The Economic Case for More Gender Equality in Estonia

4. A summary view of support for families with very young children in Estonia

Abstract

This chapter looks at the public supports available for parents with very young children. It describes the features of Estonia’s maternity, paternity and parental leaves, and its relative generosity compared with many other OECD countries. However, mothers rather than fathers use leave entitlements, and the chapter describes some options to generate a more equal use of leave entitlements among fathers and mothers. The chapter analyses the linkages between the parental leave and formal childcare systems and briefly considers pertinent issues around cost and access.

The last section of the chapter points out that reliance on informal care to address the needs of elderly relatives will increasingly hamper women’s labour force participation unless greater formal service support becomes available.

4.1. Introduction and main findings

Enabling men and women with caring responsibilities to better balance their work and family lives is not only key for their well-being, it also brings a wide range of economic benefits (European Commission, 2019[1]). Closing gender gaps in labour market outcomes by improving women’s labour supply, earnings and career progression thanks to greater work-life balance positively impacts women’s and their families’ standard of living. Greater work-life balance also allows companies to access a wider talent pool and a more motivated and productive workforce. A rise in women’s employment and working hours could also help address the challenge of demographic ageing and thus enhancing countries’ financial stability.

In Estonia, significant efforts have been made to improve work-life balance for parents of children above 3. Since 2009, the country has been constantly exceeding the Barcelona target of having at least 90% of children between 3 and school age enrolled in pre‑primary education: 93% of children in this age range attend kindergarten in 2019, with little variation across Estonian counties (Lang et al., 2021[2]). Most of them are enrolled in local government childcare institutions that provide services from 7 a.m. to 7 p.m. on weekdays, what is more at a modest price. Out-of-pocket childcare costs in Estonia as a percentage of family net income are among the lowest OECD-wide (OECD, 2020[3]).

There are three types of pre‑primary groups: crèche (for children below 3); pre‑primary groups (for children between 3 and 7); pre‑primary groups for children with special needs (for children between 3 and 7). In pre‑primary schools, groups are usually organised according to the age of children: younger (between 3 and 5 years of age); medium-aged (between 5 and 6 years of age), and older ones (between 6 and 7 years of age). However, some kindergartens also operate with mixed age‑groups that can include children with special needs as well. All children attaining age 7 before 1 October of the current year must attend school.

For children above 7 enrolled in basic education, state or municipally owned schools provide out-of-school-hours services conditional to the needs of working parents (Santiago et al., 2016[4]). Although the maximum weekly workload of a basic school student1 varies from 20 hours in Grade 1 to 32 hours in Grade 9 and is thus lower than the 40 hours worked by a parent on a full-time contract, basic schools typically organise “long day groups” that are formed after regular curricular instruction at the request of working parents. They are designed to assist students in doing their homework, and to engage them in a variety of recreational activities, including hobby education – a non-formal learning service in which young people participate voluntarily to develop their competences, be it in music, sport, technology (e.g. manual work), or other areas of their interest. Nearly 20% of Estonian children (age 6 – 11, use is highest amongst 7‑ and 8‑year‑olds) participate in such services, which is almost 10 percentage points lower than on average in other OECD countries (OECD Family Database).

What is more, Estonian men and women have satisfactory access to flexible working time arrangements, i.e. the possibility to accumulate hours for days off (full or half days) and to vary the start and end of daily work. According to the Gender Equality Act that came into force in 2004, “upon promotion of equal treatment of men and women, an employer shall (…) create working conditions which are suitable for both women and men and enhance the reconciliation of work and family life, taking into account the needs of employees”. Based on the 2018 Eurobarometer on work-life balance, more than two‑thirds of respondents in Estonia (63% of men and 70% of women) report that “flexitime” is “very widespread” or “fairly widespread” in the “company or organisation where [they] currently work/last worked”. This is substantially higher than on average in other European countries (Figure 4.1).

Main findings

• Estonian parents with children at least 3 years of age are generally able to reconcile full-time work with family commitments. Until they go to primary school at age 7, 90% of children aged 3 and over are enrolled in pre‑primary education. In addition, Estonian men and women are overall satisfied with their access to flexible working time arrangements.

