education has a significantly greater effect on women s wages than on men s wages: men with the third educational level earn 48% more than men with the first level education, but women 80%, respectively. The gender pay gap has increased in all levels of education. The men s and women s wage difference was bigger than average also for cohabitating couples: the bigger the smaller were the children. Women with up to 6 year old children earned 63% of the 6 Võrk, A., Kaarna, R Eesti maksukoormuse areng: jaotus, mõjud ja tulevikuvalikud (Tax burden development in Estonia: division, impacts and future options). Praxis. Poliitikaanalüüs (A policy analysis), 5/ Staehr, K Estimates of employment and welfare effects of personal labor income taxation in a flat-tax country: the case of Estonia. Bank of Estonia. Working Papers Series, 3/ OECD Estonia. OECD Economic Surveys. Vol. 2009/3, April Gender pay gap in unadjusted form Eurostat Randoja, M Naised ja mehed palgatööjõus (Women and men in salaried employment). Statistics Estonia. Information sheet, 3; Randoja, M Gender wage gap. In: A glimpse into the working life. Statistics Estonia. 8

9 men s wages and women with 7 17-year old children 67% of the men s wages. The difference is above average also for cohabitating couples who have no children. Women working in the public sector earned on average more than those working in the private sector (men vice versa). In 2007, women in the public sector earned 75% and in the private sector 64% of men s wages. Bigger pay gaps were mostly in activities where women were dominating or the number of men and women was equal. In wholesale, retail trade and repair activities women earned barely half of men s wages. Vertical segregation is evidenced by that differences were big also in financial intermediation, education and health care. In these activities women are in the role of unskilled workers whereas men are e.g. directors in education and surgeons in health care. Men and women earned nearly equal wages in public administration and national defence, in agriculture and real estate activities. The gaps across professions were bigger in activities where men earn higher than average wages (women in skilled and craftsmen positions earned 63% of men s wages in a similar position; in legislators, higher officials and managers 65%). Women s to me s wage ratio was higher than average in those activities women were dominating (among skilled workers in agriculture and fishing women earned 95% of men s wages). The gender pay gap is caused by the men s and women s different behaviour on the labour market, the differences in the human capital and personal characteristics. Women work more often in so-called softer areas with low wages (e.g. education, trade, health); men work in more profitable activities (construction, transport, storage, communication). Men dominate in the topmost part of professional hierarchy. The number of men in senior positions is twice that of women. Women cannot move on to jobs with higher wages because of prejudices, work environment that does not favour women and in positions where it is not possible to reach a senior position. Due to the women s bigger attachment to home, there are pauses in their working life and compared to men, their length of employment remains shorter. In order to reconcile work and family life, women engage in part-time jobs more often than men Gender segmentation According to the data of the Estonian Labour Force Survey (LFS), vertical segregation is evident upon analysing men s and women s engagement by different occupations. Compared to men, women work more as professionals, as service workers, and shop and market sales workers (in 2009, 39.9% of women and 16.3% of men) (Table 9).Technicians and associate professionals are also popular occupations among women. More men then women work as crafts and related trades workers as well as plant and machine operators and assemblers (nearly half of men and only 10.8% of women). Compared to women, more men are employed in senior positions (13.1% of men are legislators, senior officials and managers and the number of women in these positions is much smaller). Average wages are lower in the professions where the share of women is higher. 9

10 Table 9. Share of women by major group of occupations in Estonia in , % Legislators, senior officials and managers Professionals Technicians and associate professionals Clerks Service workers and shop and market sales workers Skilled agricultural and fishery workers Craft and related trade workers Plant and machine operators and assemblers Elementary occupations Source: Employees by gender and major group of occupation Statistics Estonia. Horizontal segregation is noticeable across economic activities: women are more often employed in education and health than men (in 2009, 5.3% and 27.4%, respectively) (Table 10). There are more men working in trade, but this area is more popular among women (10.6% and 16.6%, respectively). In Estonia there is women s high concentration in manufacturing, which employs 16.8% of women. Among men the most popular economic activities are construction and manufacturing (17.9% and 23.9% of are engaged). Table 10. Share of women by economic activity of employees in Estonia in , % Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Water supply; sewerage, waste management and remediation activities Construction Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence, compulsory social security Education Human health and social work activities Arts, entertainment and recreation Other activities Source: Employees by gender and economic activity (EMTAK 2008) Statistics Estonia. Hence the occupations with the highest concentration of women are health care, education and hotels, where 80-90% of the employees are women; a lot of women are also in financial intermediation. In construction, power engineering, agriculture and transportation there are mostly men. In economic activities where mostly women are working also wages are lower than average. Wages are lower in health care, education and hotels, the highest in construction, financial intermediation and transportation. Although financial intermediation is rather a women s area of activity, the average wage there is one of the highest. At the same time, men in this area are working in higher positions and earn much higher wages than women. 10

