Modernisation of Vocational Education and Training in Estonia - Estonia

National Observatory of Estonia
National Report
Observatory project team: Tiina Annus, Katrin Jõgi, Lea Orro, Reet Neudorf
2001

Members of Steering Committee of the Foundation VET Reform in Estonia

Mati Kask - School Network Office
Riina Altpere - Estonian Association of SME’s
Joel Guljavin - Kohtla-Järve Polytechnic
Helena Hannula - Ministry of Economic Affairs
Mati Ilisson - Estonian Labour Market Board
Anneli Kommer - Ministry of Education
Jüri Lember - Estonian Maritime Academy
Ilmar Link - Association of Estonian Construction Entrepreneurs
Märt Rahamägi - Estonian Wood Working Federation
Tiia Randma - Estonian Qualification Authority
Toomas Šadeiko - Türi School of Technology and Rural Economics
Sander Vaikma - The Central Association of Estonian Trade Unions

This report was prepared with the financial assistance of the European Training Foundation. The views expressed herein are those of the Contractor and do not represent any official views of the Foundation. The contents of this report have been discussed at meetings of the National Observatory's expert group.

Executive Summary
The Results of the VET Reform in 1996-2000
The Main Results of VET Development in 2000
Introduction

1. Socio-Economic Background
   1. Economic Developments
   2. Demography
   3. Social Protection
2. Labour Market Background
   1. Economic Activity of Population
   2. Employment
      1. Structural changes in employment
      2. Employment in private sector
   3. Unemployment
   4. Labour Market Policies
   5. Future Skill Needs of the Economy
   6. Conclusions as Regards the Key Labour Market Issues and Their Influece on the Aspects of Human Resources Development
3. Modernisation of Vocational Education and Training (VET) in the Perspective of Lifelong Learning
   1. Introduction
   2. Human Resource Strategy and Priorities Included in the National Development Plan
   3. Preparation for ESF Implementation
   4. Modernisation of Initial Vocational Education and Training (IVET)
      1. Structure and Organisation of the IVET system
         1. The educational system as a whole/Schope of IVET within it
            • Basic education
            • Upper secondary, general and vocational education (ISCED 3)
            • Higher education
         2. The entry to the IVET system
         3. The training levels and paths within the IVET system and certification of outputs
         4. The organisation of the training provision within each level/path
         5. The access to furher levels of education and employment
      2. Responsible bodies
      3. Financing
      4. Social dialogue and involvement of social partners
      5. Curricula development
      6. Legislation
      7. Weaknesses, strengths and future government priorities in Initial VET
   5. Modernisation of Continuing Vocational Training (CVT)
      1. CVT Provision (from the supply side perspective)
      2. CVT provision (from the demand side perspective)
         1. Participation of employed in vocational training
         2. Participation of unemployed in vocational training
         3. Participation in individually motivated vocational training
      3. Responsible bodies
      4. Financing
      5. Social dialogue and involvement of social partners
      6. Curricula development
      7. Assessment and certification of skills (including access to formal qualifications and diplomas)
      8. Legislation
      9. Weaknesses, strengths and future government priorities in CVT
   6. Links Between IVET and CVT
   7. Vocational Guidance and Counselling
4. Management and Administrators Training
5. VET Teachers/Trainers/Managers and Administrators
   1. Teachers, Schools/Training Institutions Managers and Administrators of VET System
   2. Pre-Service Formal Training of Teachers & Trainers
   3. In-Service Training of Teachers & Trainers
6. Research on Labour Market and VET
7. International Co-Operation for VET Modernisation
8. Role of the National Observatories
9. Conclusions: Challenges and Futre Needs

   Long-Term Objective - by Year 2004

   The Main Activities in 2001

Executive Summary

The 1990-s were a very important period in Estonian history, bringing along many changes in the society, economy and social sphere, which have induced the need to further reorganise and develop the vocational education and training (hereafter VET) system.

The objective of the VET system is to prepare skilled workers, who are competitive in the Estonian and European labour market.

Considering the objective, the VET system must be attractive, flexible, accessible, relevant, efficient and of high quality. In order to reach the objective it is necessary to:

• change the mentality and attitudes of the people according to the lifelong learning (LLL) principles;
• direct the society’s, government’s and employers’ attention to the opportunities of the VET;
• support innovation in order to improve the training quality;
• increase the efficiency of VET institutions;
• optimise the use of available resources (teachers, time, money, buildings, equipment).

The results of the VET reform in 1996 – 2001:

In 1996 – 2001, social agreement was reached on the ways to reorganise VET: constructive dialogue between the trainers and the social partners started, the legislation was developed, the conditions were created for directing the development according to the changes in the society and the labour market, for using the available resources more effectively, and for developing study programmes and the VET schools’ personnel.

The main results of VET development in 2001

1. The Institutional Framework

In 2001 changed the structure and location of the Ministry of Education, VET Department was dissolved, School Network Office (Koolivõrgu Büroo) and the Public Assets Administration Office (Riigivara Haldusbüroo) were established. (Look in 3.4.2 Responsible Bodies).

