9.1 Overview of the Welfare System and Main Migration Features in Estonia

9.1.1 Main Characteristics of the National Social Security System

The current welfare system in Estonia is a combination of work-based social protection ideas dating back to Soviet Union times and new transformations since the independence period during the last 25 years (Ainsaar 2001; Ainsaar and Kesselmann 2016; Trumm and Ainsaar 2009). The most turbulent changes in the social protection system took place in the 1990s when after splitting up from the Soviet system, Estonia built up a new social protection system and ideology. Contrary to many other ex-Soviet countries who had their own social protection structures already in place during the Soviet period, for Estonia, the 1992 independence meant the need to build up new structures (including financing schemes) and create relevant institutions for social protection management. Previously, the social security planning was partly shared with central institutions in Moscow. Additionally, the system of occupation-based social protection services were disappearing during the privatisation and had to be replaced with new systems. The political and economic changes were accompanied by the emergence of previously non-existent phenomenon such as unemployment, personal contributions to insurance schemes, and privatisation of the health care system. The current social protection system in Estonia still keeps many characteristics of state and employer responsibility having roots in the Soviet system (Ainsaar et al. 2019).

The current Estonian welfare regime is classified as a liberal type, often because of the low level of social protection per capita and the high level of privatisation of social protection institutions. However, the situation varies across different social protection domains. For example, the housing policy is practically missing, while the family policy is rather generous and universal (Ainsaar 2019). In addition, the government has an essential role in setting the general rules and monitoring the social protection system. The share of means-tested schemes is very low. The system generally follows solidarity principles and tax-based revenues are distributed among broader categories of recipients. Solely contributory schemes do not exist, except for unemployment insurance. The occupational and totally private insurance schemes are rare in Estonia. Old-age pensions represent the only social policy domain where private insurance plays an essential role in determining the output of social policy for the second and third pillar contributions. The Estonian social protection system is almost exclusively financed by social tax payed by employers (78% from all expenses) and by the central and local government structures (20%). Individuals cover directly only 1% of social protection expenditures. The Estonian system can therefore be seen as a state responsibility universal system by structure.

The core element of the financing of social expenditures is social tax. Employers pay it for employees and the government covers it for insured persons (children, elderly, unemployed, employees whose loss of capacity for work has been assessed as 40% or more, etc.). The social tax is 33% of the gross earnings, of which 20% forms pension insurance and 13% health insurance. Social tax contributions are used to (co)finance all social policy domains except the minimum income schemes. Also, the state budget contributions are essential in financing social protection (Ainsaar et al. 2019).

9.1.2 Migration History and Key Policy Developments

About 15% of individuals living in Estonia are born in other countries (Population Census 2011). This is one of the highest shares in Europe, although the percentage of non-national EU citizens is quite low (Batsaikhan et al. 2018). Most immigrants have arrived during the Soviet period from Russia, Ukraine, and Belorussia. Due to demographic crises, Estonia is a country with a substantial immigration need in order to replace the ageing population (Ainsaar and Stankuniene 2011; Ainsaar and Rootalu 2016), and immigration flows will probably increase in future. Still, for historical reasons, public attitudes towards immigrants are more cautious in Estonia than in many other European countries (Ainsaar 1997; Ainsaar and Beilmann 2016) and the country has had a rather conservative immigration policy during the past 25 years.

The age structure of the foreign-born population reflects the history of immigration to Estonia. 2% of foreign-born residents are in the age group 0–29 years, 6% in 30–49 years old group, and 30% in 50 and older age group. Estonia’s migration history is closely linked with broader historical developments in the country. In 1944, Estonia was annexed by the Soviet Union and after the second World War, the country experienced massive job immigration from the Russian Federation and other Soviet Union regions (Fig. 9.1), mainly to towns (Ainsaar 1997).

Fig. 9.1
A line graph plots data versus years for net migration. Values are approximate. (1946, 33000), (1970, 11000), (1992, negative 32000), (2016, 0).