11 According to the EGGE experts, in Estonia policies addressing horizontal segregation include: educational guidance and career counselling (for students and, since 2008, also for adult workers); popularising vocational education among young persons while raising its effectiveness for matching labour supply and demand. EGGE experts comment that an equal pay policy may demand additional legislation; many policies aiming to support female entrepreneurship often reinforce segregation; vertical segregation is acknowledged to be a problem but has attracted no policies; lack of data at the enterprise level hinders analysis; only about one third of the students were given career counselling at school, despite the fact that it is provided in all Estonian schools. It would be necessary in Estonia to monitor and guide the educational choices of boys and girls; improve statistical data collection, introduce gender dimension; increase awareness of the issue of segregation in the population at large, but more so among employers. According to the EU LFS data, gender segregation in occupations 11 has been constantly the highest among EU27 (in %; EU %), including gender segregation across sectors (in Estonia 25.8%, EU %) (Table 11). While vertical segregation turns out to be less important than horizontal segregation in the vast majority of countries, then Estonia is one of the five exceptions besides Slovakia, Czech Republic, Sweden and Germany). 12 Table 11. Gender segregation in occupations and sectors in Estonia and EU27 in , % Gender segregation in occupations EU Estonia Gender segregation in sectors EU Estonia Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Inactivity and part-time work due to lack of care services for children and other dependants Inactivity and part-time work due to lack of care services for children and other dependants in Estonia has decreased significantly (the respective indicator has decreased from 26.0% in 2006 to 16.7% in 2008) (Table 12). While in 2006, inactivity and part-time work due to lack of care services was on EU27 level, then by 2008 this indicator had decreased 1.6 times in Estonia, in EU27 increased slightly. At the same time, inactive persons and part-time workers with care responsibility as a share of total population increased over from 3.8% to 4.3%. 11 Compendium of indicators for monitoring the Employment Guidelines and employment analysis Gender segregation in the labour market. Root causes, implications and policy responses in the EU European Commission s Expert Group on Gender and Employment (EGGE). 11

12 Table 12. Inactivity and part-time work due to lack of care services for children and other dependants in Estonia and EU27 Inactivity and part-time work due to lack of care services (% of pers. with care resp.) Inactive Inactivity and Inactive Inactivity and persons and part-time work persons and part-time work part-time due to lack of part-time due to lack of workers with care services workers with care services care resp. (% (% of pers. care resp. (% (% of pers. of total pop.) with care of total pop.) with care Inactive persons and part-time workers with care resp. (% of total pop.) resp.) resp.) EU Estonia Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Breakdown by sex shows that inactivity and part-time work due to lack of care services for children and other dependants in Estonia is almost completely a women s problem Transition by pay level Transitions by pay level in Estonia do not show any big changes over (Table 13). Slightly over 80% of non-employed persons are still in 2007 non-employed; the proportion of those non-employed persons who have moved into deciles 5 10 has slightly increased (by 1% percentage point). In decile 1, the proportion of those who in moved into deciles 3-10 has diminished (from 33% to 22%); the share of non-employed persons has increased (from 14% to 19%) and the share of employed persons who moved into the decile 1 increased. In the decile 10, the share of those who moved into the ninth decile decreased from 17% in 2005 to 24% in 2007 and the share of persons in deciles 1-8 diminished. Hence, those with a high pay level have stayed there while the share of those in decile 1 has increased. Table 13. Some transitions by pay level in Estonia, % Pay level 2004 Pay level 2005 Pay level 2005 Pay level 2006 Pay level 2006 Pay level 2007 Non-empl. Non-empl. 83 Non-empl. Non-empl. 81 Non-empl. Non-empl. 81 Decile 1 4 Decile 1 4 Decile 1 4 Decile 2 3 Decile 2 3 Decile 2 3 Decile Decile Decile Decile Decile Decile Decile 1 Non-empl. 14 Decile 1 Non-empl. 13 Decile 1 Non-empl. 19 Decile 1 40 Decile 1 45 Decile 1 44 Decile 2 13 Decile 2 17 Decile 2 16 Decile Decile Decile Decile 10 Non-empl... Decile 10 Non-empl. 17 Decile 10 Non-empl. 17 Decile decile 1-8 decile 1-8 Decile 9 17 Decile 9 18 Decile 9 24 Decile Decile Decile Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Compendium of indicators for monitoring the Employment Guidelines and employment analysis

