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Far higher levels of pay makes Finnish labour market
attractive for Estonians


Helsinki (19.08.2011 - Juhani Artto) In Northern Europe, there is a huge pay gap between two neighbouring countries, Finland and Estonia. Despite Estonia's rapid economic development since its declaration of independence in August 1991 average wages and salaries in Finland are several times higher than those in Estonia. The latter country of 1.3 million inhabitants faces a long, uphill struggle if it is to reach its aspirations by 2020 - in terms of GNP per capita – and take its place alongside Europe's top-5 countries, as Prime minister Andrus Ansip envisioned in February.

In Estonia a construction worker’s monthly net earnings are, on average, no more than EUR600, according to the latest issue of Talouselämä, says inspector Raimo Pohjola of the Finnish Construction Trade Union. In Finland the collective agreements guarantee roughly three times that net income. This imbalance makes it easy to understand why some 30,000 Estonian construction workers choose to work in Finland and why many of them may be satisfied with wages that fall far below the minimum, as defined by the collective agreements signed by the union and the employer association.

A similar wage gap is also prevalent in low-paying jobs. The minimum wage in Estonia has been a meagre EUR278 per month since 2008. Estimates vary as to the number of employees who earn no more than the minimum, based on the agreement between the Estonian labour market confederations. According to the highest estimate people engaged in low paid and menial work number 100,000, which is about 15 per cent of all wage and salary earners. In Finland, the lowest monthly earnings, set out in collective agreements, are over EUR1,300.

So it hardly comes as a surprise that this considerable income divergence or wide disparity in pay, in tandem with the free movement of labour, should become something of a playground for numerous shady businessmen and companies, both Finnish and Estonian. In real terms the abuses and illegal practises happening at the present time amount to social dumping, tax evasion and neglect of social security contributions. Employees coming from low-pay countries, such as Estonia, are often easy victims of these unscrupulous businessmen.

The situation in the construction industry is clearly the worst example but there are many other instances where foreign workers are working in contravention of Finnish national wage agreements. Sami Lotila, a Finnish journalist with a deep knowledge of Estonia, writes in Talouselämä that recently Estonian hairdressers and cosmeticians have joined the black labour market in Finland.

More about Estonian economy and labour market: