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Labor Migration, EU Enlargement, and the Great Recession pp 345–363Cite as

Labor Market Transitions During the Great Recession in Estonia

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Abstract

The global financial crisis that started in 2008 has led to similar turbulence in the Estonian labor market to that experienced during the economic transition period in the 1990s. When Estonian real GDP fell by 14 % in 2009, the currency exchange rate was unchanged and most of the adjustment to the crisis took place through the labor market. Nominal wages fell by around 3 % from the first half of 2008 to the first half of 2010, but more importantly the unemployment rate increased from 4 % to 18 % in the same period. Purfield and Rosenberg ((2010). Adjustment under a currency peg: Estonia, Latvia and Lithuania during the global finanacial crisis 2008–2009. IMF Policy Discussion Paper, 10/213) state in an IMF Policy Discussion Paper, 10/213, that this change in the aggregate nominal wage level and the fiscal adjustment in all the Baltic countries are internationally unprecedented.

The authors thank the anonymous referees as well as the editors of this volume for providing a number of suggestions that helped to improve the chapter significantly. We remain responsible for any mistakes still present.

Jaanika Meriküll is a senior economist at Eesti Pank and a senior researcher at the University of Tartu. The author would like to thank Tairi Rõõm, Martti Randveer and participants in the internal presentations of the research in Eesti Pank for their valuable comments. The financial support from Estonian Research Council Grant IUT20-49 is acknowledged. All remaining errors are the author’s own. The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank

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Notes

  1. 1.

    See e.g. Haltiwanger and Vodopivec (2002); Lehmann et al. (2005); Masso et al. (2004).

  2. 2.

    See Jurajda and Terrell (2008, 2003), comparing Estonia and the Czech Republic, and Haltiwanger and Vodopivec (2002), comparing Estonia and Slovenia.

  3. 3.

    However, there may be some discrepancies between the net employment growth found in this study and that published by Statistics Estonia. The main reason for this is the retrospective nature of the labor market status information for the previous year in the labor force survey. See note 2 in Appendix 1 for more details.

  4. 4.

    The OECD (2010) estimated that a 10 percentage point increase in the replacement rate leads to a 0.4–0.5 percentage point increase in separation and 0.2–0.4 percentage point increase in hiring. This regularity does not stick out in the worker flows after the introduction of Estonian unemployment insurance in 2003; however this effect may be cancelled out and materialize only in the economic downturn in 2009. The institutional issues need further attention in the analysis of Estonian labor market mobility.

  5. 5.

    The maximum length of unemployment insurance benefits is 360 days, but this will apply only after 2011; see Lauringson (2010a, Sect. 2) for a discussion of the details.

  6. 6.

    It must be remembered that a direct comparison of the worker and job flows across studies is not usually possible, as different temporal frequencies or sources of data (employer-side or employee-side) may affect the results significantly.

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Authors and Affiliations

  1. Bank of Estonia, Tallinn, Estonia

    Jaanika Meriküll

  2. University of Tartu, Tartu, Estonia

    Jaanika Meriküll

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  1. Jaanika Meriküll
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Correspondence to Jaanika Meriküll .

Editor information

Editors and Affiliations

  1. Department of Public Policy, Central European University, Budapest, Hungary

    Martin Kahanec

  2. IZA - Institute for the Study of Labor, Bonn, Germany

    Klaus F. Zimmermann

Appendix 1: Worker Flows Between Labor Market States and Job Flows, 2001–2014

Appendix 1: Worker Flows Between Labor Market States and Job Flows, 2001–2014

 

EE*

EU

EI

UE

UU

UI

IE

IU

II

EE

Hiring rate

Separation rate

Job creation rate

Job destruction rate

2001

91.2

4.4

4.4

4.2

7.5

1.9

3.3

2.3

59.7

7.9

15.4

16.7

3.0

5.1

2002

92.3

3.4

4.3

3.8

5.9

2.1

3.6

2.1

60.8

9.2

16.6

16.9

5.2

3.8

2003

92.7

3.5

3.8

4.0

5.8

1.5

3.8

1.9

60.3

8.6

16.4

15.8

5.8

4.3

2004

93.1

2.7

4.2

3.7

6.0

1.2

3.4

2.1

60.0

7.8

15.0

14.7

3.7

3.5

2005

93.9

2.2

3.9

3.5

5.0

1.1

4.0

1.6

59.8

8.8

16.3

14.9

4.7

2.7

2006

94.6

1.7

3.7

3.0

3.2

0.7

4.8

1.5

53.1

9.0

16.7

14.4

8.4

2.0

2007

95.5

1.4

3.1

2.3

2.7

0.4

4.0

0.9

52.2

8.8

15.1

13.3

2.9

1.5

2008

93.4

2.7

3.9

1.8

2.0

0.3

3.8

1.1

48.3

8.6

14.2

15.2

3.2

3.0

2009

86.4

8.4

5.3

2.2

4.6

0.4

3.1

1.7

47.9

6.9

12.3

20.6

0.0

9.2

2010

87.4

7.9

4.7

4.9

9.5

0.8

3.6

2.1

53.0

6.1

14.5

18.6

4.6

8.8

2011

92.5

3.7

3.9

6.7

9.0

0.9

4.5

1.9

52.3

6.9

18.1

14.4

10.7

5.0

2012

93.0

3.0

3.9

4.5

6.8

1.0

4.1

1.6

48.7

8.3

16.9

15.2

7.3

3.8

2013

92.9

3.5

3.6

4.1

4.8

0.6

3.6

1.3

47.6

7.6

15.3

14.8

3.4

3.9

2014

93.4

2.5

4.1

3.6

3.9

0.8

3.9

1.5

46.2

7.9

15.3

14.5

3.8

3.2

  1. Note 1: See Sect. 3 for the flow notations and definitions; EE* – individuals who were employed a year ago and are still employed divided by the total amount of employment a year ago; EE – individuals who were employed a year ago and are still employed but with a different employer divided by the total amount of employment year ago
  2. Note 2: The difference between hiring and separation rates should result in net employment growth. This regularity between gross and net flows does not always result in exactly the same net employment growth under the methodology used in this study. The discrepancy comes from the different base employment value of official statistics on employment growth and our gross flow calculations – I work with respondents’ retrospective estimation of their employment status a year ago, while official statistics uses the estimations of a current year
  3. Source: Author’s calculations on LFS microdata

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Meriküll, J. (2016). Labor Market Transitions During the Great Recession in Estonia. In: Kahanec, M., Zimmermann, K.F. (eds) Labor Migration, EU Enlargement, and the Great Recession. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-45320-9_14

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