Key issues
- In the last two years, Estonia has had one of the highest inflation levels in the European Union, even a record 25% in 2022. Price increases, including the soaring energy prices in the winter of 2021, have significantly damaged the purchasing power and livelihoods of every second Estonian, especially those with lower incomes.
- The war in Ukraine has had a strong impact on the increase in inflation, 30% of Estonians believe that they have faced serious economic difficulties precisely due to the effects of the war.
- In 2023, nearly 36,000 displaced persons from Ukraine live in Estonia under temporary protection, over 12,000 of them have found employment, which shows that Ukrainian refugees have quickly and successfully been integrated into the labour market.
- In 2022, 303,900 people in Estonia lived in relative poverty, an increase of nearly 3,000 compared to the previous year. Among individuals aged 65 and over, 46.8% lived in poverty, while the EU average was 18.1%. Absolute poverty was experienced by nearly 48,000 people in Estonia in 2022, which is two and a half times more than in 2021.
Political and institutional developments
In the years 2021–2023, policy on employment and social protection has largely been based on the Welfare Development Plan approved by the government in 2016. On 23 February 2023, the government confirmed the Welfare Development Plan 2023–2030[1], which serves as a continuation of the previous development plan. It highlights key issues in family policy, social affairs, and the labour sector, sets strategic goals for the coming years, and outlines the actions needed to achieve them.
In July 2022, the coalition of the previous government, which included the Reform Party, Social Democrats, and Isamaa, agreed to a significant increase in family benefits, primarily targeted at families with many children. On 28 December 2022, the Parliament passed the Act Amending the Family Benefits Act, the Family Law Act, and the Employment Contracts Act[2], which resulted in several important changes to family benefits taking effect from 1 February 2023.
After the parliamentary elections on 5 March 2023, a new government coalition was formed, comprising the Reform Party, Estonia 200, and the Social Democrats. The coalition decided to change the family benefits system that came into effect in the beginning of 2023, as discussions about support measures for large families sparked concerns about the fairness to one- and two-child families. It was deemed necessary to revise the Family Benefits Act in its entirety to make it more affordable for the state budget, resulting in a reduction in support for large families. The decision also included abandoning the indexation of support for large families with the pension index from 2024 onwards.[3] The changes were adopted on 14 June 2023, and will enter into force on 1 January 2024.[4]
Regarding long-term care, several amendments to the Social Welfare Act were passed in the Parliament in 2022 to enable people to live in their homes for as long as possible and receive quality services.[5] On 7 December 2022, the Parliament approved a care reform that, starting from 1 July 2023, made care home services more affordable for recipients, improved the quality of general care, and enhanced the availability of home support services. Additionally, local municipalities partially reimburse accommodation and meal expenses for service recipients with incomes lower than the average old-age pension. Projections indicate that in 2023, the average monthly fee for a care home for a person with high care needs is € 1375, part of which (care staff costs) will be covered by local municipalities, and the average pension of € 700 will allow the individual to cover the rest.[6]
According to the draft law, the state will invest € 40 million in 2023 to improve the availability and quality of general care services. In 2024, nearly € 57 million will be allocated from the state budget to the local government revenue base, and by 2026, the funding is projected to increase to € 62 million.[7]
The legislative amendment also supports the development of home care services in local municipalities. Municipalities have the opportunity, in organising long-term care, to develop and offer home services alongside 24-hour general care. This provides individuals with the opportunity to continue living in their homes and helps prevent or delay the worsening of their care needs.[8]
The need for a care reform in Estonia is significant because a large portion of individuals over 65 in need of long-term care do not receive assistance with personal care or household tasks. Estonia faces a greater shortage of home care services than anywhere else in the EU, and these services are not equally accessible across the country due to variations in municipalities’ capacity to provide them. Informal caregivers are extensively relied upon, while the financial support provided to caregivers is very limited. The absence of uniform national service standards and a shortage of workers make it challenging to ensure quality care. Estonia has one of the lowest public sector expenditures on long-term care in the EU, constituting 0.4% of GDP in Estonia in 2019 compared to the EU average of 1.7%.[9]
Legislative developments
On 1 April 2023, a new Victim Support Act entered into force, improving the accessibility of assistance for victims of violence, crime, or crisis situations.[10] The system of applying for compensation for crime victims became clearer. The new law includes, for the first time, the formulation of crisis support for victims of sexual violence, support for abandoning violence, psychosocial assistance in crisis situations, and basic victim support services. Services for women’s support centres, restorative justice, and victims of human trafficking have been enhanced, along with the content and conditions for mental health support for trauma recovery.