13 1.7. Transition by type of contract In Estonia, no big changes have occurred in transition by type of contract over years Approximately 2/3 of the persons aged years have had permanent contracts and a very little (and diminishing) share of contracts has been temporary, self-employed accounted for 5% (Table 14). Those who had a permanent contract in 2005 had one also in 2007 (92% and 93%, respectively). The number of persons with a temporary contract who transferred to the permanent contract increased (from 49% to 58%). Although most of the unemployed stayed unemployed, the share of unemployed diminished from 51% to 46%. At the same time, movement from the unemployed status to employee-permanent increased from 27% to 37%. Most (84%) of the inactive persons remained inactive, although transition from inactivity to employee-permanent status increased from 10% to 13%. Table 14. Transitions by type of contract in Estonia in , % 2004 status 2005 status 2005 status 2006 status 2006 status 2007 status Total Employeepermanenpermanenpermanent 60 Total Employee- 63 Total Employee- 64 Employeetemporartemporartemporary 3 Employee- 2 Employee- 1 Self-employed 5 Self-employed 5 Self-employed 5 Unemployed 7 Unemployed 6 Unemployed 4 Inactive 26 Inactive 25 Inactive 26 Employeepermanenpermanenpermanenpermanenpermanenpermanent Employee- 92 Employee- Employee- 92 Employee- Employee- 93 Employeetemporartemporartemporary.. Employee-.. Employee- 1 Self-employed.. Self-employed.. Self-employed 1 Selfemployed Unemployed Employeetemporary Unemployed 3 Unemployed 3 Unemployed 1 Inactive 3 Inactive 4 Inactive 4 Employeepermanentemporarpermanentemporarpermanent 49 Employee- Employee- 62 Employee- Employee- 58 Employeetemporartemporartemporary.. Employee- 10 Employee- 11 Self-employed.. Self-employed.. Self-employed 1 Unemployed.. Unemployed.. Unemployed 16 Inactive.. Inactive.. Inactive 14 Employeepermanenemployepermanenemployepermanent.. Self- Employee- 16 Self- Employee- 14 Employeetemporartemporartemporary.. Employee-.. Employee- 0 Self-employed 78 Self-employed 76 Self-employed 83 Unemployed.. Unemployed.. Unemployed 1 Inactive.. Inactive.. Inactive 2 Employeepermanenployepermanenployepermanent 27 Unem- Employee- 33 Unem- Employee- 37 Employeetemporartemporartemporary.. Employee-.. Employee- 2 Self-employed.. Self-employed.. Self-employed 1 Unemployed 51 Unemployed 49 Unemployed 46 Inactive.. Inactive 13 Inactive 15 13

