At its sitting today, the Riigikogu discussed the effect of inequality on Estonia’s development and the well-being of its residents, as well as ways for levelling the field. This was discussed as a matter of significant national importance at the initiative of the Social Democratic Party.
Economic analyst Madis Aben focused his speech on the economic impact of inequality. He pointed out that inequality has recently increased and is being discussed more in the society.
Aben also referred to reasons why inequality might be beneficial for economic growth – it creates incentives, rewards risk taking, rewards hard work. Modern developed economies grow mostly through innovation efforts. This makes a certain degree of inequality and economic incentives important for economic development.
He sees a clear link between the growth of prosperity and the increase in life expectancy; however, once a country reaches a certain prosperity level, this link vanishes. Estonia is soon joining the so-called rich countries’ club, where additional increase in wealth no longer leads to a noticeable increase in life expectancy.
Aben also touched on social status. He referred to a book by Wilkinson and Pickett, which claims that large discrepancies in the social status cause sense of superiority and inferiority, and make people conscious of their social status.
He also highlighted how the marginalisation of certain communities as a result of inequality constitutes an increasing threat to Estonia’s security because the people who feel left out of the growing well-being around us are easy prey to the propaganda of hostile forces.
The economic analyst admitted that he had no ready solutions to offer, but stressed the equality of opportunities in quality education. He believes that the foundation for school and university studies and academic degrees is laid in early childhood, long before starting school.
Aben pointed out the US financial crisis which was caused by growing inequality. “Inequality grew because the US school system, education system, but maybe also social system more broadly, was not capable of producing enough sufficiently high quality high school graduates who could have enrolled in a university, receive an education, and meet the growing need for top specialists,” Aben explained. “Since the demand for such specialists was huge, the salaries of those who had the education kept increasing rapidly, while others were left behind.”
In answer to the questions of the MPs, Aben said that the expected positive impacts of the reform in higher education have not materialised. He observed that a child from a poor family may be admitted to Hugo Treffner Gymnasium, but the elite schools system in Tallinn and Tartu selects students according to their family background and fails to ensure a more equal access to the so-called good specialities in universities which promise a better future and a higher pay.
Professor of Urban and Population Geography Tiit Tammaru focused on internal migration and regional policy, and introduced the concept of spatial inequality.
He confirmed the common perception that people tend to gravitate towards Tallinn; however, next to permanent changes in residence we also have a great number of other movements that are more temporary in nature. His graphs showed how North and West Estonia either have a positive net migration or a lower negative net migration, while South Estonia is experiencing larger emigration, as does East Estonia.
Within a ten year period, there has been a turnaround in migration and the net international migration has turned positive, which is largely caused by Estonians returning home, also from Finland. “Many people who have moved to Finland have seen it as a temporary solution,” Tammaru said. “The money they are making in Finland is actually used to improve their conditions of life in Estonia.” The money from the migration to Finland has reached all the Estonian counties.
Concerning the changes over the last 30 years, Tammaru highlighted the population concentration into Tallinn metropolitan area – mostly into Tallinn but also its environs. The migration has had the most systematic impact on small towns outside metropolitan areas and county centres. Internal migration has started to polarise settlement hierarchy. Small towns in particular have lost their population, while Tallinn and actually also rural areas have grown somewhat.
Tammaru also outlined clear patterns in the lifespan of people: the increased migration into Tallinn, and particularly to its environs, is fed by new residents who are up to 30 years old. In later stages of the lifespan, as people age, they start to reverse the migration process. Older people with families or those who have lost their jobs move to rural areas. The Professor explains it partly with universities being in cities, and everyone being able to enrol there. “But after all we select our students based on their knowledge and not their talent and potential. In other words we do select the more ambitious, talented, and smarter young people. On the other hand, cities also promote such youth by giving them a good education, and so forth. This is actually the basic mechanism that creates the difference in the regional development,” Tammaru explained.
Tammaru continued by elaborating how, as the lifespan progresses, people start to gradually move out of the city, which shows that the job is no longer the consideration No. 1 in choosing the place of residence. They start to think more broadly about their living environment, home, children, schools, and how all these different factors can best be combined. Professor Tammaru defines this as the moment of suburbanisation. He also explained that middle aged people who change jobs do not change their residence as a consequence. They are willing to start commuting between work and home. This unlinking of work and home has been boosted by the modern telework options.
Tammaru also talked about people having several homes, with many city dwellers also having a country home where they live for a large part of the year.
He sees a need to better define how the activity space of people has shaped in Estonia, and how this can be used as a guide to direct regional development more fairly.
Professor Tammaru highlighted the correlation between the increased inequality of incomes and an increased spatial inequality that follows after a certain period; and vice versa, when incomes become more even, we should also see a drop in spatial inequality after a while. In Estonia, we saw the differences between incomes widen in the 1990s, and a decade later spatial inequality opened up between counties.
