Retraining, adult education and enterprise policy must be synchronised to increase employment

Toomas Mattson | 6/1/2016 | 12:00 AM

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  • Providing labour market services alone is not enough in regions of high unemployment; it is also necessary to create jobs.
  • Instead of short-term general training, unemployed persons should be offered long-term training that allows them to learn a profession and take an exam that proves their qualifications. Only 6.5% of the registered unemployed currently take the exam. Ca 43% of unemployed persons have no professional qualifications.
  • The act that prohibits the registration of persons who are studying full-time (e.g. in a vocational school) with the Unemployment Insurance Fund needs amendment. Also, the law has established a restriction on the Unemployment Insurance Fund, which states that labour market training may not last longer than one year, which is an obstacle to the acquisition of qualifications.

TALLINN, 1 June 2016 – The National Audit Office is of the opinion that employment can be improved if the creation of jobs in regions of higher unemployment was promoted alongside the provision of labour market services. The skills and knowledge of the unemployed can be made to correspond to the needs of the labour market by offering the kind of professional skills training after which the unemployed will take a professional examination.

The results of the audit indicated that although the principles of providing labour market services are the same nationwide, the chances of unemployed persons of finding a job depended on the region where they lived. For example, labour market services were provided to 88.5% of registered unemployed persons in Valga County and 35.9% of them found jobs. At the same time, the share of labour market service recipients in Harju County was 74.1% and 42.0% of them found jobs.

The results of the audit suggest that increasing the volume of labour market services alone does not guarantee that unemployed persons find work, and that adult education and enterprise policy should also support the efforts to decrease unemployment. The chances of finding a job are influenced by the vacancies existing in the specific region, and the correspondence of the skills and knowledge of unemployed persons to the needs of the labour market.

Increasing enterprise activity is a premise to the creation of paid jobs. The number of companies and the increase in the number of companies in counties where unemployment is high are considerably lower than the Estonian average. Whilst the number of companies in Ida-Viru County and Valga County, for example, increased by six and seven companies per 1000 people, respectively, from 2010-2014, then the increase in Harju County was 17 companies. There were 2.7 times fewer companies in Ida-Viru County by 2014 than the Estonian average, and 3.5 times more unemployed persons per vacancy than the average. The number of companies, and consequently the number of vacancies, was considerably lower than the average in all other counties of high unemployment – Valga, Võru and Põlva. It is therefore important to coordinate labour market policy (incl. the provision of labour market services) and regional development of enterprise, especially in regions of high unemployment.

The lack of jobs means that working-age people continue moving to larger centres. The population forecast indicates that if nothing is done to influence regional population trends, the population of Harju County will increase by 10% by 2030 on the account of counties where unemployment is currently high.

One of the premises for reducing unemployment is the capacity to use training to increase the quantity of workers with the skills and knowledge that meet the needs of employers.

At present, the main obstacle to achieving this is the state’s insufficient knowledge of how many people are needed, which qualifications they should have, and in which Estonian regions they are needed. In other words, there is not enough knowledge of which skills and knowledge to teach to the unemployed to ensure that they are the ones that employers will need the most in the future.

The opportunities of unemployed persons to acquire new qualifications or improve existing ones are restricted by the provisions of the Labour Market Services and Benefits Act, which stipulate that a person who is studying full-time may not be registered with the Unemployment Insurance Fund. Also, the same Act has established a restriction on the Unemployment Insurance Fund, which states that labour market training may not last longer than one year. In order to ensure that all of the conditions required for increasing people’s qualifications have been created, it is necessary to review the restrictions and agree on the division of the functions of institutions in offering retraining to the unemployed.

The audit also indicated that many unemployed persons have received training, but a significant share of such training lasts for a short time and is aimed at giving general education (e.g. computer training, work-related motivation training), and the unemployed persons who complete the training generally receive no professional certificate or certificate of proficiency. Comparing the persons who passed a professional examination with those who did not, we see that 6.7% of the persons who passed the examination were subsequently employed. However, only 6.5% of the registered unemployed passed professional examinations.

The situation where unemployed persons do not pass a professional or proficiency examination and receive no certificate about the level of their skills and knowledge restricts the improvement of their competitiveness on the labour market. At the same time, employers cannot be certain that the unemployed persons have the knowledge and skills they need. Employers keep citing the lack of qualified labour in Estonia as the main reason why companies find it difficult to increase their turnover. The audit indicated that ca 43% of unemployed persons have no professional qualifications.

Based on the above, the National Audit Office advised the state to develop a programme by the end of 2017, which would guarantee the coordinated regional development of enterprise considering the specific features of each region, the promotion of creating new and the provision of labour market services. The National Audit Office also considers it necessary to initiate an amendment of the Labour Market Services and Benefits Act, which would give unemployed persons with insufficient knowledge and skills, and the persons who need retraining in order to find jobs, the opportunity to acquire the necessary education either via formal education or labour market training that lasts longer than a year. The functions of the Unemployment Insurance Fund in offering long-term retraining should thereby be clearly defined.

Background
The National Audit Office has regularly assessed the state’s constitutional obligation to help job-seekers find work. The last time this was done before the present audit was in 2012 within the scope of the audit “Activities of the State in Bringing the Unemployed to the Labour Market”, where the main conclusion was that the system of supporting the unemployed needed to be changed, as it did not help mitigate or prevent either short-term or long-term unemployment. Therefore, the National Audit Office considered it necessary to carry out this follow-up audit and assess whether the situation has improved compared to 2012.

The rate of unemployment in the age group of 16 to retirement age in 2015 was 6.4%, i.e. there were 40,800 unemployed people who would have liked to start working immediately. 15,900 of them had been unemployed for 12 months or longer. In terms of counties, the ones that stand out with the highest unemployment rates (average from 2013-2015) are Ida-Viru County (13.2%) and Põlva County (10.6%). The counties with the lowest unemployment rates were Tartu County (4.4%) and Hiiu County (5.7%).

 

Toomas Mattson
Communication Manager
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toomas.mattson@riigikontroll.ee
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  • Posted: 6/1/2016 12:00 AM
  • Last Update: 6/1/2016 11:45 AM
  • Last Review: 6/1/2016 11:45 AM

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