2. Development of national VET priorities (Asjatundjate Komisjon)

In July 2000, the Government of the Republic established an Expert Committee to develop national VET priorities and the reorganisation action plan . The ministers of education, economic and social affairs and the representatives of employers, Chamber of Commerce and Industry, Foundation VET Reform and the VET schools directors were members of the Committee. In 12. June 2001, the “Action Plan for Developing Estonian VET System in 2001 – 2004” was approved by the Government of the Republic.

In the end of 2001, the government adopted the education strategy “Õpi-Eesti”. The purpose of the strategy is to visualise Estonian education system development directions, to provide a foundation for reorganising the education legislation, teachers’ initial and complementary training and the education institutions administration and management. The most important national objective is that Estonian society will become an open learning society, where individuals and organisations are informed learners and the primary learning language is the Estonian language. The Education system must provide people with the learning opportunities throughout their lives, ensure the development of the necessary institutions and support continuous development of the learning organisations and the whole society.

3. Personnel development:

• reorganisation of the teachers’ and directors’ initial and complementary training started;
• organisation of the VET teachers’ in-service training in enterprises is moving on slowly;
• higher qualification requirements for the teachers and directors have forced them to start studies in higher education institutions.

4. Programme development:

• complementary training of the programme developers;
• preparation of the national modular programmes in economy/business, information technology, construction, health care, mechanics and (tele)communication fields. The new programmes are directed towards developing wide-based competencies, so that after graduation the choices for re- or complementary training would be available if necessary;
• basic VET for gümnaasium students started in Võru, Viljandi and Valga county –the conditions were created for the secondary general school (gümnaasium) students to acquire basic VET in the scope of the free/elective subjects in their programme in co- operation with the VET schools. • Preparations for provision of basic VET for the young people who have not acquired basic (compulsory) education.

5. Reorganisation of the VET school network:

• merging two VET schools in Lääne-Viru county;
• three VET schools in Tartu were transferred to the municipal (town government) ownership. Their merger is planned to take place on 1. sept 2002.

Introduction

In spite of frequent government changes, the successive Governments of Estonia have kept the country firmly on the road towards a market-based system. Estonia takes pride in having adopted perhaps the most liberal form of market economy in the Central and Eastern Europe. It has managed to restructure and stabilise the economy in remarkably short time and has achieved substantial progress in the liberalisation of prices, keeping trade free from tariffs and quantitative restrictions, and in attracting foreign investment. The move towards open economic system brings along significant changes also in education, primarily concerning the skills required by industry but also in the construction, service and management sectors.

Since January 1993, the effort has been put on reorganisation of the structures and mechanisms of education, including VET and development of legislation. The centre of the strategy is alignment to the labour market needs and co-operation with the social partners. The Vocational Educational Institutions Act (July 1998, 2001) aims at facilitating the positive attitudes in the society towards VET and its development in the changing environment.

In 2000 – 2001, the key word in Estonia, has been integration with the global economy. The competitiveness of the country depends primarily on prices of the production inputs: raw materials, capital and labour. Compared to the material production inputs, issues related to the labour and capital are becoming more topical. Developments on the labour market are a risk factor for the Estonian macroeconomic development. It has resulted in increasing attention and interest in VET.

An important breakthrough in cooperation with the social partners was reached in December 2000, when an Agreement on common action in speeding up the process of matching the labour force qualifications to the needs of the labour market in 2001 – 2004 was signed by the ministers of education, economy and social affairs, representatives of employers' and employees' central organisations and the Chamber of Commerce and Industry. The agreement is further elaborated in the document “Action Plan For Developing Estonian VET System in 2001 – 2004”, which preparation was started in 2000 under the lead of the Expert Committee.

Chapter 1: Socio-economic background

From 1991 to 1994 Estonia’s gross domestic product dropped dramatically due to the many shocks brought about by the transition to the new economic system. The situation stabilised by the beginning of 1994, with the increase in efficiency. 1997 was the most economically successful year with the GDP growing by 11,4%. Changes in the external environment caused by several subsequent financial crises resulted in slow-down rates in the second half of 1998. The real Gross Domestic Product (GDP) growth for 1998 was around 4,7%. GDP decrease by 1,1% in 1999, characterises the vulnerability of the Estonian economy at the time, as it was orienting on only one (the Russian) market.

Future policy developments are expected to evolve increasingly around the question of adapting the Estonian economy to become competitive in the international market and eventually meet the needs of the European Single Market. Policies include regional development, reflecting a need to avoid the situation where certain regions outside the immediate surroundings of major cities are left behind in terms of economic development. While the general objective of the economic reform is to improve Estonia’s export performance, one specific task is to develop and support small- and medium-sized enterprises, by establishing business advisory centres. Trade unions are emerging in Estonia to represent and protect the economic and social interests of workers and to pursue the development of appropriate legislation. Currently, trade unions represent at maximum 15% of the labour force.

Economic Developments

Estonian current economic situation is well indicated by the following details: Inflation has been fuelled mainly by the internal and external price convergence that came with the prices liberalisation in 1992. Changes in the consumption quality and structure have also had a significant impact on prices. Despite a steady decrease in 1995 – 1998, inflation remained high because of certain domestic factors and a slow convergence with world market prices. In 1999, the 3,3% inflation was significantly smallest than ever, while in 2000, probably due to the negative economic performance in 1999, the index increased to 4%.