Net migration in Estonia (1946–2016) (Source: Ainsaar 1997; Statistics Estonia 2018)

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Immigration was replaced by net out-migration trends after the re-independence at the beginning of the 1990s. A large share of Soviet Union military personnel, their families and related population groups formed the main emigrant group at the beginning of 1990s. The group of emigrants also included members of the Russian-speaking population, who felt insecurity towards their future or were reluctance about the official language and citizenship requirements (Tammur 2017). The Russian-speaking group (Russians, Belarusians and Ukrainians) still remain the dominant ethnic group in Estonia (Ainsaar and Stankuniene 2011).

Estonia’s accession to the EU in 2004 changed migration flows as emigration started to decline and immigration to rise, although the net migration remained negative. Geographically close Finland became the main destination country for economic emigrants. The majority of new immigrants still arrived from Russia and Ukraine (Tammur 2017). Since 2015, immigration from other EU member states also started to grow, partially due to return migration (Statistics Estonia 2019).

Since 2015, a new methodology for counting international migration was applied in Estonia, using cumulative data from many administrative registers to calculate the so-called residency index for all individuals (Tiit and Maasing 2016). If the records in registers are missing for several continuous years, the person is classified as emigrant and once the registers reveal the activity of a person in the country, he/she can be counted as an immigrant. Due to this new methodology, both immigration and emigration numbers rose and the net migration rate became positive.

The entitlement to social security rights is based mostly on legal residency record in Estonia. All newly arrived persons must register their place of residence and the registration procedures depend on their nationality. EU citizens who stay more than three months in Estonia must register at the population register within first three months of arrival. Non-EU foreigners must have a valid visa, or a temporary or long-term residence permit prior to their registration. Estonian immigration policy applies a quota system for third-country nationals, although the regulations have became more liberal in recent decades due to labour force shortages. For example, there is no quota for specialists earning more than two times the average salary or for nationals from countries with a special agreement with Estonia. Moreover, the immigration quota does not include foreign employees in the information technology sector or start-up companies.

Although there are signs of growing inflows, the number of new immigrants is rather small and Estonia balances around the zero net migration. Although immigration is an essential topic in the public debate, Estonia has less experience with newly arrived immigrants than other EU countries.

9.2 Migration and Social Protection in Estonia

Despite the relatively long history as a sending country, the topic of immigration and emigration is poorly covered in the domestic social protection legislation in Estonia. This applies for the legislation covering most social benefits except for pensions. Concerning mobility, the Estonian social protection system follows the EU requirements, but many mobility-related social rights are not covered explicitly in the national law and in certain cases, the details regarding mobility-related situations are completely missing.

The main principles of social protection in Estonia are based almost exclusively on the legal residency requirement. If a person is registered as a legal resident in the population register, she/he has equal entitlement for social rights with long-term legal residents. The social protection entitlement usually does not require waiting periods. Once a foreigner becomes resident, equal treatment with national residents is guaranteed. Hence, citizenship does not determine access to social rights. EU foreigners and citizens of countries with bilateral agreements with Estonia might have additional protection in some situations.

9.2.1 Unemployment

The Estonian unemployment policy includes unemployment insurance benefits, the unemployment allowance, and labor market services (e.g. career counselling, employment trainings and stipends, employment subsidies). The Law of Unemployment InsuranceFootnote 1 sets the compulsory unemployment insurance tax shared by employers and employees. In 2015–2018, the tax rate was 1.6% of income for employees and 0.8% for employers.Footnote 2 The unemployment allowance is a flat-rate, means-tested benefit financed from the state budget. The Estonian Unemployment Insurance Fund is the main institution in charge of implementing unemployment policies.

All legal residents have equal access to unemployment benefits and allowance, as long as they fulfil the requirements. To qualify for unemployment allowance, individuals must have worked 180 days during the last 12 months; and 12 months during the last 36 months for the unemployment insurance benefit. The unemployment allowance is means-tested and the applicants’ income must be lower than 164 euros a month.Footnote 3 There is also a waiting period of one month since the application was submitted for unemployment allowance. The maximum period to receive the unemployment allowance is 270 days. The waiting period for the unemployment insurance benefit is 8 days since submission of the claim. The duration of this benefit depends on the period of prior contribution: for individuals who have worked one to five years, the benefit is granted for 180 days; for those who worked 5 to 10 years, the duration of the benefit is 270 days; and it is further increased to 360 days for those who contributed for 10 years or more.