• The Estonian system aims to provide a continuum of support to families with paid leave offering a total of 605 calendar days of maternity-, paternity- and shared parental benefits that can be taken up until the child is turns 3 years old. Most parents take the entire leave during the 18 months following childbirth, upon which the child should get access to publicly provided formal childcare. However, for many parents with very young children, the balance of work and care commitments is fully tilted towards care responsibilities often until children are 2 to 3 years of age. The optimal time of parental leave in terms of child- and family-well-being is hard to pin down. It will also vary across parents and children. In any case, a prolonged period of leave has considerable implications for career enhancement of leave‑takers, and economic family well-being, and since the vast majority of those who take leave for more than 1 year are women, gender equality in labour market outcomes. A more equal sharing of parental leave can enhance gender equality in the labour market as well as family- and child-well-being.

• Maternity leave is for 100 calendar days (14 weeks) paid at 100% of earnings without cap, at least 30 calendar days of which have to be taken before expected birth. Paternity leave is for 30 calendar days paid at 100% up to a threshold of EUR 4 043 per month in 2022 – about 3 times average earnings. During the subsequent parental leave period, parents can receive the parental allowance at a payment rate of 100% (up to a threshold as under paternity leave) for 68 weeks (if taken directly in one row/part after maternity leave, this would be until the child is around 18 months old). The leave is a family entitlement, so one of the parents can claim it at the time, except for 8 weeks that parents can use parental leave simultaneously. Most Estonian families use the entire period of paid parental leave. The period of employment-protection around parental leave lasts until the child turns three, and the majority of leave takers extend their parental leave beyond 18 months. Recent reform abolished the payment of a flat-rate childcare benefit to families until children are 3 years of age: this benefit is not paid to children born after 1 September 2019.

• The Estonian system stands out from that of most other countries as being on leave while receiving the parental allowance is not compulsory – the system facilitates taking leave on a part-time basis. The parental leave benefit is reduced by 50 cents for each Euro earned in excess of 1.5 times average salary (EUR 2 021.54 per month in 2022). Fathers can claim the payment once the child is 70 days old (the earliest date at which maternity leave expires) and if they have taken their entitlement to 30 days of paternity leave. This facilitates fathers claiming the paid leave payments (which from a household perspective makes financial sense as their earnings are often higher than their partners’ earnings), but women still make up over 85% of paid parental leave takers. They also make up the totality of adults in childbearing age who interrupt their presence in the workplace for more than 2 years to take care of their child(ren).

• To enhance gender equality in labour market outcomes, it is critical to foster a more equal use of leave entitlements among fathers and mothers, and limit the length of career breaks after childbirth for women since these breaks curtail their career opportunities and contribute to gender pay gaps over the life course (Chapter 3):

  • Recent attempts to increase the attractiveness of the paid parental leave for Estonian fathers may have triggered some perverse effects. While the share of fathers who receive the parental leave benefit has increased, early indications suggest that a significant fraction of the fathers receiving the parental allowance continue working, which may complicate the return to work for their partners.

  • Meanwhile, policy reform could increase childcare leave periods for the exclusive use by fathers. This could be by introducing a “father quota” – a non-transferable period of parental leave that is reserved to fathers who take time off to care for children, or a further extension of paternity leave.

  • Reform could be introduced gradually. For example, the leave period for fathers could be increased to 3 months, while the paid leave period mothers can take overall after childbirth is reduced to 15 months. At a later stage, the period of paid leave mothers can take could be reduced to a year (the OECD average) as the reserved period for fathers is increased.

  • It is vital that the policy system provides a de facto continuum of supports to parents with young children. To that end, it is important that childcare places are accessible when paid parental leave runs out. While more than 90% of children in-between 18 and 36 months of age get a place in kindergarten, nearly 10% of these children do not. And when parents with children in this age‑group get a place, it is usually several months after the date at which they had intended their child to start attending formal care (often only in August/September).

  • The forecast decline of pre‑school children between 2020 and 2030 should partly absorb the current demand for places in local government kindergarten for children between 1.5 and 3 years of age. Assuming the demand will remain unchanged, there should be no shortage of kindergarten places in 2030 in Estonia, except in Tallinn and Tartu counties. However, a more gender-equal use of leave entitlements for a shorter duration will require an increase in capacity so that more one‑year olds can attend local government kindergarten. It may therefore be necessary to devote more public investment to formal childcare to ensure that parents with very young children can return to work when they want, rather than when a childcare place becomes available. There is room in Estonia to re‑direct public investment in families away from cash support to greater investment in childcare.