The economic developments in 2000 are substantially influenced by favourable external environment and export growth. Strong US dollar and low domestic inflation rate also had a positive impact on the competitiveness of Estonian goods. The economic growth in Estonia was 5.2% in 1st quarter, 7.4% in 2nd quarter and according to preliminary estimates 6.9% in the 3rd quarter. The economic growth in this year is promoted by industry, which is expanding mostly due to the subcontracting works for our northern neighbours and by the fast growth of transport, storage and communications supported by increased transit traffic of oil products and export. In the 2nd quarter domestic demand also started to support economic growth – the wholesale and retail trade and construction had a take-off.

The growth of the GDP in 2000 shows that Estonian industry has managed to survive the recent economic decline and is being positively influenced by the economic success of the European countries. The centre of economic growth is shifting from domestic demand and that of the CIS (the Commonwealth of Independent States) countries towards the import demands of the West European countries. This shift also induces the need for supply structure modification, a long-term process characterised by the convergence of producer prices, real wages, and productivity.

In the 1998 – 1999 period, Estonian industry had to face all-time high levels of free market competition. The ability to cut down expenses was put to the test both because of the high cost of financing and modest commercial opportunities. In 1998, the ability of Estonian industrial enterprises to restructure their activities in order to compete on the West European markets underwent some trials. Because of the decrease in import demand after the devaluation of the Russian rouble, many enterprises that operated only on the CIS markets faced serious economic difficulties. The main source of this year’s economic growth has been the success of enterprises oriented towards European markets. It may be concluded that the sale of Estonian industrial goods is substantially dependent on the situation of export markets, and that the small size of the domestic market is one of the most important factors hindering the development of Estonian industry.

Employment in industry and agriculture is decreasing; while increasing in the services sector. The following sectors have been identified as having good employment perspectives: wood industry, food industry, light industry/textiles, metalworking and mechanical engineering, chemical industry, electronic industry and instrument engineering.

Although year 2000 was successful for industry, it did not have positive effect on employment. The unemployment rate continued to increase (13.7% in 2000) according to the Labour Force Survey data comprising of 96.5 thousand unemployed. The number of registered unemployed increased to 46,318 persons (5.3%).

The structure of employment over the last years has changed, because the new enterprises belong mainly to the secondary and tertiary sectors. In 2000 there was a light increase in employment in secondary sector mainly due to the decrease in primary sector.

Table 1. Most important economic indicators for Estonia¹

¹ Estonian Statistical Office
² 1 Euro = 15,64 EEK
³ Since 1999 the average gross wages per month do not include health insurance benefits

Regional development during the period of transition has been very uneven. The factor that has had the greatest impact on regional development (as well as on overall economic development) is the change from a centrally planned economy to a market-driven one in parallel with the change of the society as a whole. This change has led to the closing and restructuring of a large number of inefficient companies in all sectors of economy. Industries requiring a great deal of energy for production or distribution were particularly affected by the liberalisation of prices for fuel, gas, etc. Due to the concentration of these industries in certain geographical areas, the process influenced regional structures and developments in Estonia.

Major trends in regional development in Estonia include:

• increasing centre-periphery differences in income and employment opportunities;
• a remarkable decrease in employment in regions formerly dominated by agriculture and bigger companies (often monosectoral focus);
• a transfer of economic activities from the East to the West of the country.

Conversion and recovery efforts were hitherto primarily concentrated on urban areas in the western region of the country and Tallinn in particular. This was mainly due to the higher attractiveness of the location for trade, tourism and foreign direct investment. Meanwhile, the eastern part of the country saw its ties with the Russian markets of St. Petersburg and Pskov partially severed. The economic recession in Russia in 1998 has significantly influenced especially this region. The Russian crisis was particularly devastating for remote rural areas that depend primarily on the production in large food-processing plants. Higher transport costs to western markets and the low skill levels of workers who chose to remain in these areas illustrate the difficult situation these regions are facing.

In general, job losses in the rural areas have resulted in a relative decrease of living standards, an increasing population outflow and dependence on public sector employment and state aid. Job losses in industrial regions were somewhat less problematic due to a compensatory increase in tertiary sector employment (except for the Ida-Viru county where industry is still the dominant sector). General economic activity is higher in the capital region and other urban areas, as well as in the western part of the country.

In addition to the relatively high unemployment in the south-eastern parts, longer-term unem- ployment (more than 12 months) is increasing also in other regions of Estonia. Income levels are highest in the capital area and lowest in the southern and eastern parts of Estonia. Since the mid-1990s, Estonia has tried to balance regional development. In the 1996 – 1999 period, eight regional programmes were in operation that channelled financial support to rural areas, to highly sensitive settlements dependent on a single industrial plant and to various peripheral areas (islands, border areas, Ida-Viru county, south-east Estonia). Since 2000 the programmes have been reorganised according to the regional development strategy approved in 1999.