14 Inactive Employeepermanenpermanenpermanent 10 Inactive Employee- 13 Inactive Employee- 13 Employeetemporartemporartemporary 2 Employee-.. Employee- 1 Self-employed.. Self-employed.. Self-employed 1 Unemployed 3 Unemployed.. Unemployed 2 Inactive 84 Inactive 83 Inactive 84 Note: unreliable data Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Diversity and reasons for contractual and working arrangements The share of total employees in part-time and/or fixed-term contracts plus total self-employed in employment decreased over the period from 16.5% to 15.4% (among men more than among women) in Estonia (Table 15). At the same time, in the EU27, the share of total employees in part-time and/or fixed-term contracts plus total self-employed in employment remained at almost the same level throughout the period (38.7% in 2008). Part-time employees accounted for a significantly higher share of total employees than fixed term employment throughout the period (6.1% and 1.9% in 2008, respectively), especially for women. EU27 is characterised by a similar tendency, but the indicators are much higher 14.5% and 10.3%, respectively. Table 15. Diversity of contractual and working arrangements by sex in Estonia in , % Total employees in part-time and/or fixed-term contracts + total self-employed as % of persons in employment Employees in non-standard employment (part-time and/or fixed term) as % of total employees Total self-employed as % of total persons in employment Part-time Total Part-time Fixed-term Part-time Could not only only and fixed find full term time and/or perm. job men women men women men women men women Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Unfortunately it is not possible on the basis of the Compendium of indicators for monitoring the Employment Guidelines and employment analysis, because of the unreliable data, to identify the reasons for diversity of contractual and working arrangements in Estonia. 14

15 The impact of the economic crisis on the Estonian labour market started to show in the second half of 2008 and the decline in employment was accompanied by a growing number of those employees who were forced to work part time because of economic difficulties faced by enterprises. The number of part-time 14 employees started to increase in the fourth quarter of 2008, which is still a better option for employees than losing employment and income during a crisis (Table 16). In the period from the second quarter 2008 to second quarter 2009, the number of full-time employees decreased by 91.6 thousand; most of them became unemployed, although quite many remained to work part time. In this period, the number of part-time employees increased by 27.6 thousand, including that of underemployed 15 even 5 times (from 2.9 to 14.7 thousand). 16 Table 16. Full- and part-time employees in Estonia, in I Q II Q III Q IV Q I Q II Q Total full- and part-time employment, thousand Full-time Part-time underemployment Total full- and part-time employment, % Full-time Part-time underemployment Source: Töövaldkonna areng (Development of labour sphere ) Trendide kogumik (Collection of trends). Ministry of Social Affairs Undeclared work According to the Compendium of indicators for monitoring the Employment Guidelines and employment analysis, undeclared work in Estonia as a share of GDP was 8-9% in According to the Statistics Estonia, the share of shadow economy in GDP decreased over due to the economic boom, decrease in hidden labour and undeclared wages from 10.7% to 5.2%. 17 The research by Estonian Institute of Economic Research 18 shows that under the conditions of economic growth and stable tax policy undeclared work diminished in the pre-crisis years; e.g. in 2008, 12% of the employees received undeclared wages (in % employees). Researchers of the Linz University, Austria, have assessed that the share of undeclared work in Estonia, Latvia, Romania and Bulgaria amounts to 36-39% of total economy Part-time employee is a person who normally works less than 35 hours per week; exceptions are occupations where a shorter working week is established by law. 15 Underemployed is a part-time employed person who wants to work more and is ready to accept additional work promptly (within two weeks). 16 Töövaldkonna areng (Development of the labour sphere ) Trendide kogumik (Collection of trends). Ministry of Social Affairs. 17 Kuhi, M Varimajandus Eestis (Shadow economy in Estonia) Statistics Estonia. Information sheet, Varimajandus Eestis 2008 (elanike hinnangute alusel) (Shadow economy in Estonia 2008 (on the basis of an opinion poll) Estonia Institute of Economic Research. elanike_hinnangute_alusel_.pdf. 19 Majanduskriisi probleemid: töötajatele makstav ümbrikupalk turgutab varimajandust (Problems of Economic Crisis: Unreported Wages Nurture the Shadow Economy) Eesti Päevaleht, April