• Opportunities to reconcile work and family life are not only hampered when children are very young, but also when long-term care needs for older relatives come to the fore.

  • In Estonia, informal care is the backbone of the current long-term care system, and very much relies on women to care for relatives, which curtails their ability to actively participate in the labour market at an increasing rate.

  • Estonian authorities are taking action to alleviate the informal care burden by focusing on improving the efficiency of integrated long-term care service delivery, but increased funding towards formal service delivery is necessary to reduce the reliance on female relatives.

Figure 4.1. More than two‑thirds of respondents consider flexible work arrangements as widespread in Estonia

Note: Data refer to all employed or previously employed individuals less than 65 years old.

Source: European Commission (2018[5]), Flash Eurobarometer 470: Work-Life Balance, http://data.europa.eu/88u/dataset/S2185_470_ENG.

4.2. Limiting the length of career breaks after childbirth

Career breaks after childbirth are particularly long in Estonia, and disproportionately affect women. There are several options the Estonian Government could consider to strengthen current efforts to generate a more equal sharing of paid and unpaid work among parents of very young children.

4.2.1. Overview of the challenge

Employment-protected parental leave (which is coupled with employment-protected home care leave in some countries) is one of the longest in Estonia (Panel A of Figure 4.2. ). This leave of absence allows Estonian parents to stay away from work until their child turns three, meaning that employers have an obligation to keep their (or a similar) job open for them until then. In a context where Estonian mothers must take at least 4 weeks of leave after childbirth, this means that employment-protected (paid and unpaid) parental and home care leave available to mothers lasts 152 weeks in Estonia, as opposed to 64 weeks OECD-wide. Mothers have access to a longer employment-protected parental leave only in Poland (184 weeks).

When the length of the paid parental leave is expressed in “full-rate” equivalent, i.e. the number of weeks paid at 100% of previous earnings, Estonia has the longest period across OECD countries (Panel B of Figure 4.2. ). The parental leave is calibrated so that parents are compensated at 100% of their previous earnings during 18 months after childbirth,2 whereas mothers without previous earnings receive the minimum wage.3 This pattern significantly differs from the situation that prevails in other OECD countries. While the “full-rate” equivalent paid parental leave is 68 weeks in Estonia in 2022, it lies below 20 weeks OECD-wide in 2020 (noting that the length of the full rate equivalent paid maternity leave in Estonia in 2022 is the same as the average in other OECD countries in 2020: 14 weeks). Estonian mothers can even extend their parental leave entitlements further: if they only take the 4 weeks of maternity leave that are required before expected birth, the remaining 6 available pre‑birth leave weeks are transferred to the shared parental leave entitlement – prolonging the potentially available “full-rate” equivalent parental leave even further to 74 weeks. The latter is the same length as for those mothers that are not entitled to maternity leave benefits before birth. However, any of these shifts of maternity leave towards parental leave do not change the total length of maternity and parental leave that mothers can take.

Figure 4.2. The length of parental leave in Estonia is one of the highest OECD-wide

Note: Home care leave (also called childcare or child raising leave) is an employment-protected leave of absence that can follow parental leave and that typically allows at least one parent to remain at home to provide care until the child is two or three years of age. Home care leaves are less common than the other three types of leave (maternity, paternity and parental leave) and are offered only in a minority of OECD countries. They are also often unpaid. Where a benefit is available, home care leaves tend to be paid only at a low flat-rate.

Panel B Data for the OECD average does not include Austria, Chile, France, Germany and Lithuania as they are based on net income compared to gross income for other countries.

Source: OECD Family Database, indicators PF2.1 Key characteristics of parental leave systems and PF2.5 Trends in leave entitlements around childbirth (https://www.oecd.org/els/family/database.htm).

According to the Estonian Social Insurance Board, most parents in Estonia use the parental leave, at least during the entire period that is fully compensated. In addition, a significant share of parents extend their parental leave beyond 18 months. In 2010, this was the case for a majority of Estonian parental leave takers, with 63% staying on leave between 1.5 and 3 years. In 2018 a majority (62%) of Estonian adults in childbearing age (25‑44) who interrupted their paid work to take care of their child(ren), did so for more than 2 years (Panel B of Figure 4.3. ). This share is nearly twice as high as on average in other OECD countries that are also part of the EU, noting that Estonia already stands out as one of OECD-EU countries where the share of adults with a work interruption for childcare reasons is one of the highest (Panel A of Figure 4.3. .