An amount of 227 million EEK (in current prices) has been spent on the regional development programmes to support various projects in 1996 – 1999. Over two thirds of the funds has been allocated to support infrastructure, training and study projects. The share of support to productive investment has been very small. Regional support has been targeted to favour the more problematic counties, but Ida-Viru County has received proportionally little support in comparison with the islands and the south-eastern counties.

Demography

Since the beginning of the 1990s, the birth rates have been significantly decreasing (graph 1). In 2000, the trends characteristic of the previous years continued – the number of abortions and infant mortality fell, and the mean age at contracting a marriage and mother’s age at childbirth grew. In 2000, more children were born than a year earlier, thus the growth in fertility that had started in 1999 continued. The share of women who gave birth to a third or subsequent child grew. The share of boys among newborn children was the highest of the last decades – 1,094 boys per 1,000 girls. Only 46% of children were born to legally married couples. 117 abortions were induced per 100 live births.¹

On 1. September 2000 only 15,200 children were enrolled in grade 1, while in 1997 the enrolment had still been over 21,000.² The fact is not influencing the economic activity in the near future, but it is important to consider in planning the general and vocational education and training. The number of basic school graduates will start quickly decreasing in 2004/05 academic year.

Table 2. Population by sex and age, January 1st 2001

Source: Estonian Statistical Office, “Population age structure, Cities and Rural Municipalities”, 2001.

Table 3. Population at the beginning of the year 1989, 1990, 1994 – 2001

* Census

Table 4. Ethnic composition of the population, 1989, 1990, 1995, 1998-2000 (at the beginning of the year)¹

¹ Belorussians, Finns, Jews, Tatars, Germans, Latvians, Poles, Lithuanians and other.

Source: Estonian Statistical Office, “Yearbook”, 2001.

Table 5. Population between 1991 and 2000 (thousands of people)

Source: Estonian Statistical Office, “Yearbook” 1997, 1998, 1999, 2000, 2001.

Social Protection

Estonia’s safety net incorporates cash benefits and in kind assistance. Current cash benefits include pensions, child benefits (primarily family allowances), sickness, maternity and other leave-related benefits, unemployment compensation, and means tested income support. Housing support for lower income families is an additional cash benefit, although the household itself does not receive cash, payment is made directly to the property owner to cover rent and heating expenses over and above a certain share of household income for a specified maximum floor space. In kind components of Estonia’s safety net include training for the unemployed, other employment services and counselling, institutional care and material assistance administered through the social welfare offices. Majority of the benefits are paid on the basis of eligibility criteria. Only social assistance, which includes both housing support and income support, is explicitly targeted by income.

Eligibility rules: To be registered as an unemployed person, the applicant must be at least 16 years old, seeking for employment and not engaged in any activity approximating employment, must have worked 180 days during the year preceding the registration at the Employment Office. Some groups of applicants are exempt from the work requirement. After being formally employed around 6 months, one can re-register as an unemployed and re- apply for unemployment benefits, income support, and housing allowance.

Duration of Benefits: Initially, the maximum duration of unemployment benefits was six months. According to the Social Protection of the Unemployed Act (1994), all registered unemployed are eligible for a 90-day extension of benefits if they are unable to find work through no fault of their own. Although the benefits are low (400 EEK since 01.01.19999)³, there are other incentives to apply for unemployment compensation and to register at the Employment Offices. Chief among these is the eligibility of social assistance. The unemployed must also be registered in order to receive health insurance and the period of receiving the unemployment benefit counts as an active contribution period for old-age insurance purposes.

Training: Registered unemployed are offered training free of charge for a period of up to six months, as well as a training stipend. (Stipend is 600 EEK per month since 01.01.1999) Training falls under two broad categories: vocational training and “labour market preparation“ (including, among others, job search training).

Employment subsidies. There are two types of subsidies. One is in a form of a lump-sum payment of up to EEK 10,000 (since 01.07.1997) contingent on starting self-employment. To receive this subsidy, the unemployed person must obtain the approval of his or her business plan by a committee of experts. The second is a subsidy provided to employers who employ people from the risk groups. Employment Office committees, deciding on a case-by-case basis, can grant a subsidy of up to EEK 450 for the first six months and half of the original amount for another six months.

Public works: The main areas of activity are maintenance and repair of roads, cleaning of parks, and construction. An agreement must be made between the employer (any business entity) and an Employment Office. Participants continue to receive unemployment compensation in addition to earnings no less than 5 EEK per hour (paid by either the employer or the Employment Office, if the employer is a local government). Table 6 presents the composition of social safety net expenditures in 1996 – 2000 period. The vast majority of social cash benefits are paid on the basis of strict criteria. Only social assistance (including housing assistance and income support) is explicitly targeted by income.

Table 6. Expenditures foreseen in the state budget for benefits in 1996 – 2000 (million EEK)

Source: Ministry of Social Affairs, 2000

Chapter 2: Labour Market background

The Estonian labour market has passed through extensive changes in its transition to the market economy. The changes have been caused by economy restructuring with its attendant unemployment and by a shift in the demographic structure of the population. In 1989 – 1999 the Estonian population decreased by 8%, as a result of natural causes and out-migration of the non-Estonians. Based on the 2000 Population Census, the estimated population at the beginning of 2001 was 1,367,000.⁴

One advantages of the Estonian economy is inexpensive labour force. This advantage is becoming less considerable over the years, since the growth of real wages in the industrial sector exerts a long-term influence on production and export prices and on the overall competitiveness of the Estonian economy. The labour force released from the industrial sector has not been fully employed by the service and commercial sectors, and the result of this has been a high unemployment rate and increased tensions within society.

Economic activity of population

The trend of the declining employment and rising unemployment in 1990s continued also in 2000. The number of employed declined by more than 200,000 and unemployment increased dramatically as more people were excluded from active working life. In 2000, the labour force (sum of the employed and unemployed) slightly increased compared to 1999 level. It is the first time after the decreasing economic activity of the population 1990s. The labour force participation rate of the population aged 15 – 74 increased by 0.4 percentage points in 2000 compared with 1999.

Table 7. Population aged 15 – 74 by economic status, 2000 (annual average, thousands)

¹ Population aged 15 – 69.

Source: Estonian Statistical Office, “Labour Force 2000”, 2001.

According to the place of residence the growth of economic activity was caused by urban population because in countryside the economic activity decreased continuously. Non- Estonians are economically more active compared with Estonians and their participation rate also rose more in 2000.

The biggest problem for the labour market is the gap between demand and supply of labour, characterised by high unemployment rate while suffering from a shortage of qualified labour. Young unemployment and long-term unemployment are high and continue to grow. Also the number of discouraged persons among the inactive has been constantly growing (14% in 2000). The participation of youth in the labour force started to decrease in the middle of 1990s. In connection with the formation of private higher education institutions the number of persons attaining higher education increased and they started to take up the first job later.⁵

Table 8. Population aged 15 – 74 by region* and economic status, 2000** (thousands)

* Northern Estonia — Harju county (incl. Tallinn);
Central Estonia — Järva, Lääne-Viru and Rapla counties;
Northeastern Estonia — Ida-Viru county;
Western Estonia — Hiiu, Lääne, Pärnu and Saare counties;
Southern Estonia — Jõgeva, Põlva, Tartu, Valga, Viljandi and Võru counties.
** Comparison to the previous years is not possible, as groups of counties presented on the 3rd level of the Estonian nomenclature of territorial units for statistics confirmed by the Government of the Republic Regulation No. 126 of 3. April 2001 differ from groups with the same name formerly used by the Estonian Statistical Office.

Source: Estonian Statistical Office, “Estonian Statistics”, Monthly, 2001

Employment

The labour supply rarely meets the demand for it, due to the lack of relevant skills and other factors. There is a mismatch between the skills available and the skills required. This mismatch may also be true for the location of vacancies and the location of the unemployed, given that the majority of the unemployed people are registered in the rural areas.

The employment in 2000 is characterised by the continuation of changes taken place during the 1990s. The employment decreased, the restructuring of employment by economic and occupational sectors continued, the self-employment increased, the share of the private sector rose.⁶

Table 9. Employed by economic sector, 1990, 1995 – 2000*

* 1990 – 1996: population aged 15 – 69; 1997 – 2000: population aged 15 – 74.

Source: Estonian Statistical Office, “Yearbook”, 2000, 2001.

Table 10. Employment by economic sector, 1990, 1995 – 2000*

* 1990 – 1996: population aged 15 – 69; 1997 – 2000: population aged 15 – 74.

Structural changes in employment

The fast restructuring of the economy has caused decreasing number of jobs in the traditional sectors of the economy. Increased efficiency in large enterprises and the accompanying decrease in the number of employees will continue also in the future. On the other hand, there is a lack of qualified labour in several rapidly developing economic sectors, which refers to the fact that a lot of unemployment is structural. Recent developments have shown that the market cannot manage to reduce structural unemployment, which can eventually begin to obstruct the continued development of the economy.

Table 11. Employment by occupation* (annual average, thousands)

- data not available
* 1991 – 1996: persons aged 15 – 69; 1997 – 2000: persons aged 15 – 74, because the ELFS defines working- age population as persons aged 15 – 74. All the data on 1997 and the following years are collected from this age group. The data on 1989-1996, which have been received retrospectively in the ELFS 95 and ELSF 97 are for the persons aged 15-69.

Source: Estonian Statistical Office "Labour Force", 2000.

Unemployment problems are closely related to education and social issues. For efficient reduction of unemployment it is necessary to support new and small businesses, since it is where new jobs are created. SME support policy is focused on the support of starting business activities, in order to support the creation of jobs. In the end of 2001, the Ministry of Economic Affairs was finalising the “Estonian National Policy for SME Development 2002 – 2006” (Ettevõtlik Eesti). The policy will be targeted at small and medium sized enterprises: microenterprises (0 – 9employees), small enterprises (10 – 49 employees) and medium-sized enterprises (50 – 249 employees). The objective of the policy is to enhance entrepreneurship and creation of new jobs and to increase competitiveness of the Estonian enterprises.⁷

Productivity has increased in both the service and manufacturing sectors, but increased demand for services has resulted in the gradual shift of labour force into the service sector. In 2000, the employment decreased most in electricity, gas and water supply, and agriculture, hunting and forestry activities, whereas the employment increased in hotels and restaurants, manufacturing and real estate, renting and business activities. Manufacturing is the economic activity employing the biggest number of workers, 23% in 2000.

Table 12. Employed by economic activity, 1990, 1995, 1997, 1999, 2000*

* 1990 – 1996: population aged 15 – 69; 1997 – 2000: population aged 15 - 74.
** 1990 – 1998 by main economic activity of the enterprise; 1999 – 2000: by economic activity of the local unit (establishment).

Employment in private sector

Great changes in ownership structures took place in Estonia as in most transition countries. Although the forms of privatisation vary, most of the economic institutions in transition countries are privately owned. In Estonia, for instance, 87.8% of the registered enterprises are private, which means that joint stock companies, joint ventures and other forms of businesses (i.e. practically all profit-oriented economic activities) are private. However, the share of the public sector as an employer is relatively large, since the state is the main employer in the fields of electricity, gas and water supply, education, health care, public administration, etc.

Table 13. Employed persons by type of ownership of enterprise and sector of economy 1990, 1995 – 2000* (thousands, %)

*1990 – 1996: population aged 15 – 69; 1997 – 2000: population aged 15 – 74.

Source: Estonian Statistical Office “Labour Force”, 1998, 1999, 2000, 2001.

Employment in the public sector has decreased drastically during the transition. The fastest decreases have come in manufacturing, but also in the service sector. From the point of view of general economic competitiveness, the relatively large share of the private sector in the economy is positive. As a result of quick privatisation, most profit-oriented enterprises are in private ownership. As in the case of general employment, the largest share of persons employed in the private sector are involved in the service sector. The share of the private sector in employment will probably increase in the near future due to the decision to privatise several major infrastructure firms, such as power stations and railway transport.

Table 14. Employed* in the private sector by economic activity, 1997, 2000

* population aged 15 – 74.

Source: Estonian Statistical office, “Labour Force”, 1999, 2001.

Establishment of private firms contributes to increase in jobs, mostly in small enterprises. According to the Estonian Enterprises Register data, employment in small firms (less than 5 people) increased almost 40% during 1994 – 1998. Employment in the private sector increased 1,96 times in 1990 – 2000 .

Unemployment

The labour market went through a rapid process of adaptation in 1999, as the economic recession forced companies to change their labour policy. Employees were dismissed to reduce expenditure and the number of unemployed increased. The unemployment rate, which had started to increase rapidly during the beginning of 1990s rose to 10% in 1995. In 1999 the unemployment rate bagan to grow again, reaching 14,8% in the 1st quarter of 2000, which was the higher rate since Estonia had regained its independence. The unemployment rate by ILO methodology remained at a high level at the beginning of 2001 as well, reaching 14.2% (99,000) in the first quarter. Since then the unemployment rate has fallen.⁸

Table 15. Unemployment rate in 2nd quarter, 1996 – 2001

Source: Estonian Statistical Office, “Estonian Statistics”, Monthly No7 1997, 1998, 1999, 2000, 2001.

The effect of unemployment on different socio-demographic groups has varied. Approximately two thirds of the unemployed are at their most active working age, i.e. 25 – 49 years of age. When comparing unemployment among men and women it can be seen that starting from 1995 the unemployment rate among men has been 1 – 2 percentage points higher than that of women. Comparison with other transition countries shows that the unemployment rate of men is higher there as well, except for the Czech Republic and Poland.

Table 16. Unemployed persons and unemployment rate by sex, place of residence and ethnic nationality, 1999, 2000 (annual average)

Source: Estonian Statistical Office “Labour Force”, 2001.

The difference between urban and rural population decreased also during the previous two years.

Table 17. The unemployment rate (the ratio of the unemployed in the labour force), %

1991 – 1996 15-69 years old
1997 – 2000 15 – 74 years old.

Source: Labour Force Survey.

In 2000, by counties the enemployment rate differed more than two times, from 9,5% in Hiiu county to 21,1% in Ida-Viru and 23% in Põlva counties. Compared to 1999, unemployment decreased only in Hiiu and Saare counties.

Analysis of unemployment in different age groups indicates that in 1998 – 2000 unemployment has been increasing the most among the young people (15 – 24 years old, especially 20 – 24 years old). In 2000, the unemployment of the young aged 15 – 24, increased by 4,300, from 19.8% in 1999 to 23,9%. But in registered unemployment only 10.5%, which shows that young people do not register themselves actively. The survey also shows that the unemployment of young people has particularly increased in rural areas and more among the women. Every fourth unemployed person in rural areas is aged 16 – 24, whereas 30.5% of the young women are unemployed.

Failure to find a job can be caused by an inadequate command of the Estonian language. In 2000, the unemployment rate of the Estonians aged 15 – 24 was 19.7%, but 30,7% among the non-Estonians. Especially the young people in Ida-Viru county have great difficulties in finding a job even after graduation from the local VET school. Compared to the other age groups, the unemployment rate of young people is high also because most young people are at the age where they are still studying (and thus belong among inactive people). The absolute figure of the labour force is therefore relatively low.