Starting from 1 October 2023, services of speech therapists, physiotherapists, and psychologists have been made more accessible, as they now have the right to provide healthcare services as independent healthcare service providers.[11] This allows individuals, with a referral from their general practitioner, to seek assistance from a practice in contract with the Health Insurance Fund, and the cost is covered by the Health Insurance Fund. Equalisation with healthcare workers gives the specialists quick access to the patient’s medical history and the opportunity to participate independently in the patient’s treatment process.[12]
On 16 March 2023, the government approved the national pension index for 2023, resulting in an increase in the average pension to € 700 from 1 April 2023.[13] The approved index value is 1.139. Consequently, pensions and the daily rate of disability benefits increased by an average of 13.9%. This pension increase is the largest in the last 15 years. In addition to the indexing, tax changes in the beginning of the year also leave more money in the hands of pensioners. However, the pension increase falls short of lifting pensioners out of relative poverty.[14]
Statistics and surveys
In 2022, approximately 303,900 people in Estonia were living in relative poverty, which is nearly 3,000 more than in 2021, and the monthly income for these households was less than € 756.[15] The relative poverty rate in 2022 was the highest in years, primarily among the elderly. In 2022, 46.8% of people aged 65 and older lived in poverty, while the EU average is 18.1%. Among individuals aged 65 and older living alone, 79.1% experienced relative poverty, which is 3.7% less than the previous year. The poverty of the elderly is characterised by a gender gap (for women, the indicator is 52.5%, or almost 31 percentage points higher than for men).[16] About one-third of single parents, predominantly mothers, also experience relative poverty, with a rate of 34.8%, representing a 2.1% increase compared to 2021.[17]
Absolute poverty was experienced by nearly 48,000 people in Estonia in 2022. In 2021, this number was 18,000, meaning it has increased two and a half times. The monthly net income for these households was less than € 303.[18] The increase in the number of people in absolute poverty in 2022 is attributed to significant inflation, raising the threshold of the subsistence minimum by 30%, from € 234 to € 303.[19] Absolute poverty was highest among individuals living alone under the age of 65 and single parents. By age group, absolute poverty was highest among 18- to 24-year-old.[20]
Impact of Inflation
Since May 2021, inflation in both Estonia and the Baltic region as a whole has been higher than the European average.[21] According to a 2022 survey, every second Estonian respondent was facing difficulties due to rising prices. 12% of those surveyed confirmed experiencing serious difficulties, and 39% claimed that inflation has significantly hindered their ability to cope. 30% stated that they have faced serious economic challenges, particularly due to the effects of the war in Ukraine. The impact of price increases is felt most acutely by those with the lowest incomes, for whom the monthly net income per family member is around € 600; 69% of them stated that their financial well-being is significantly compromised.[22]
Health status
Statistical data indicates that in 2022, life expectancy of Estonian residents at birth was 78.1 years. Life expectancy for men was 73.6 years, and for women 82.3 years. Men live in good health for 57.9 years, while women for 60.6 years, revealing a gender disparity. Compared to 2020, Estonian men now live in good health for two years and four months longer. Healthy life expectancy for Estonian women has increased by one year and one month.[23]
The COVID-19 pandemic has significantly impacted the mental health of the population. In the spring of 2021, risk of depression was present in more than a quarter (28%) of adults, and one in five (20%) adults had a risk of generalised anxiety disorder. Both depression and anxiety disorders were most prevalent among young adults (18–24 years old), with a risk of anxiety disorders at 37% and a risk of depression as high as 56%.[24]
Ukrainian refugees