Figure 4.3. Estonian mothers are not only much more likely than fathers to interrupt their career for childcare reasons, they are also the only parents who do so for more than 2 years

Note: The data for both panels are sourced from an ad-hoc module to the EU Labour Force Survey (LFS), released in 2019. LFS data for ad hoc modules, once released, are usually not revised, unless major errors are identified in the delivered or processed data. Therefore, the data presented in both panels are not affected by the implementation of the new EU Labour Force Survey methodology in 2021, which, among changes in sampling and the structure of the questionnaire, affects the definition of employment, particularly in relation to maternity-, paternity- and parental leave. Source: Panel A: Eurostat Population by effects of childcare on work, https://ec.europa.eu/eurostat/databrowser/view/LFSO_18STWKED__custom_1550504/default/table?lang=en; Panel B: Eurostat: Population with work interruption for childcare purposes by duration of interruption [lfso_18stlened], https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfso_18stlened&lang=en.

At the same time, women are over-represented among parental leave takers. According to the Estonian Social Insurance Board, 83% of parental leave takers in 2021 were women, which is only slightly lower than the share of female leave takers (90%) in 2010. The gender gap in the share of adults in childbearing age who have interrupted their paid work to take care of their child(ren) is also the second highest of OECD-EU countries. While 71% of Estonian women in childbearing age stopped working, for childcare purposes, at least temporary, this was the case for only 9% of Estonian men in the same age range (Figure 4.3. , Panel A).4 Estonian men are not only less likely than Estonian women to interrupt their career for childcare reasons, they are also less likely to do so for a long period: all Estonian adults in childbearing age who interrupted their paid work for more than 2 years are women (Figure 4.3. , Panel B).

The combination in Estonia of a three-year long employment-protected parental leave and of its disproportionate uptake by mothers explains why the employment rate of Estonian women whose youngest child is under 14 strongly depends on whether the child is below or above 3 years of age (Figure 4.4.). While the employment rate of Estonian women whose youngest child is below 3 is one of the lowest OECD‑wide (30.4%), the employment rate of Estonian women whose youngest child is above 3 is one of the highest (85.5%).

Figure 4.4. The share of Estonian women in work with children not yet 3 years of age is low

Note: See Chart LMF1.2.A from OECD Family Database, LMF1.2 Maternal employment. Estimates for children above 3 based on youngest child aged 3‑5 and 6‑14. The data concern 2019 and predate the January 2021 change in the LFS definition that now considers all workers on parental leave in employment regardless of its duration. For most countries, women on maternity parental leave are considered as employed. Estonian mothers on maternity leave are considered as employed, while those on parental leave were considered inactive by the ELFS in 2019. See more information here: http://www.oecd.org/els/emp/LFSNOTES_SOURCES.pdf.

Source: OECD Family Database, LMF1.2 Maternal employment (https://www.oecd.org/els/family/database.htm).

To improve gender equality in labour market opportunities and reduce gender pay gaps (Chapters 2 and 3), it is critical to limit the length of women’s career breaks after childbirth. The Employment Contracts Act stipulates that “upon termination of pregnancy and maternity leave, a woman has the right to use the improved working conditions which she would have been entitled to during her absence”. In other words, benefits that were granted to all staff during a woman’s maternity leave should be extended to her when she returns. However, this provision is not sufficient to compensate women for the detrimental effects of long career breaks, for at least four reasons. First, the provision does not cover parents returning from parental leave. Second, long career breaks after childbirth entail a risk of work skills deterioration. Third, long career breaks after childbirth contribute to voluntary and involuntary sorting of women in childbearing age into lower-paying firms. Because they know their capacity to offer flexibility in excessive working hours to be low after childbirth, they are not incited to apply to higher-paying firms − where the capacity to provide excessive working hours tends to be in greater demand and thus rewarded at a disproportionately higher rate than in other firms (See (Goldin, 2014[6]) for evidence of this non-linear relationship between hourly wage and working hours). Meanwhile, because they anticipate that, relative to men, women will be less available for work after childbirth, higher-paying firms may engage in hiring discrimination against female applicants in childbearing age. Finally, long career breaks after childbirth also contribute to voluntary and involuntary sorting of women in childbearing age into lower-level occupations, tasks and responsibilities within firms. Young women may “voluntarily” stick to lower-paid but less demanding jobs to ensure reconciliation of their professional workload with a surge in their unpaid work burden in the event where they become mother. Meanwhile, because they anticipate that women will stay away from their job for a substantial period of time after childbirth, employers face lower incentives to invest in improving their human capital and promote them to (high) managerial positions.