Table 18. Registered unemployment (NLMB) and unemployment by ILO method (ELFS)*

* 1997 – 2001 persons aged 15 – 74.

Source: NLMB for register data and LFS.

The number of registered unemployed will probably increase in 2001 and onwards, as the implementation of the new Employment Services Act (Tööturuteenuse seadus), 2000, provides motives for registration for more unemployed people.

Labour market policies

The governing labour market institution in Estonia is the Ministry of Social Affairs. On February 1, 1993, the Ministries of Health, Social Security and Labour were reorganised into the Ministry of Social Affairs. The main functions of the Ministry include drafting and implementing the social policy and solving social problems.

In recent years the legal status of the national labour market institutions has been somewhat equivocal. The Government in principle liquidated the Labour Market Board in 1996 through 32 an amendment in legislation. As a result, funds were allocated from the budget to the Labour Market Board in the 1997 – 1998 period only for covering maintenance costs in state Employment Offices and for the provision of employment services to the unemployed. In 1999, the Labour Market Board was restored as an institution, and the statutes of the Labour Market Board and state Employment Offices, together with the new structure and composition of the Labour Market Board, were approved on May 28, 1999, by Regulation No 42 of the Ministry of Social Affairs.

To increase the administrative capacity of the Ministry of Social Affairs in solving the employment problems, the position of Deputy Secretary-General of Labour Policy was created in 1999, and the new Labour Market Department was set up in January 2000. The Deputy Secretary-General of Labour Policy is in charge of issues governing labour relations, work environment and the labour market, including the drafting of the employment policy. The objective of the employment policy is to increase the quality of the labour force and create new jobs, thus attaining the highest possible employment rate and reducing unemployment by one fifth. The following table shows objectives up to 2004.⁹

The strategy will be implemented up to 2004 through the following priority action lines:

• improvement of active labour market policies in order to create jobs;
• promotion of opportunities for the continuing training and retraining of adults;
• integration of disadvantaged groups into the labour market;
• raising the administrative capacity of the Labour Market Board and Employment Offices.

In March 19, 2001, Joint Assessment of Employment Priorities in Estonia (JAP) (Tööhõive Ühishinnang) was signed. JAP is a strategic document, which describes Estonian labour market situation, identifies the main development fields and methods for improving the labour market situation. The objective of JAP is to provide an overview of how a candidate country labour market system is able to implement European Union employment strategy.

JAP was prepared by the European Commission and the Estonian Ministry of Social Affairs in cooperation with other ministries.

Future skill needs of the economy

The representatives of industry and the entrepreneurs cannot yet clearly articulate their skill requirements in a way that the education sectors could respond (this is the conclusion on the basis of different surveys, conducted in 1998 – 2000). Furthermore, industry lacks the essential methodology to identify their training needs based on their business plans. Before this change they could deliver to defined specifications – now the schools have to predict which qualification profiles the companies will require in the future.

Professions Act (passed 19 December 2000) provides the bases for the development of the requirements for professional qualifications and for the attestation and award of professional qualifications. This Act does not apply to professions in the case of which the development of requirements for professional qualifications and the attestation and award of professional qualifications is regulated by other Acts. In 2001, several regulations of the Government of the Republic on Professions Act were passed: Establishment of the Estonian Qualification Authority (26. June 2001); Establishment and Statue of the national professions register (17. July 2001); Statute of the Vocational Council (16. Oct. 2001); Statute, format and issuing order of a vocational qualification certificate, and order for covering the costs (23. Oct. 2001); The main conditions for attestation and award of vocational qualifications (8.Nov 2001).

In the survey “Skill Needs Of Companies In South-Estonia” the following recommendations for upgrading the skills were presented, which well describe the situation in whole Estonia.¹⁰

1. As the companies mainly identify the skilled and craft workers and service and sales personnel among the problematic occupational groups therefore it is necessary to pay priority attention to vocational training;
2. the share of teaching foreign languages and training personality related skills should be raised in training and school study programs;
3. in the future the companies anticipate problems in recruiting senior and mid-level professionals as there is too little supply of the professionals and the region’s attractiveness is relatively low to 34 recruit those professionals from outside the region. As big share of the companies prefer to recruit inside the company, there is market for trainers to provide qualification-raising courses;
4. it is important that the companies consider workforce issues as important as the other (financial, technical etc.);
5. the companies should be trained to prepare systematic training plans and to include these into business plans. There is lack of competence in this area. It is necessary to specialise some managers on human resources development;
6. there should be more co-operation between enterprises, regional stakeholders, training providers and vocational schools in workforce development issues to highlight education and qualification upgrading needs and use the information by planners/developers and trainers. Closer contacts between enterprises should be established both in forms of informal networks and through associations;
7. there should be more analysis concerning the workforce issues of micro-enterprises that is the fastest growing group of employers. Their needs are different from that of larger enterprises. The information could be used in developing new business start-up activities;
8. the development priorities in the regional plans address the need to develop high-tech and knowledge-intensive industries. While there is a large number of low-skilled workers (and unemployed) consideration should also be given to labour-intensive industries and services. The region should have activities for all groups.

