Estonia

Estonia, a small country of 1.3 million in the Baltic region of Eastern Europe, is caught in the middle of the global demographic divide. Estonia is an economically stable nation that is facing depopulation. Located between Latvia and Russia, its economy is currently on par with rest of the EU, but economic restructuring, high mortality, and extending social problems in education and health are resulting in an aging population with low fertility (“Demographic Situation” 2010). Until the 1990’s when they gained independence, Estonia was controlled by the Soviet Union through a communist economic structure. After WWII, Estonia lost 200,000 of its people due to political restructuring and immigration back to Russia. About 17.5% of the Estonia’s population was lost, which did not allow for a post-war Baby Boom (“Demographic Situation” 2010). After gaining independence in 1991, the country shifted from a communistic economic approach to a more individualistic society, based on a market economy and private enterprise. While the country as a whole benefited from this form of society, individual citizens faced a large increase in unemployment do to the economic transition.  Not only has this led to an increase in mortality from suicide (Estonia has one of the highest suicide rates in the European Union), but mortality in Estonia has been stated as their most critical demographic issues (“Demographic Situation” 2010).                                              

Estonia has not been as progressive in lowering mortality rates as their European counter-parts. Due to such a lack in mortality development; life expectancy in Estonia is at a fixed relatively low level of 69 years for males (“World Population Data Sheet” 2010). Suicide, heart disease, and cardiovascular diseases account for most of the mortality in the country. While Estonia is making gains in their education and health services, population decline for the country is inevitable.  While the economy is producing a promising GDP and has been welcomed with open arms by the EU, Estonia’s mortality and unemployment rates prevent it from being considered on the upper side of the demographic divide.

Demographic Analysis

Estonia is a relatively small country, even by European standards. Their population of 1.3 million resides in a state about the size of Vermont and New Hampshire combined (World Population Data Sheet). While the country has “one of the highest per capita income levels in Eastern Europe,” demographic problems are projected to adversely affect the economy and the population (“Estonia” 2010). The country is economically successful as a whole, but Estonia’s low fertility rates, high mortality, and increasing social stratification are becoming largely pressing issues for the nation (“Demographic Problems” 2010).

Of the 1.3 million citizens, about 18% of the population comes from those aged 65 and older. Those under 15 only account for about 15% of the nation and are expected to decrease more over the next thirty to fifty years (World Population Data Sheet 2010). Currently the birth rate and death rate are equal at 12 births and deaths per 1,000, but the fertility and mortality rates are more indicative of Estonia’s current demographic trends.  The mortality rate is relatively high for Europe at 3.6 percent, with the fertility rate well below replacement level at 1.6, implying a percentage increase in total population of only .9. Ultimately, this trend will lead to an aging and decreasing population in years to come. The country is expecting a 1.2 million total population by 2050 (World Population Data Sheet). 

Life expectancy in Estonia is lower than its Western European counterparts, especially for men. While women are living to a health 79 years, the gender gap is about ten years, with male life expectancy at 69 years—five years less than the average for other economically developed nations (Demographic Situation). The large discrepancy between gendered life expectancy and the large percentages of early male death are current issues facing Estonia. The country is relatively urban, with 69% of people living in urban towns or cities (Demographic Situation). This gives the majority of the population access to skilled doctors and modern health technologies, allowing for above average health and nutrition. Over 90% of the population had vaccinations against measles, clean drinking water sources, and improved sanitary facilities as of 2007. As a result, the percentage of low birth weight babies in Estonia is among the lowest in the EU. AS of 2006, 5% of the total GDP was expended toward health services (WHO). Only 2.6% of the population lives with AIDS/HIV, but with such a small population size, these numbers are still an indicator of concern.

Estonia’s political and economic shifts from publicly run to privatization and urbanization have caused the economy to flourish. Their large shares of oil have allowed them to be 90% independent with their energy resources (“Estonia”). Their main trading partners include Germany, Finland, and Sweden, and much of their economic output depends on these countries. The shift to privatization, however, has left many citizens unemployed. The ramifications of this will become evident in our sections on unemployment.

Demographic Comparison

Estonia, compared to the European Union and its region, is lacking economically in regards to: minimum wage, general government dept, gender gap, unemployment rate, and population density.  Minimum wage applies to minimum amount of money a person can earn working full time. Minimum wage is shown by Euro/month because most countries decide the minimum wage through a monthly rate.  Data from the Eurostate web site shows that Estonia has been relatively low in regards to minimum wage against the region.  Estonia’s minimum wage in 1999 was only 80.32 Euros per month; the minimum wage in 2010 is set at 278.02 Euros a month.   The lowest in the region for 2010 is Bulgaria where the full time works make at least 122.71 Euros a month.  Estonia is the 6th lowest country in regards to minimum wage.  The highest minimum wage in the region is Luxemburg whose citizens with minimum wage jobs receive 1,682.76. The United States is in between Estonia and Luxemburg with 872.32 Euros a month.  This means that people working minimum wages in Estonia makes 1.74 Euros or roughly $2.43 an hour (Eurostat).

