Estonian labor asks for better price

The Baltic Times
By Kairi Kurm
Mar 22, 2006

The free movement of labor and migration is one of the biggest issues facing the Baltic states today. Since EU accession, Estonia has seen a stream of blue collar laborers enter its market while qualified professionals leave. According to Agu Vahur, chief operations officer at the recruitment company CVO Group, Estonia lacks desirable candidates for today’s labor market. But the situation could prove beneficial to employees, as salaries and the overall working environment improves. The Baltic Times listened to Vahur as he explained the pros and cons of Estonia’s current labor shortage and what changes it can expect in the future.

Years ago companies would choose the best employee among several candidates, but now the situation is just the opposite. Candidates choose who they want to work for, and there is a line outside recruitment company doors – not a line of unemployed managers, but of companies to be managed.
There has been a rather rapid transformation on the labor market. Deficit has occurred in almost all sectors, and there are fewer employees available than there is a demand. Right after joining the EU, small- to medium-sized enterprises from mature markets such as Sweden, the U.K., the Netherlands and Germany started to pay more attention to our labor markets. Hence, employees feel that they have an almost unlimited freedom of choice. It is harder to recruit and harder to retain people in their jobs today than it was 12 months ago.

You previously said that a few years ago there were 980 applications for the sales director position at the Kalev confectionery. Now the number is 100 times less.
If you choose the right channels and advertise your vacancy professionally, both online and in traditional media, then you will get over 10 qualified applicants for a job response. There are occasions where the response rate is nil.

Is it a problem of poor recruitment advertising?
No, we are talking about combined media here – the print media and online media. What companies do nowadays is advertise their jobs in all media.
But this is not the only way. You can also headhunt or hire temporarily. Headhunting used to be only for managerial jobs, but now specialists are also subject to headhunting. In this respect, the landscape has changed in the labor market as well as on the marketplace for recruitment services.

Although Estonia’s un-employment rate has decreased from 10 to 9 percent, this is still considerably high. Who are the people who can’t find work?
We have long-term unemployment. There are people who are mentally or physically not capable of working full-time. The other type of unemployed people are those who do not want to move to the city for work. There is also some artificial joblessness. These are people who work part-time in Finland for example, and declare themselves officially unemployed to receive social benefits and medical insurance. If you listen to what people say in rural areas, you realize they have no problem finding a job.

You mentioned temporary recruitment as an option. In other parts of the world this sector makes up 2 percent of the labor market. What is the case in Estonia?
There are two sides of the story. One is that the temporary recruitment service market took off only a year ago. There is still no appropriate legislation in the Baltic states. There are over 1,000 employers offering temporary services in Estonia and hundreds in Latvia and Lithuania.
The other is that people are still uncomfortable about being temporarily employed. It is good for an employee as they have an agent looking after them; you are like an actor or football star. You will have an agent who sells your services. Hence it is pretty convenient for employees as well. The share of temp services is increasing 20 percent on a monthly basis. Recruitment agencies are also struggling to find employees. But by focusing on these services, they are more effective than companies operating in other fields. Often it is a money issue. For the right salary there is no problem attracting employees.
But sometimes companies think they can still get away with 2004 wage levels. They just lose people.

Some companies cut costs in every possible way to keep salaries high, bringing down expenses on rental, training and equipment. What is the future here?
Nowadays, especially with key strategic position holders, customized compensation packages are the only way to go. You see a lot of occasions where people have cut salaries, which may seem weird. But these are difficult times for the generation that entered the labor market in early ‘90s. They have been working day and night and earned some level of wealth. Now they prefer to raise a family – a change of lifestyle. A job is like a support mission for them.
This is also true with the younger generation. They are not as career-oriented as they are society-oriented. The overall mindset and meaning of employment is changing. It is not about survival any more. In this respect, flexibility and providing a meaningful work environment is key. It is no longer only about the salary and bonuses. It is about the team and the nature of the job.

You also said that people who left to work abroad place less of a priority on wages once they return. They value something else. They want flexible working hours and a positive team atmosphere.
When you work abroad, like in Moscow for example, you spend four hours a day in traffic and another six hours to get home on the weekends. In other locations you don’t even have direct flights home. So you spend almost twice as much time on the job. The actual quality of life is better at home. You also spend more money while living abroad. The tendency among young people is to leave right after graduation and come back when it’s time to start a family. It’s beneficial for the local labor market to have these young professionals back.

Do you foresee any major increase in the labor movement now that Finland has opened its market?
There will be a slight increase. Those who wanted to go are already there.
It depends on the local economy as well. If the salary increase comes to a halt but prices continue rising, there won’t be too many attractive jobs around, and more people will decide to leave. Whether or not we can retain our labor force is up to macroeconomic and political developments in Estonia, Latvia and Lithuania.

How many foreigners are entering the Estonian labor market? What kind of jobs can they get if they don’t speak the local language?
Foreigners are mostly self-employed and establish their own service organizations to invest in the local market – mainly the real estate businesses. But the technology sector and call centers are also popular. You don’t need to speak the local language if you speak Java.

A company manager said he’s looking for people close to retirement and young people with huge loans who want stability. This way he can keep his engineers and other professionals from moving abroad.
You can build your strategy on recruiting those with less liquidity – people who do not speak foreign languages or don’t consider it an option to leave the country. But you can also work out your strategy to recruit the most qualified people and pay the best salaries. You focus on getting the best projects and the best bids from the government, and you build a successful company. You can no longer take the labor force for granted, so you have to work much harder to get your strategy right and hire the right type of people.
Despite all of this, Estonia is still a rather attractive market place. There have been no occasions where we haven’t found anyone in IT, finance, management or other areas. Companies are already recruiting from all three Baltic countries at the same time. You simply need to approach individuals with the right offer at the right moment. Inefficient companies will go out of business or become targets for takeovers and mergers. The quality of management matters. The strongest will survive. There will be a lot of companies going bankrupt and plenty of investors purchasing a handful of firms and merging them. Efficiency will increase and employers’ ability to pay individuals will improve.
The Baltic countries are still an attractive place to invest, even at a slightly higher cost of labor. The price gap between the Baltic states and mature EU countries will remain in the foreseeable future, but the quality of the professional labor force will increase continuously.