Estonia has taken action to limit involuntary sorting of women in childbearing age into lower-paying firms and into lower-level occupations, tasks and responsibilities within firms. Unless agreed otherwise and starting from 1 April 2022, parents (mostly mothers in practice) will have to notify employers about their decision to go on parental leave and return from parental leave 30 calendar days before going on leave and returning, as opposed to 14 days beforehand. Extension of the advance notice period will contribute to reduce the substantial administrative and organisational burden that employers associate with childbirth. At the same time, employees received the right to request opportunities for reconciling work and family life, such as flexible working, to which the employer must respond within a reasonable time (15 days). Yet, more efforts are needed to mitigate the motherhood penalty, as detailed in the next section.

4.2.2. Possible avenues to shorten the length of career breaks after childbirth

To limit the length of career breaks after childbirth, different measures could be contemplated, including: (i) generating a more equal use of leave entitlements among fathers and mothers and (ii) ensuring that parents have a place in local government kindergarten when their child turns 18 months and thus when paid parental leave ends.

Generating a more equal use of leave entitlements among fathers and mothers

Significant steps in Estonia were recently taken or are planned to be implemented in the near future to increase the involvement of fathers in caregiving when children are very young:

• First, on 1 July 2020, paternity leave for fathers was extended from 10 working days – which was only available to fathers in dependent employment – to 30 calendar days available to all fathers, including those who are unemployed, inactive and self-employed. This is paid at 100% of previous earnings, more than three times longer than OECD-wide (Figure 4.5).

• Second, in a context where paid parental leave benefit in Estonia can be received while earning, the labour earnings threshold above which parents partially lose parental leave benefit was increased on 1 March 2018. From that date onwards, the parental leave benefit is reduced only if monthly labour earnings exceed 1.5 times average salary (EUR 2 021.54 in 2022) – while before March 2018 parental leave benefit was reduced if monthly labour earnings exceeded the benefit rate (EUR 470 in 2018). This change had a double objective: inducing more mothers, notably those earning higher wages before childbirth, to work part-time while being on paid parental leave, and making paid parental leave more attractive to fathers by improving the possibility for those who take the parental leave to not fully disconnect from work while taking care of their new-born.

• Third, on 1 April 2022, the attractiveness of paid parental leave was further enhanced since parents became able to take the parental leave in turn, rather than having to decide which one takes the parental leave in full, at the exclusion of the other. Following this change, the parental leave system was made highly flexible since parents are able to stop and restart receiving the benefit on a daily basis, meaning that both parents will be able to alternate days where they work at their employer’s site and days where they take care of their child at home.

• Finally, since 1 April 2022, maternity leave has been reduced from 140 to 100 calendar days – up to 70 days before and 30 days after expected birth – in order to increase the duration of parental leave. At the same time, up to 40 days of the pre‑birth maternity leave can be transferred towards paid parental leave (and can thus be taken by both parents). Consequently, the length of paid parental leave rose from 435 to 475 days, i.e. nearly 16 months, which can be extended to 515 days with unused pre‑birth maternity leave. Parents are allowed to be simultaneously on paid leave for up to 60 days, noting that, in case they jointly take these two months, the remaining period of paid parental leave is reduced by 120 days.

Figure 4.5. Since its extension on 1 July 2020, paternity leave is more than three times longer in Estonia than OECD-wide

Notes: 1) The figure only shows the leave period that are available for the exclusive use by fathers; 2) Countries highlighted with an asterisk (*) are those where the average payment rate for paid father-specific leave is 100% of previous earnings.

Source: Tables PF2.1.C-PF2.1.E from the OECD Family Database, https://www.oecd.org/els/family/database.htm.