Receiving unemployment benefits does not hinder foreigners’ access to residence permits. However, having a job is an important factor in the decisions regarding residence permits. The allowance and insurance benefit can be received by nationals residing in other EU countries, but not in non-EU countries. Unemployment benefits recipients can travel to other EU countries to look for a job up to 3 months and continue receiving the benefits if this is agreed with the Unemployment Insurance Fund. Estonia also has two bilateral agreements (with Ukraine and Australia) covering unemployment issues. For example, the agreement with Ukraine allows to add up working periods in both countries to qualify for an unemployment allowance.

9.2.2 Health Care

The main scheme to cover health insurance is a compulsory earnings-related health insurance scheme for the economically active population, paid by employees and self-employed. For many groups, the insurance is covered by the government (resident children up to 19 years of age, students up to 24 years of age, parents of children in certain conditions, recipients of social benefits or insurance schemes, pregnant women, etc.).

Compulsory contributory health insurance covers the costs of medical examinations, medical treatment and prescription pharmaceuticals at discounted prices. It also covers the costs of the allowance for temporary incapacity for work. Because of its small size and centralised management of health care, Estonia has only one (central) Sickness Fund. Voluntary health insurance is used mainly for travel related additional health insurance cases. If the person is not already insured, he/she can enter into a voluntary insurance contract with the national Health Insurance Fund or any private insurance company. According to OECD estimates, 9.9% of the health expenditures in Estonia is financed by government schemes, 65.6% by the compulsory social health insurance, 1.6% by the voluntary health insurance schemes and 22.7% by out-of-pocket payment (Ainsaar et al. forthcoming). The health care costs for those who are not insured (5% of the population) are financed as out-of-pocket payments.

The Estonian system defines disability as a long term mental or body dysfunctionality that causes coping restrictions. Disabled people benefits are financed from several sources and are available only for those who are permanent residents in Estonia. The benefits’ level and arrangements are dependent on the type and degree of disability.

All legal residents have the same entitlement rules for health treatment and health insurance, regardless of their nationality. If a person is working in several EU countries, he/she is entitled to the health insurance coverage if he/she contributes to the health insurance fund. The insurance coverage starts after 14 days waiting period and is valid for two months after the termination of the employment contract. Persons insured in Estonia can receive health treatment in other EU countries. When travelling in Europe, holders of the Sickness Fund insurance are entitled to medical care on an equal level with the nationals of their countries of residence (EU countries, Liechtenstein, Norway, Iceland, and Switzerland). For expensive operations and treatment in non-EU countries, a prior agreement from the Sickness Fund is required. If an insured person falls ill abroad, the Health Insurance Fund will pay the sickness benefit.

All persons having compulsory contributory health insurance are entitled for almost free treatment in hospitals (with very low of pocket payment - 2 euros per day) and access to medical doctors (with symbolic 1–3 euros out of pocket payment for a visit). When the person falls ill, he/she can obtain a sick leave certificate and the sickness benefit will be paid by the employer and the Health Insurance Fund. For days 4–8 of sickness, the employer pays the benefit at 70% of 6 months’ average salary of the employee. From day 9, sickness benefit is paid by the Health Insurance Fund based on employee’s daily income. A person is entitled to the sickness benefit for up to 182 consecutive calendar days. A physician can also issue a certificate for sick leave for a longer period, but no sickness benefit will be paid during this period.

EU and non EU residents can access health benefits in kind and cash under the same conditions as national residents. Moreover, nationals residing abroad have access to health care under the same eligibility conditions as nationals living in Estonia.

9.2.3 Pensions

Pensioners in Estonia have higher poverty rate and their economic situation is worse compared with the EU average (Estonia 2018). The old-age pension system stands on three pillars. The national pension (rahvapension) and old-age pension (vanaduspension) comprise the first pillar. National pension is financed from the state budget, whereas the old-age pension and the second pillar are financed by individuals and employers from an earmarked social tax and by state budget. The second pillar is mandatory for younger people (born in 1983 or later) with some state supervision and the third pillar is a voluntary pension scheme without state supervision.