Conclusions as regards the key labour market issues and their influence on the aspects of human resources development

The lack of qualified labour force hinders the establishment of new competitive enterprises and the expansion of existing ones. The main cause of the increasing structural unemployment is the current non-flexible re-training system, which fails to train sufficient numbers of qualified workers able to orient themselves in a modern industrial environment. The fact that the division of the labour force within society is not balanced exerts a negative influence on overall productivity. However, thanks to a reduction in the number of employees and an increased net turnover of realization, working efficiency in the manufacturing industry has risen since the second quarter of 1999. This development was achieved mainly through reductions in labour costs, the percentage of these costs being lowered to 20% in 1999.

Chapter 3: Modernisation of Vocational Education and Training (VET) in the perspective of life long learning

Introduction

The development of the VET system during the period of re-establishing independence in the beginning of the 1990s did not cope with the rapid changes in the society. In spite of the quick changes towards democracy and a free market economy, reorganisation of the VET system since 1996, still adapted to the requirements of the old command economy from the Soviet period, appeared to be a difficult task.

Human resource strategy and priorities included in the National Development Plan

The Estonian Government and the Bank of Estonia continue to pursue liberal and open economic policies aimed at ensuring a stable economic environment and sustainable economic growth, based on the following economic policy principles:

• economic growth will result primarily from the growth of exports;
• investment demand will continue to be high;
• stable economic environment will continue to attract foreign capital inflows;
• the price level and structure convergence is not over and therefore inflation will be slightly higher;
• the situation on the labour market will influence the competitiveness the most;
• growth of the economic activity and decrease of the tax burden will decrease the unemployment rate. Diminishing of the low-salaried labour force’s tax burden is expected to decrease the share of the shadow economy, and support economic growth;
• preparation of qualified labour force is supported as the lack of it may become a limitation to economic growth;
• active labour market policies will decreasing the number of inactive population, integrating risk groups into the labour market and promoting flexible employment relations necessitated by the changes in overall economic environment;
• the level of general educational background improved and increasing number of 37 specialists with higher degrees decrease the number of the potential unemployed;
• developing vocational training and introducing and implementing the principle of lifelong learning will improve the quality of labour force.

Preparation for ESF implementation

Preparing the implementation of ESF in Estonia, the Foundation VET Reform in cooperation with the European Training Foundation and other parties has organised different events during 1999/2000:

• conferences and seminars introducing the preparation for joining the European Union from the perspective of human resource development;
• preparation of different target groups for participation in ESF;
• translation, publication, updating and dissemination (e.g. via Internet) of information related to ESF;

The target groups have been the ministries, local and county governments, Employment Offices, employers and entrepreneurs, trade unions and education and training institutions (incl. VET schools, universities). Currently Estonia is implementing SPP (Special Preparatory Program), which is a European Union measure for preparing the accession countries for structural funds. The aim of the SPP is to prepare the candidate countries and provide a functioning mechanism for accessing and using the EU structural funds at the time of joining the EU. Currently there are two pre-structural funds: SAPARD (Special Assistance Programme for Agriculture and Rural Development) –country life and agriculture; and ISPA (Instrument for Structural Policies for Pre-accession) – environment and transport.

Modernisation of Initial Vocational Education and Training (IVET)

Modernisation of IVET has been led by the Ministry of Education, mainly through Phare and bilateral programmes. One of the main directions in modernisation of VET is setting up multi-functional vocational training centres. This process is started and will be carried further first of all in the target regions of the national regional policy – Ida-Viru county, South Estonia and the islands. The new co-operation mechanisms between VET system and business community, arranging of qualification certificate examinations and adult vocational training will be piloted first in the same regions.

Modernisation of VET and vocational higher education programmes will be based on the needs assessed on the basis of the county labour market studies. The regional labour market studies serve also as the basis for strengthening active labour market policies. Special programmes to fight unemployment targeted to regionally specified risk groups will be elaborated. Implementation of these programmes will be piloted first in the regional policy target areas where one can observe the highest rates of unemployment.

Current principles of a centralised management of VET institutions (the majority of VET institutions belong to the state) does not allow for the quick adaptation to local needs on one hand and does not account for the increasing interest towards VET from the part of local authorities on the other. VET reforms will have to increasingly pay attention to the sharing of interests and responsibilities among the national and local authorities. Some municipalities in Estonia have already demonstrated their interest in the management of VET. According to current procedures local municipalities are obliged to co-ordinate school admission plans and programmes. However, their active participation in the development of VET is only emerging.

The principles for VET reorganisation and development are described in the VET concept (1998), with the following key words: functionality, flexibility, co-operation, integration, quality, availability, consistency, relevance and efficiency.

Functionality – the VET system fills its function in the society. It is reorganised and developed according to the social and economic development of the society, i.e. adjusting to the needs and to the changes of the labour market.

Flexibility – the VET content and provision is easily adjustable to the different needs of different target groups.

Co-operation – between the public and social partners (employers, employees, local governments, VET experts (scientists, specialists, etc.)); and teachers and trainers in developing the VET system and improving the provision.

Integration – removing strict borders between different types (general and vocational) and levels (basic, secondary, higher) of education.

Quality – VET is an asset ensuring competitiveness and ability to cope with changes on