16 1.10. Overtime work and hours of overtime According to the Compendium of indicators for monitoring the Employment Guidelines and employment analysis, the share of overtime work in Estonia is very small compared to EU27 (Table 17). Only in Bulgaria the share of overtime work and hours of overtime were lower than in Estonia in 2008 (0.4% and 0.6%, respectively. Table 17. Overtime work and hours of overtime in Estonia and EU27 in , % EU :.. men :.. women : Estonia (1.7) men (2.7) (0.8).. women : 0.9 (0.7) (0.7) (0.4) Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis Access to flexitime According to the Compendium of indicators for monitoring the Employment Guidelines and employment analysis, the access to the flexitime is very low in Estonia, compared to EU27 nearly 2 times lower (16.6% and 31.3%, respectively), especially for women (2.4 times) (Table 18). Only in five countries (Bulgaria, Greece, Spain Cyprus and Romania) the access to the flexitime is even lower than in Estonia, ranging from 10.6% to 15.3%. Table 18. Access to the flexitime in Estonia and EU27 in 2004, % Total Men Women EU Estonia Source: Compendium of indicators for monitoring the Employment Guidelines and employment analysis In Estonia, 83.3% of the employees have fixed start and end of the working day; 6% of the employees have fixed working hours per day, but they can choose the beginning and end of the working day; 3.3% can vary working hours upon agreement with employer; 3.2% decide on their working time themselves. A total of 12.5% of employees can decide their own working schedule. 20 Various recent studies (Labour Force Survey and Working life Barometer) have also indicated that the standard full-time open-ended employment contract is still the norm in Estonia. Even though different flexible working arrangements are also possible within the traditional open-ended full-time contracts (e.g. flexible arrangements with working time and place), this is also not very common in Estonian practice Comparative analysis of working time in the European Union EWCO Eamets, R., Anspal, S., Roosalu, T Tööturu paindlikkus ja paindlikud töövormid (Labour market flexibility and flexible forms of labour). In: Labour Market Statistics Estonia. 16

17 1.12. National indicators and data to monitor in-work poverty and labour market segmentation, the definitions used at national level (incl. "low wage employment"), trends over time Early in 1995, Statistics Estonia conducted the first Estonian Labour Force Survey (ETU 95). Requirements set for the European Union labour force surveys have also been observed in addition to the Estonian data users while developing the Estonian Labour Force Survey. Starting from 2001, a module satisfying the European Union requirements has been added to the Estonian labour force survey questionnaire with the topics varying annually. The subjects covered by the Eurostat modules by year are as follows: 2001 Length and patterns of working time; 2002 Employment of disabled people; 2003 Lifelong learning; 2004 Work organisation and working time arrangements; 2005 Reconciliation between work and family life; 2006 Transition from work into retirement; 2007 Accidents at work and work-related health problems; 2008 Labour market situation of migrants and their immediate descendants; 2009 Entry of young people into the labour market. Since 2002, the labour force survey covers, in addition to the Eurostat modules, other modules at the request of Estonian data users: 2002 Long-term unemployment; 2002 Housing and changes in residence; 2002 Youth; 2003 Health; 2003 Working conditions; 2004 Consumption of culture; 2006 and 2008 Health and ability to work; 2008 Quality of working life; 2009 Accidents at work and work-related problems. Any specific national indicators to monitor in-work poverty and labour market segmentation have not been published in the Statistics Estonia so far. 2. Main causes of in-work poverty and labour market segmentation: literature review 2.1. Review of national studies Against the background of one of the highest at-risk-of-poverty rate (19% in 2008) 22 in EU27, no sufficient attention has been paid to in-work poverty in Estonia so far. The recently published Poverty in Estonia has still mentioned that working is not always a sufficient way to escape poverty. 23 Employed people account for one fifth of the poor, i.e thousand employed people 22 At-risk-of-poverty rate after social transfers by gender Eurostat Randoja, M Poverty patterns. In: Poverty in Estonia. Statistics Estonia. 17