The European Union finds the general government debt as a percentage of gross domestic product (GDP.)  The general government debt is defined as “the general government sector comprises the subsectors of central government, state government, local government and social security funds . . . . Debt is valued at nominal value” (Eurostat).  The Eurostat sight shows the he general government debt average across 27 european countries was 62.8 percent of the GDP in 2005 and no average statistics have been reported since then.  Estonia is on the low end of general government debt which is a good thing—in 2005 Estonia was at 4.6 percent and in 2009 a slight increase to 7.2 percent.  Estonia has the lowest general government debt.  The highest in the European Union is Italy with more debt than GDP with 116.0%.  Eurostat’s table showed the highest general government debt worldwide was Japan in 2004 with 164.0%. 

One concern the EU finds is the gender gap in wages for Estonians in the workforce. “Women in Estonia suffer from EU’s worst gender pay gap” explains that in Estonia women get paid 30 percent less than males.  The is also a totem pole of discrimination against women in wages and the person at the lowest section of the totem pole are Russian women.  On average in the EU women get paid 17 percent less than man.  The article explains that Estonia gender pay gap is the worst in all of Europe.    Women also are pushed into lower wage jobs “like healthcare and education while men dominate the more lucrative private sector” (Women).  One person termed it as a simple “case of double standards” (Women).

One thing that Estonia is ranking in at a high level is unemployment. Estonians population is currently 1.3 million people and a staggering 75,700 of them are without a job. “At the end of July there were 75 780 registered unemployed persons in Estonia and the registered unemployment rate was 11.7%” (Castro). With comparison to Estonians region the unemployment rate is very high.  The article “Estiona: ‘Unemployment rate is high compared to other EU countries’” shared that in March 2010 Estonia’s harmonized unemployment rate  was 19,0% compared to the average EU country harmonized unemployment was 9.6%.  The government has projected that the unemployment rate will decrease by the end of the year by 4-5 percentage points (Hõbemägi).

Independence From Soviet Union

Estonia is currently a parliamentary republic, with a president, prime minister, and a cabinet. However, this wasn’t always the case. Until 1991, Estonia was controlled by the Soviet Union. Russian citizens at the time of Soviet occupation were the country’s largest minority at 8.2% (Demographic Problems -Estonica 2010). World War II left Estonia’s population in ruins. 25% of the population was lost as war casualties. Over 90,000 deaths were estimated. This large decrease in population made repair and growth extremely difficult. WWII had caused Estonia to become a state "characterized by slow generation replacement where it took considerably longer for the wounds to heal; Estonian population may never recover these losses” (Estonica). 

In addition to the loss of sheer numbers causing demographic issues, the political structure and influence of the Soviet Union was causing problems in Estonia as well. The Soviet economy, publically run, was much less advanced than those in Europe. After gaining independence, the country struggled with shifting to a privatized and urban economy (Estonica). Estonia has made strides in becoming a powerful privatized state.

Gender Inequality Throughout Estonia

Estonia is a country with high gender gap. Many authors and citizens have said that females are not equally valuable to men in the work force. In “Gender Equality in Estonia” Commissioner Mari-Liis Sepper acknowledges that the 2008 Eurostat data shows “Estonia ranks among countries where the negative impact of parenthood on female employment is higher by 15 percent” (Diel). The work force is highly segregated; compared to its region Estonian women only hold 6 percent of seats on boards of directors compared to the average in Europe which is 11 percent. This shows that gender is a huge issue when a female wants to reach a higher level in her field.

The government has taken initiative in achieving the decline in gender gap equality in the institutions. The government passed the Gender Equality Act in 2004; the act during the legislation process was resisted by many but ultimately passed. The hope is that this act will provide awareness to citizens “rights, their legal remedies, and the first cases to reach courts in upcoming years” (Diel).

Currently Estonia is 47th out of 134 in the Global Gender Gap Report created by the World Economic Forum; sadly Estonia ranked lower than Russia who was ranked number 45th. Estonia has been dropping their position in the Global Gender Gap Report for 4 years; in 2006 Estonia was ranked number 26th and in 2009 the country rested at 37th out of 134 countries. The biggest gap in gender inequality is in salaries which the country ranked sadly 87th. “Quite negative also the results Estonia got on political participation (74th) and health (50th), both areas that suggest a strong intervention from Estonian policy makes in order to bring an effective change in the way women and men are treated” (De Castro).

Gender Equality Act and the Equal Treatment Act. The opinion under the commissioner though is non-binding, they “contact the alleged discriminator and demand an explanation, as well as all the necessary data and documents... [they] may disclose the subject matter of the dispute . . . and exercise certain pressure through the media” (Diel).The commissioner is hoping in the next couple years to educate legal professionals on the issues concerning equal treatment among gender (Diel).