As of 20 August 2023, there were 35,598 Ukrainian refugees with a valid temporary residence permit under temporary protection in Estonia.[25] At the same time, 12,203 refugees were employed, and despite having an education level above the average, the majority of refugees worked in low-skilled jobs (almost 40%). There were 4,605 registered unemployed individuals, and the lack of language skills was a significant factor contributing to unemployment.[26]
Noteworthy public discussions
The central topic during 2021–2023 was the increase in child and family benefits. Different perspectives on child and family support clashed in 2021 during Kaja Kallas’s first government, formed by the Reform Party and the Centre Party. Increasing benefits for large families was considered by the media as one possible reason for the government crisis that led to a change in government.[27] The draft law to increase family benefits was adopted, but only during the second government of Kaja Kallas, on 28 December 2022. It sparked discussions among politicians[28], academics[29] Mother of the Year[30], and others. A significant critical force was the citizen initiative “Make Family Benefits Fair!” which collected 8,704 signatures and was submitted to the Parliament on 7 October 2022.[31]
A new wave of debates started in 2023 when Kaja Kallas’s third government, consisting of the Reform Party, Estonia 200, and the Social Democrats, decided that Family Benefits Act must be changed as a whole in order to prevent possible inequality between different family types. Opponents, notably Isamaa party, as well as the NGO Lasterikkad Isad (Fathers of Large Families), and the Estonian Association of Large Families, were not satisfied with the changes. They argued that the fair solution was the original version of family benefits, which prioritised large families. Lea Danilson-Järg, a politician from the Isamaa party, expressed her opinion that it was unfair to overhaul the family benefits system, which had been the subject of debate for over half a year in the previous composition of the Parliament, leading to a compromise supported by all five parliamentary parties.[32]
Case description
Levila published an article titled “When Salary Leads to Poverty,” featuring stories of persons at risk of impoverishment due to rapid price increases in 2023.[33] One story is about Rait (41), a teacher at Tartu Children’s Art School and a father of three. He mentions that he is already short of food money. Although his spouse receives a doctoral stipend, just under € 1000, fixed expenses – rent € 370, utilities nearly € 200, as well as food and kindergarten fees – consume a significant portion. In addition, Rait has an Artists’ Association studio in Tallinn, costing around € 250 euros per month. If he did not have it, he would not have a place for his paintings. They simply would not last in unheated rooms. Unfortunately, he has given up going to the studio in Tallinn, painting, and preparing for exhibitions. He undertakes these activities infrequently, one at a time. To make ends meet and for last summer’s trip to the Biennale in Germany, Rait took out a small loan with an interest rate of almost 10%, which he is currently repaying. Fortunately, the family receives free clothes and food assistance through the Association of Large Families. Rait sometimes uses this assistance, but often the items given out have a short expiration date, and much of it ends up being discarded.
Recommendations
- Estonian individuals need to be more purposefully prepared for retirement. To prevent the risk of future pensioners falling into poverty, it is necessary to enhance people’s financial literacy, encourage them to save, and direct funds into voluntary pension funds and other investments.
- Health education should be increased to reduce health behaviour risks. More than half of the years of life lost in Estonia due to premature death and illness result from risk factors or risk behaviour.
[1] Sotsiaalministeerium. 2023. Heaolu arengukava 2023–2030.
[2] Riigi Teataja. 2022. Perehüvitiste seaduse, perekonnaseaduse ja töölepingu seaduse muutmise seadus, RT I, 11.01.2023, 2.
[3] Riigikogu. 2023. Menetlusse võeti eelnõu perehüvitiste seaduse muutmiseks, 25.04.2023.
[4] Riigi Teataja. 2023. Perehüvitiste seaduse ning perehüvitiste seaduse, perekonnaseaduse ja töölepingu seaduse muutmise seaduse muutmise seadus, RT I, 06.07.2023, 3.
[5] Riigi Teataja. 2022. Sotsiaalhoolekande seaduse ja teiste seaduste muutmise seadus, RT I, 28.04.2022, 1.
