OECD urges Estonia to improve labor market measures

Photo: SCANPIX

The Organization for Economic Cooperation and Development (OECD) recommends in its annual Going for Growth report that Estonia strengthen its active labor market policies to reduce unemployment and lower the tax burden of low-wage earners.

Strengthened active labor market and education policies, as well as a pro-poor tax wedge reduction would not only stimulate growth, but also make it more inclusive, the report says.

The annual overview of policy developments takes note of Estonia's progress in reducing product market regulation, including the opening of the electricity market, removal of obstacles to foreign direct investment, and reduction of administrative costs by extending e-services.

In order to promote economic growth, a further increase in spending on activation policies is advisable, the report says. Also, such policies should be targeted at key risk groups and control of the quality of training courses for the unemployed increased.

In regard to taxes, the report recommends reducing labor taxation and increasing environmental and property taxes, including by taxing houses and apartments and using market-based land valuation. Initial labor tax cuts should be targeted at low-wage earners so as to maximize employment gains, the report says.