Entitlement for old-age pension requires at least 15 years of employment in Estonia. Periods worked in other EU countries can be taken into account. Those who do not meet the 15 years requirement can claim a national pension (tax-financed universal scheme guaranteeing a minimum pension for residents). The pensionable age is 63, to be gradually increased to 65 by 2026. When a person retires earlier, the pension is reduced by 0.4% per each month retired earlier. The national pension is granted to individuals in retirement age who do not meet the qualifying period requirement for an old-age pension and have resided in Estonia for at least five years immediately before the submission of the claim. National pension is not paid to persons who receive pension from another state.

There is no qualifying period for 2nd and 3rd pillar pensions schemes, but payments depend on the amount of collected money. Since 2018, there is no special geographical restrictions for the use of 2nd and 3rd pillar pensions around the world. Non-residents who have contributed to pension schemes in Estonia (old age, second and third pillar) have the right to an old-age pension and second and third pillar payments. To receive their pension abroad, non-residents must contact the Pension Center and submit yearly life certificates or certificates of residence in the other country.

EU rules regulate how mobile EU citizens collect their pension rights from other EU countries,Footnote 4 by guaranteeing that the entitlement period and level on pension earned in different EU countries are taken into account. Transferable pension rights and eligibility criteria are the main topics of the bilateral agreements that Estonia has signed with non-EU countries (Table 9.1). The most common issue regulated in these agreements is the treatment of years at work (from the Soviet Union period in the agreements with Latvia, Lithuania, Russia, Ukraine) for eligibility of pension insurance. Bilateral contracts with EU countries Latvia and Lithuania regulate the period during the Soviet Union period. However, the contribution to the pension schemes made in non-EU countries not covered by a bilateral agreement with Estonia will not be taken into account for entitlement to pensions. If the person moves to non-EU countries, he/she might lose the right for the first pillar old-age pension earned in Estonia.

Table 9.1 Active bilateral social security agreements signed by Estonia
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9.2.4 Family Benefits

The Estonian family policy system can be divided into three subsystems: family benefits, leaves and leave benefits (maternity, paternity, parental), and day care.Footnote 5 In 2018, family benefits include birth grant, life entrance grant for children who graduate from institutions and start to live independently, child allowance, single parent allowance, allowance for families with three or more children, child allowance for a family of temporary military servant, and child allowance for a child in custody care. As in case of other social protection schemes, all legal residents of Estonia are entitled to family benefits and childcare services, regardless of their migration background in case of birth of a child or if they have children in the household. There is no special waiting period for the family benefits package. Family benefits are financed from the general state budget and are not means-tested. Childcare leave benefits (with some exceptions) are income-related with lower and upper ceiling. The birth grant is a lump sum paid to one resident parent. For child allowance, single parent allowance, allowance for families with three or more children, child allowance for a family of temporary military servant, child allowance for a child in custody care, the child must live in Estonia and cannot receive similar benefits from elsewhere.

The maternity benefit is paid by the Health Insurance Fund to female employees who are insured. The benefit is paid for 140 calendar days, at a rate of 100% of the average income per calendar day (with upper and lower ceiling). Women who did not work in Estonia before the maternity leave period are not eligible for a maternity leave and benefit.

Working fathers can use the paternity leave of 30 working days in two months before the predicted date of birth or two months after the birth (the leave can also be used in parts). As for the parental leave, this is generally used after pregnancy and maternity leave. The eligibility criteria is legal residency in Estonia. A mother or father has the right for parental leave until their child reaches the age of 3. Parent can change upon agreement who will use the child care leave, but the parental leave benefit is generally paid to the parent taking care of the child. Parental leave benefit is paid for 18 months and the state pays additionally for this period contributions to the parent’s mandatory funded pension and health insurance. The amount of parental leave benefit depend on social tax contribution in Estonia if the parent worked previously. If parent worked 100% in another EU country, the benefit will be calculated according the average salary. If a parent worked partially in another EU country or did not receive income in Estonia, the parental benefit calculations are based on the minimum wage in Estonia. After the parental benefit period comes to an end, one parent is entitled for childcare allowance, which does not depend on previous earnings. All legal resident parents are entitled to claim the childcare allowance.

