The public defence of Kerly Espenberg's Ph.D thesis "Inequalities on the labour market in Estonia during the Great Recession" will take place on April 9, 2013 at 14.15 in room B306, Narva Rd 4, Oeconomicum, University of Tartu
Kaia Philips (Ph.D, Associate Professor), University of Tartu, Estonia
Jaan Masso (Ph.D, Senior Research Fellow), University of Tartu, Estonia
Ellu Saar (Ph.D, Professor), Tallinn University, Estonia
Wiemer Salverda (Ph.D, Professor), University of Amsterdam, Netherlands
Discourse on the concept of inequality dates back to ancient times. The recent crisis, which has also been named the Great Recession, was the most severe of the recessions Estonia has experienced. As a small open economy with a small domestic market, Estonia is vulnerable to external shocks. The global financial crisis and the slump in private capital flows affected the country heavily. The crisis had a severe effect on the Estonian labour market, the most severe in EU comparison after Latvia.
In the thesis the focus is on inequalities on the Estonian labour market during the financial crisis (years 2008-2010). The aim of the thesis is to ascertain which labour market groups have been most vulnerable since the onset of the recession in Estonia and which changes occurred in inequalities on the labour market during the Great Recession. It is analysed which adjustment mechanisms were used in the Estonian labour market to cope with the crisis, which was the role of institutions and which were differences between industries and based on gender, age, nationality and educational level. In addition, a theoretical system of inequalities on the labour market is developed that draws together the employment and remuneration side of such inequalities.
In the international comparison Estonia is highlighted as a best practice example where country implemented proper measures and enabled to overcome the crisis despite its small size and severe effects of the crisis. The results of the analysis indicate that Estonian labour market remained highly flexible during the Great Recession. All three adjustment mechanisms - reductions in employment, wages and working hours - were used. Compared to other EU countries Estonia clearly stands out, since employment, hours and wage adjustments occurred in the very early phase of the recession and the negative consequences for the labour market were particularly severe. In the beginning of the crisis the increase in employment was one of the highest in EU comparison in Estonia. In Estonia wage decreases were much more widespread than in other EU countries. Adjustment via working hours occurred mostly in the beginning of the recession.
In Estonia's public sector, austerity was mainly achieved via internal devaluation, mostly via pay cuts during the recession. Employment and hours decreases were used less. Wages were reduced in many Estonian public sector organisations as early as 2008-2009, which was exceptional in Europe. In the private sector the adjustment mechanisms were remarkably different across sectors. In those sectors which suffered the most during the recession, all three adjustment measures were used. Wage inequality measured as a P90/P10 ratio remained largely unchanged during the recession, indicating that those at the upper and lower ends of wage distribution experienced wage cuts to a similar extent. Middle-wage earners, however, were hit harder during the recession. Labour market institutions (minimum wage, trade unions) had a limited influence of inequalities on the labour market during the recession, the main reason for changes was sectoral and occupational segregation.
Analysis has shown that inequalities emerging on the Estonian labour market during the global financial crisis can be divided into two groups. The first group includes those inequalities that were short-lived and diminished during the recovery period. The second group of inequalities includes those that demand appropriate policy attention now. The experience of the recession indicated that like other EU countries the most vulnerable groups on the labour market in Estonia were youth, non-Estonians and the lower-educated. During the recovery the share of long-term unemployed has increased the most among elderly. Proper policy measures need to be applied in order to bring these people back to the labour market.
In addition to mapping general labour market developments during the crisis, one group was more specifically surveyed in the thesis: university graduates. It is often claimed that Estonia's higher education system 'overproduces' social sciences graduates and that their labour market prospects are gloomy compared to those of real sciences graduates. However, the results of our analysis do not support this hypothesis. The unemployment remained low in both groups even during the crisis, but contrary to popular belief, a social sciences education is worth more on the labour market than one in real sciences in terms of wages, at least at the master's/doctoral level and shortly after completing studies. The wage differences are partly explained by differences in work experience: compared to real sciences students, those in the social sciences are more engaged with the labour market while studying, and if we exclude extramural students the wage gap is in favour of graduates of real sciences.
The gender wage gap between university graduates is about the same in magnitude as the overall gender wage gap in Estonia (25%). The gender pay gap varies considerably across fields of study undertaken - from close to zero in services to more than 40% in health and welfare. Occupational segregation is the most important factor explaining part of the wage gap, but the role of the traditions and norms inherent in society also play an important role. Therefore, changing attitudes is necessary.