[6] Sotsiaalministeerium. 2022. Riigikogu kiitis heaks hooldereformi, 07.12.2022.
[7] Ibid.
[8] Ibid.
[9] Euroopa Komisjon. 2023. Komisjoni talituste töödokument. 2023. aasta aruanne Eesti kohta, 24.05.2023.
[10] Sotsiaalministeerium. 2022. Riigikogu võttis vastu ohvriabi seaduse, 14.12.2022.
[11] Riigi Teataja. 2022. Psühhiaatrilise abi seaduse ja tervishoiuteenuste korraldamise seaduse muutmise seadus, RT I, 10.10.2022, 1.
[12] Sotsiaalministeerium. 2022. Logopeedide, füsioterapeutide ja psühholoogide abi muutub kättesaadavamaks, 24.09.2022.
[13] Sotsiaalministeerium. 2023. Valitsuse kinnitatud pensionitõusuga jõuab keskmine pension 700 euroni, 16.03.2023.
[14] Euroopa Komisjon. 2023. Komisjoni talituste töödokument. 2023. aasta aruanne Eesti kohta, 24.05.2023.
[15] Statistikaamet. 2023. Absoluutses vaesuses elavate inimeste arv kasvas kaks ja pool korda, 10.11.2023.
[16] Euroopa Komisjon. 2023. Komisjoni talituste töödokument. 2023. aasta aruanne Eesti kohta, 24.05.2023.
[17] Statistikaamet. Statistika andmebaas.
[18] Statistikaamet. 2023. Absoluutses vaesuses elavate inimeste arv kasvas kaks ja pool korda, 10.11.2023.
[19] Ibid.
[20] Ibid.
[21] Eesti Pank. 2022. Eesti Panga 2021. aasta aruanne.
[22] Postimees. 2022. Küsitlus: iga teine Eesti elanik on hinnatõusu tõttu raskustes, 15.08.2022.
[23] Statistikaamet. 2023. Eestimaalased elavad üha kauem tervena, 28.06.2023.
[24] Tervise Arengu Instituut. 2023. Suitsiidimõtetega noorte osatähtsus on aastatega suurenenud, 12.09.2023.
[25] Siseministeerium. 2023. Statistika Ukraina sõjapõgenike kohta.
[26] Sotsiaalministeerium. 2023. Aasta sõjapõgenikke Eestis, 23.04.2023.
[27] Kusma, E. 2022. Valitsuskriisi põhjustanud perehüvitiste seaduse muudatused saadeti esimesele lugemisele, Õhtuleht, 16.05.2022.
[28] Kallas, S. 2022. Siim Kallas: perehüvitiste eelnõu on suitsukate arusaamatute poliitiliste punktide võitmiseks, Reformierakond, 31.05.2022; Sibul, P. 2022. Reformierakonna võitlus peretoetuste vastu on põhimõttelage, Postimees, 01.06.2022; Kiisler, S. 2022. Siim Kiisler: riigikogu peaks õiglustunde Isamaa käsulaudadest kõrgemale seadma, Eesti Päevaleht, 22.12.2022; Paas, K. 2023. Riigikogu seadustas hardas üksmeeles aastakümnete kõige suurema riikliku ebaõigluse, Eesti 200, 05.01.2023.
[29] Eamets, R., Järvan, K. 2022. Kas raha paneb sünnitama? Postimees, 06.06.2022.
[30] Õunap, A. 2022. Tagasivaade 2022. aastale aasta ema pilgu läbi, Postimees, 31.12.2022.
[31] Virolainen, L., Jõks, T. 2022. Rahvaalgatus „Peretoetused õiglaseks! 7.10.2022.
[32] Danilson-Järg, L. 2023. Lea Danilson-Järg: jaanipäevaks viskab koalitsioon Eesti perede heaolu lõkkesse, Eesti Päevaleht, 25.04.2023.
[33] Zõbin, J. 2023. Kui palk viib vaesusesse, Levila, veebruar 2023.