18 cannot earn sufficiently to escape poverty. The reasons mentioned are small wages, low education and skills, and unstable part-time job, as well as working as an entrepreneur. The problem of labour market segregation has been studied since the 90s at the University of Tartu (R. Eamets, K. Philips, etc.). 24 Segregation on the Estonian labour market is revealed in the so-called men s and women s occupations and fields of activity, whereas the pay in positions more frequently held by women (education, trade, health care) is smaller than average. Due to the discrimination on the ground of sex, women get paid less than men even when working in the same positions as men. In the analysis of gender-specific wages inequality it was found that in Estonia 1/3 of the gender pay gap can be explained by the differences in men s and women s human capital and jobs, but 2/3 of the differences in wages remain unexplained. 25 Although women have higher probability of working in low-paid positions, the in-work at-risk-of-poverty-rate is close to the relevant rate of men. Women s poverty risk is reduced by the fact that they usually earn secondary income in the household, women also utilise the opportunities provided by social protection to a greater extent than men and traditionally receive child-related benefits (child allowance, parental benefit, etc.). In addition to low-paid jobs, women s poverty is increased by unequal distribution of economic power in the household. This is linked to the preservation of traditional gender roles and to women s attempt to improve reconciliation of work and family life. Women are significantly more involved in the so-called unpaid labour they deal more with organising domestic affairs and child care. According to the Time Use Survey of Statistics Estonia in , women aged spend on household chores and family two hours more than men and men spend on average one hour more on wage labour. Due to the domestic duties, women have less time and opportunities to earn income. 26 Despite the high human capital and strong linkage to the labour market, many women in Estonia stay for quite a long time away from the labour market in connection with child birth. Due to the legislation that favours women s staying away from the labour market for the birth giving period, which provides them various guarantees for retaining the labour market position and competitiveness after the end of the parental leave and especially child care for over three year old children, men and women in the Estonian labour market are equal actors until the moment the female employee gives birth to a child and stays on parental leave. From that moment mothers (of infants) are in a worse position in labour market competition and career, since their past employment, work experience and skills lag behind those of both men in their own generation and women with no (small) children who have not taken a break in their career Eamets, R., Philips, K., Annus, T Eesti tööturg ja tööpoliitika (Estonian labor market and labor policy). University of Tartu; Eamets, R. Philips, K. Eesti tööturg ja tööjõu konkurentsivõime (Estonian labor market and competitiveness of workforce) In: Eesti majanduse konkurentsivõime (Competitiveness of the Estonian economy). University of Tartu; Eamets, R, Philips, K. Annus, T Employment and Labour Market in Estonia: Background Study European Training Foundation, Working Document. Torino/Tartu; etc. 25 Rõõm, T., Kallaste, E Naised-mehed Eesti tööturul: palgaerinevuste hinnang (Women-men in the Estonian labour market: assessment of pay gaps). Praxis Center for Policy Studies. Poliitikaanalüüs (A policy analysis), Randoja, M Poverty patterns. In: Poverty in Estonia. Statistics Estonia. 27 Estonian Human Development Report Eesti Koostöö Kogu. 18

19 Recent research papers 28 have identified professional and occupational segregation (vertical and horizontal) that is typical of the Estonian labour market: The gender segregation of the Estonian labour market is regarded by both women and men as quite normal that does not require regulation; ¾ of the men work in firms where management consists only or mostly of men; 2/5 of women work in an institution/enterprise managed by a person of the same gender; 1/3 of men definitely prefer a person of the same gender as their direct boss; 3% of women want to work under subordination of a female; Nearly 2/3 of both men and women work in a same-gender collective; Men s and women s way of thinking of gender segmentation are similar: men suit better for plumbers and transport engineers, women for child caring and flower selling jobs; From the gender equality aspect we should first achieve the situation where suitability for the job wouldn t depend on their gender in the opinion of people The political debate at national level In Estonia there has been no political debate whatsoever on in-work poverty as such. It may be said that the public lacks awareness of such phenomenon. During the economic crisis, raising of the minimum wage was not even touched. Although there is awareness of the large labour market segregation, no policies have been developed to reduce it. 3. Presentation and analysis of policies 3.1. In-work poverty Low net wage Minimum wages/ collective wage settings at the lower end of the labour market The national minimum wage 29 was first agreed in 1992 in a tripartite agreement. Since 2002, minimum wages have been set in annual bipartite agreements between the Estonian Trade Union Confederation (EAKL) and Estonian Employers Confederation (ETK), and have been brought into effect by a government decree. The national monthly minimum wage is valid for all full-time workers and an hourly minimum wage is also calculated. There is no differentiation for other groups of workers. In , minimum wages increased rapidly due to the favourable economic situation (Table 19). The most recent minimum wage agreement between EAKL and ETK was made in 2008 (4350 kroons or euros per month; per hour 27 cents). No agreement has been reached during the economic crisis to raise the minimum wage and for two last years the minimum wage has stayed on 2008 level. 28 Vöörmann, R Sex segregation on the labour market by occupation and economic activity. In: A glimpse into the working life. Statistics Estonia. 29 Palgaseadus (Wages Act)