Family benefits are not transferable to other countries once the person leaves Estonia. In case of child benefits (but not for leave benefits), the entitlement depends on parent(s) residence and work status. For example, if one parent does not work, but the other works in another EU country, the child get the child benefit from one country and if in the other country, the level is higher, the missing part being covered by the other EU country.

9.2.5 Guaranteed Minimum Resources

Minimum incomes in Estonia are guaranteed under the subsistence benefit scheme. The benefit is paid to individuals/households residing in Estonia, whose income after payment of fixed housing expenses are below the subsistence level. In 2020, the subsistence level for people living alone or for the first member of the family was 150 euros per month, 180 euros for every child and 120 euros for each following family member.Footnote 6 The subsistence benefit is granted for one month at time, but there is no maximum time period limitations for receiving the benefit. A new means test is carried out each month. Municipalities are responsible for the management of the subsistence benefits, but the overall regulationFootnote 7 is approved in the national Parliament.

To claim subsistence benefits, individuals must submit an application to the local authorities with documents certifying the net income of the household. In case of doubt regarding the correctness of documents proving income and information concerning residence, the documents shall be submitted to the regional structural unit of the Tax and Customs Board or the authorised processor of the population register for inspection. To enforce the right to decline the application for subsistence benefit on the basis of property evaluation, local government officials have the right to ask the person concerned or other parties for supplementary information.

The conditions of access to this benefit are the same between national residents, EU foreigners and non-EU foreigners if they reside legally in Estonia. The only eligibility condition is either short- or long-term legal residency in Estonia and income level. Due to the residency-based nature of this benefit, nationals residing abroad are not considered as eligible claimants. There is no explicit requirement that individuals have to search for a job while receiving the subsistence benefit. All legal residents get immediate access to this benefit after registering their residency in Estonia, although the lack of decent income level can serve as a ground for denying the application for legal residence.

9.3 Conclusions

The current social policy in Estonia is a product of combination of prevailing right-wing governments, Soviet and Nordic welfare traditions, and EU normative guidelines (Ainsaar et al. 2019). Social security rights are based mostly on recorded residency in Estonia with some additional entitlement rights for immigrants from other EU countries or countries covered by bilateral agreements.

Immigration and emigration issues are still poorly regulated in the Estonian social protection laws. For the last 25 years, Estonia has been mainly an emigration country and this might explain the low salience of immigration-related social security regulations in Estonia. Mass immigration has not been a problem and the social protection acts hardly cover mobility-related issues in an explicit manner. Policy discussions related to the social protection of non-national residents and non-resident nationals have been missing from the public debate during the last 15 years.

Immigrants’ access to social benefits in Estonia also depends on the general structure of the national social protection system. The government and municipalities are mostly responsible for providing social security and only certain domains of social policy (like health care, old-age pensions and unemployment insurance) are related to the contributory insurance in Estonia. Missing waiting periods for entitlement to social benefits guarantee for newly arrived immigrants have similar rights with long-term residents in terms of access to social protection.

The main channel for acquiring social protection rights in Estonia is the legal residency. Although heavily financed by taxes and state contributions, the system is quite generous towards foreign residents, especially the eligibility conditions or general procedures for accessing benefits do not vary between national and foreign residents. Estonia does not have specific scheme of social benefits only for foreigners or only for Estonian citizens residing abroad. In most cases, there is no differential treatment between EU and non-EU citizens, only pensioners and health care patients from EU can export some right for entitlement benefits from their countries of origin. The EU rules cover illness and maternity benefits, disability, old age and survivor’s pension, occupational accident and occupational disease benefits, funeral allowance, and benefits paid to the unemployed and family benefits. Persons leaving Estonia mostly lose entitlement for social protection, except for the pension scheme and health care in EU. Due to bilateral agreements and EU regulations, a gradual shift is observable in Estonia to take more into account international mobility in recent years.