Since 2009, the commissioner created an institution called the Gender Equality and Equal Treatment Commissioner. The institution views companies and different field and looks if discrimination has occurred through the Gender Equality Act and the Equal Treatment Act. The opinion under the commissioner though is non-binding; they “contact the alleged discriminator and demand an explanation, as well as all the necessary data and documents... [they] may disclose the subject matter of the dispute . . . and exercise certain pressure through the media” (Diel). The commissioner is hoping in the next couple years to educate legal professionals on the issues concerning equal treatment among gender (Diel).

Estonia Changing to the Euro

Six years after joining the European Union, Estonia will start using the Euro as their currency starting January 1st, 2010. “The EU finance ministers have given the final approval . . . [and] decided to use the existing exchange rate of 15.6466 kroon to one euro as the final conversion rate” (BBC). Estonia will be the 17th member of the 27 state European Union; Estonia will join Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Austria, Finland Slovenia, Cyprus, Malta, and Slovakia by using the same currency (BBC)


In order to enter the currency the other sixteen government members, the European Commission, the Euro Parliament, the Assembly’s’ economic and monetary affairs committee and the finance ministers all have to approve the country (Becerra). Eight other countries requested to join the currency were denied because they did not meet the requirements. “To join the Euro zone, candidates must show that their public finances are in good shape and the exchange rate and prices are stable. Their interest rates must also be low and national legislation on monetary matters must be in line with EU law” (Becerra). Estonia was able to meet all of the requirements, but will become the second smallest economy that holds the euro as its currency.


The New York Times acknowledges the debt crisis that has been spreading across the European Union to countries such as Greece, Spain, and Ireland. Even with the euro being the strongest currency in the world many people and governments are wondering if the countries will desert the euro. “Joining the euro is a status issue for countries seeking to cement their positions at Europe’s top table . . . But you also could call it sheer bloody-mindedness of Estonia to join now with the outlook for the currency so uncertain” (Kanter). Amadeu Altafaj, who is involved in EU’s commissioner for economic and monetary affairs believes adding Estonia to the currency shows other countries that the EU is going to bounce back its economy by the euro.


Joining the currency is a sign that the country is achieving Western Europe’s standards of living; Estonia, being the first former satellite of the USSR acquiring the euro, and being the third post communist state to obtain the euro, has proved they have met that goal. Estonia’s small public debt of 7.2 percent of GDP, and small gap between revenue and spending shows the country is capable of being one of the 17 members using the currency (Kanter). Andrus Ansip, the prime minister of Estonia explained that the country “prefer[s] to be inside, to join the club, to be among the decision makers” (Kanter).


Joining the currency has some advantages and disadvantages. “[T]he most immediate advantages are likely to include greater interest from foreign investors and lower borrowing costs for both the public and private sector” (kanter). But the measures to joining the euro has proven to create disadvantages; there may in time be financial problems associated with Estonia’s export-driven economy—especially if the EU currency remains unsound. “Investors will only be willing to lend to Estonia on favorable terms if Estonia can continue to compete. . . . That is where the biggest risks for Estonia now lie” (Kanter).

Estonia: Euro News (Euro & Skype)

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Skype

Estonia entered the EU in 2004 and currently obtains a modern market-based economy. The government has pursued a “free market, pro-business economic agenda and [has] wavered little in their commitment to pro-market reforms” (Estonia’s Economy). Prior to 2009, the government maintained a balanced budget and sound fiscal policies. Estonia’s goal is “to sustain high growth rates - on average 8% per year from 2003 to 2007” (Estonia’s Economy). The economy benefits from strong electronics and telecommunications sectors. The two important technological advances that were made in Estonia are, Skype and Hotmail.  These two online services have helped boost Estonians economy the last decade.  Hotmail was created by Steve Jürvetson. Hotmail is mailing site Steve bought “from a young Hindu for 300 thousand dollars and began developing it. After two years, Jürvetson sold the product for 400 million dollars to Microsoft” (Kivi).“[M]ore than half of Skype’s global workforce is in the Estonian capital,” the company is also responsible for half of the money spent in Estonia’s private sector research and development money (Estonia’s e-President). NATO established the cyber-defense centre in Estonia’s capitol Tallin because of the wide success of Skype and Estonia’s technology communications.

Skype is an internet telephone service created by Niklas Zennstrom and Dane Janus Friis in 2003.  The software allows a person to “make telephone calls all over the world” (Kivi, Priit). The company is based out of Tallinn and currently there are over 42 million members on Skype. The software became popular because of the purity of the sound quality.  “Skype represents an ideal of what . . . Estonia should be - a small group of people come together and come up with a really brilliant idea that becomes known all over,” the president of Estonia, Toomas Hendrik Ilves has said (Estonia’s e-President).    "Our entire national mythology is based on the fact that while we are not large in number we have to be large with our ideas and Skype is a realization of that in the 21st century world," Ilves said (Estonia’s e-President).  The founders of the company acknowledged that the “key was to create an open and friendly environment for innovation and new talent” (Estonia’s e-President).