In Estonia, spatial inequality has stubbornly remained at a higher level compared to the inequality of incomes. “I’m sure that the decrease in general inequality has had a certain positive impact but not enough to reduce regional inequality,” Professor said. Going forward, we need to implement regional policy measures.
Regional policy has a conventional way of concentrating on the jobs. “If we stimulate the creation of jobs with a number of measures, it also attracts people to where the jobs are,” he said. This is followed by the infrastructure and accessibility, starting with different elements of infrastructure, such as roads, internet, energy, etc. The relocation of opportunities, public sector jobs, regional universities, and finally salaries and taxes.
But he also encouraged us to use a different angle – jobs are where people are, and if there are no people there are also no jobs. He pointed out that schools are closed where no children and families reside. This means that the spatial approach should shift the focus on what people are doing in the space in the first place, and maybe we would see jobs following people.
Professor emerita Marju Lauristin’s report was about the two corona waves putting the education system to the test and shining a light on the inequalities.
Lauristin admitted that education is an extremely sensitive system that was right at the centre of the crisis. “The crisis was a test of education as a whole,” Lauristin said. “While we were planning a reform in education to take place over 15 years, the corona crisis forced us to accomplish a lot overnight that might have developed up to the same point gradually over 15 years.”
Individual paths to learning developed overnight. The crucial point was how a child was able to plan their own time a take control of themselves as a student. The central question of the whole education strategy is how could we arrive where the prevailing student type is one that is able to develop and walk their individual path to learning. This was a challenging time for the teachers, parents and our e-governance alike.
The students who had supportive families coped the best. This was also evident in distance learning. Lauristin was presenting the Education Forum study, which clearly delineated a general fatigue and a drop in motivation. She drew particular attention to the problem of teachers’ health. Teachers complained about stress and not getting enough exercise. Young teachers experienced more stress.
To summarise the presentation of the study, Lauristin highlighted the expectations of the teachers. “They wish that the national education policy was clear, democratic, and long-term,” said Lauristin. The fair remuneration of teachers does not mean only a raise, but compensation for tutoring, preparing video lessons, and other activities that are not defined as contact lessons in classroom. Teachers would also like to see investments into the development and infrastructure of study centred education.
Member of the Riigikogu Riina Sikkut’s presentation showed that inequality is not an unavoidable spiral that cannot be stopped, but that the state can close up the gaps and even change the direction. For this purpose, she sees a need for decisions, and allocations from the state budget.
Sikkut spoke about three misconceptions that stand in the way of making the decisions necessary for reducing inequality. First was the belief that anyone is able to come up with a solution, they just need to work harder. She believes that a solution can only be found with the help of someone on a stronger or better position who has more money and a stronger will.
Second misconception is the hope that it will pass. She spoke about how inequality does not disappear by itself but can instead be amplified. For example, income above certain level transforms into savings and assets that start to affect the incomes in turn. “An invisible hand is operating the market, giving more to those who already have,” Sikkut said.
Referring to a Praxis study, Sikkut said that the approximate median level of net assets in Estonia is the lowest in the euro zone, however we do have one of the most unequal societies. She also referred to the analysis the Eesti Pank (Bank of Estonia) conducted a couple of years ago on the financial behaviour and consumption habits of Estonian households, which showed the fastest growth in the one-fifth segment that owns the most net assets.
“The crisis shines a light on inequalities and amplifies these. The crisis is a change and changes need us to adapt, but to adapt we need resources – money, time, contacts, internet connection, the option to work from home – depending on the crisis that hits us. These are resources that some are lacking.”
The third misconception is that the inequality is here to stay. She is very much against resigning to the thought that nothing can be done. “Social inequality itself exists in the free society, people do have different preferences and choices, which is only positive. But the nature and extent of inequality, the limits to our tolerance, is a question of political choices and values,” Sikkut said. She said that the state could create the equality of opportunities. This includes the opportunity to receive medical care, take an exercise class, or own your home. One of the key political instruments to reduce inequality and promote equal opportunities is investing into education and skills, and the key way to reduce inequalities in income is through taxation and the social insurance system.
In conclusion, Sikkut declared that inequality was not something to be ashamed of and keep quiet about. “Only once we have a grasp of the situation can we consciously set objectives and make decisions to shape the future of ourselves and our children instead of waiting how it would turn out if the inequality amplifies,” she said.
During the debate, Jürgen Ligi (Reform Party), Maria Jufereva-Skuratovski (Centre Party), Heiki Hepner (Isamaa), Indrek Saar (Social Democratic Party), and Peeter Ernits (Estonian Conservative People’s Party) took the floor on behalf of their factions. Mihhail Lotman (Isamaa) also spoke during the debate.
Verbatim record of the sitting (in Estonian)
The video recording of the sitting will be available on the Riigikogu YouTube channel.
(Please note that the recording will be uploaded with a delay.)
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