1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Estonia

Making the most of human capital

Labour input in Estonia remains lower than before the crisis. Skill mismatches between workers and jobs contribute to structural unemployment and emigration, notably among young, employed workers, has reduced labour supply. Although the government has lowered labour taxes and further reductions are planned, government revenues still rely heavily on taxing employment. Shifting some of the tax burden on labour to real estate would make the tax system more employment friendly. High costs reduce the returns workers earn on the assets in the compulsory private pension system, effectively raising the tax burden on labour. There is scope to reduce costs. In the public pension system, phasing out early retirement schemes for workers in specific sectors or professions would make room for lower social security contributions. They pay gap between men and women is substantial and further steps could be envisaged to reduce it. Reforms to improve the skills of Estonian workers have a high pay-off in view of increased demand for skilled workers. The recent initiatives of the government to foster life-long learning and improve financial support for students from low-income families in tertiary education are welcome. There is scope to promote apprenticeships, for example by fostering cooperation between local firms and local schools. This would help reduce skill mismatch. More financial support is needed for students, especially to ensure youth have access to upper secondary vocational education. This Working Paper relates to the 2015 OECD Economic Survey www.oecd.org/eco/surveys/economic-survey-estonia.htm

English

Keywords: public pensions, labour supply, access to education, gender pay gap, private pensions, social security contributions, Estonia, vocational education, part-time work
JEL: J24: Labor and Demographic Economics / Demand and Supply of Labor / Human Capital; Skills; Occupational Choice; Labor Productivity; J16: Labor and Demographic Economics / Demographic Economics / Economics of Gender; Non-labor Discrimination; J22: Labor and Demographic Economics / Demand and Supply of Labor / Time Allocation and Labor Supply; J26: Labor and Demographic Economics / Demand and Supply of Labor / Retirement; Retirement Policies; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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