Migrant workers bless Estonia with hundreds of millions of euros

Photo: Mati Hiis / Õhtuleht

At an Eesti Pank seminar last week, a central bank economist Orsolya Soosaar said free movement of workers strategy was aimed at achieving maximally inclusive economic growth, boost overall employment, and enhance use of the existing labour force.

«Free movement of workers is a pillar of the single economic space,» underlined Ms Soosaar.

Statistical Office data says Estonia had a registered exodus of 47,090 by the year 2011. Regrettably, a significant part of emigration will go unregistered and that may only be assessed indirectly. It is estimated that unregistered emigration amounts to some 20,000; that would mean that since the change of the century, about 67,000 people have left Estonia.  

For the economy, the greatest problem is that emigration amplifies aging of the population, as it is mainly the young who leave, and thus there will be less and less working-aged tax payers per pensioner.

«In longer term, migration has a large impact on the amount of births, putting the social security system under pressure,» said Ms Soosaar. As also confirmed by LHV bank economist Heido Vitsur, we will have to consider that with low birth-rate and youth-exodus, we will have a population that ages faster than its death-rate; therefore, the negative effect of a shrinking working-age population on the economy will show much sooner than the effect on the size of population.

«And while our economy might perhaps handle aging due to low birth-rate, with the rate of working-age and non-working-age population deteriorating twice as fast it will be rather questionable,» stressed Mr Vitsur. «Thus, the overwhelming exodus would not pose any economic problem in short or long perspective – were it not to the backdrop of an aging population,» he added.

For the people headed to other lands, the change may be positive in various ways. The most direct benefit thereof is financial; in a way, this may be compared to export or foreign aid.

According to Eesti Pank, people living and working abroad last year sent to Estonia €324m i.e. €245 per inhabitant, making for 1.8 percent of gross domestic product (GDP). To compare: net inflow if EU aid was 3.3 of GDP – only bigger a bit more than twice.

For some economies, the income sent home by emigrants and the labour income earned by residents mostly working in neighbouring countries, are very important.

For example: with countries of Central Asia, such income makes for a substantial share of GDP: 47.5 percent in Tajikistan, 31.4 percent in Kyrgyzstan, and 21.3 percent in Armenia. In European Union, the new member states have the greatest such percentage. According to World Bank data, it is larger than in Estonia in such countries as Lithuania (4.5 percent of GDP) and Latvia (2.6 percent).

«Such inflow of income helps support domestic demand in recipient country’s economy – consumption and investments,» said Ms Soosaar.

Secondly: in a situation where our economy is unable to create enough jobs, especially so with jobs of desired income, emigration is basically the only balancing factor for the labour market and thus to the economy.

«Let’s consider, for instance, that if 60,000 of our people would not find employment in Finland only, our unemployment would not be four percent lower than EU average of 12 percent, but rather among the highest,» underlined Mr Vitsur. «Had these 60,000 people stayed in Estonia, in high likelihood they would have been an extra weight on our cash strapped social system; also, our domestic product would have missed the additional demand supplied by them,» he added.

According to Mr Vitsur, the favourable economic impact does have a hidden negative side to it: «Because of that, we do not really feel how unattractive our economic environment really is for entrepreneurs; and it often seems to us that we have still time when it comes to needed reforms.»

In addition to the direct financial income, working abroad has some indirect benefits. Thus, the professionals, the highly qualified and educated specialists gain new working experience while abroad, as well as options to further develop and diversify their skills. Via contacts maintained or having returned to homeland, they pass this knowledge on to colleagues in Estonia or will employ the skills obtained for the benefit of their country. 

«Frankly, I couldn’t imagine in my own field, or in electronics, that the specialists could make it without having attended courses, studied or worked abroad. This is a wide open world, and the opportunities need to be used,» said Nordea bank chief economist Tõnu Palm.

The more we are integrated in the global subcontracting chain, the more cross-border work there will be. Thus, international experience may also be obtained while working in international companies, also in Estonia.

«People can work at home, but cross-border. Also in training, distance learning is a way to plug into in-service training at various educational institutions,» said Mr Palm. «There is, in a good sense, a globalisation taking place via greater options. Lots of Estonian youth study abroad, and that’s the same tendency as elsewhere,» he added.

But such emigration where a family is started elsewhere has a negative touch, for a small country. As long as Estonia’s living standards are low, there is a risk that people go to stay. The risk tends to be greater with ladies, as usually it is very difficult to lure anybody towards the North from a warmer climate, from European hubs, and from better paid jobs. «There are the historical examples that even royal families in Nordic countries had difficulty drawing additional members from elsewhere in Europe,» said Tõnu Palm.

Heido Vitsur added that with the never-ever-leavers the problem may be that while they stay put, the local economic problems are often «solved» in ways that deepen personal problems; in not-too-long perspective, this may be costlier to us than the gain produced. 

«Meanwhile, cross-border employment is nothing to look down at, in itself,» said Mr Vitsur. «There are regions in Europe where up to a fifth of people work cross-border. Here, all depends on motives and condition,» he added.