Fathers appear to have welcomed the extension of the paternity leave. The upward trend in the take‑up rate of paternity leave accelerated following this extension instead of slowing down (Figure 4.6). What is more, data from the Social Insurance Fund reveal that fathers who took the paternity leave after July 2020 used it for an average of 25.1 days, hence in almost full length.

Meanwhile, attempts to increase the attractiveness of paid parental leave for fathers have led to increased use by fathers of parental leave benefit. According to the Social Insurance Board, the share of fathers among recipients of parental leave benefit doubled (16% in March 2021 as opposed to 8% in March 2018), following the increase in March 2018 of the labour earnings threshold above which parents partially lose parental leave benefit. But there is more – fathers are not only more likely to receive the parental leave benefit, those who do increasingly stay connected to work. The share of male parental leave benefit recipients who receive income from work increased from 53% to 71% between 2018 and 2021, while this share had been stable at around 50% before. By contrast, the share of female parental leave benefit recipients who receive income from work is much lower and changed little in recent years: from 7% to 9% between 2018 and 2021.

Figure 4.6. The uptake of paternity leave in Estonia accelerated after the reform of July 2020

Note: The structurally upward trend hold despite take‑up rates of paternity leave for the period from July 2020 to June 2021 underestimating the ratio of paternity leave recipients to the number of births. Since the extension of July 2020, fathers can use the paternity leave until the child turns 3, while they were previously only allowed to use the paternity leave either 2 months before or 2 months after childbirth.

Source: Social Insurance Board, Statistics Estonia, Ministry of Social Affairs calculations.

Does this mean that the share of “superdads” working and caring in Estonia is higher than the share of “supermums”, and that it is increasing at a faster rate? Probably not. New data is yet to become available, but there is a risk that in households where fathers receive both parental leave benefit and income from work, this complicates the return to work for their partners. From a household perspective, this is not surprising. Since men often earn more than women do, and the relevant benefit payment rate will be higher, this organisation of responsibilities maximises household income. The relatively high EUR 2 021.54 earnings threshold (1.5 times average earnings) above which the parental leave benefit is reduced allows a large share of fathers to work full time. As a result, the reform may not have fundamentally changed the distribution of unpaid work within households.

Against this backdrop, it seems critical to consider, in addition to the recent extension of paternity leave, complementary policies to increase the actual take up of care leave by fathers (rather than just their receipt of the parental leave benefit). Evidence suggests that, unless a “father quota” (a non-transferable period of leave that is reserved to fathers) or “bonus period” (additional paid leave only awarded when fathers take a specified period of leave) is introduced, the likelihood of fathers to take a significant share of the parental leave will remain low (OECD, 2017[7]; OECD, 2018[8]). Almost half of OECD countries are implementing this strategy (Figure 4.5). For example, as an intermediate step, the leave period for fathers could be increased to 3 months, while the paid leave period mothers can take overall after childbirth is reduced to 15 months. Finland recently introduced parental leave reform in this vein. As from September 2022 onwards, both parents are entitled to 160 parental allowance days (about 6.4 months of leave) of which 63 parental allowance days (about 2.5 months) can be transferred to the partner (Ministry of Economic Affairs and Employment, 2022[9]).

These changes seem all the more important since greater equality in caregiving around birth has downstream effects on gender equality in parenting behaviour as children age. Fathers’ leave‑taking increases their involvement in childcare and housework, and such effects increase with the length of the leave (and persist after fathers return from leave) – see (Huerta et al., 2013[10]) in Australia, Denmark, the United Kingdom and the United States; (Almqvist and Duvander, 2014[11]) in Sweden; (Pailhé, Solaz and Tô, 2019[12]) in France; (Patnaik, 2019[13]) in Canada (Quebec); (Tamm, 2019[14]) in Germany; (Meil et al., 2021[15]) in Spain.

Ensuring that parents have a place in local government kindergarten when paid leave runs out

In many OECD countries, the net (out-of-pocket) childcare costs for parents are high, despite supports such as free or subsidised access to public Early Childhood Education and Care (ECEC) facilities, cash supports and/or tax reliefs. Calculations using comparable data on childcare prices charged to parents, and accounting for all relevant support provisions, show that net costs of couple where both partners earn two‑thirds of the average wage as well as for single mothers who earn two‑thirds of the average wage are zero (Figure 4.7. ). Together with Latvia and Italy, Estonia therefore has the lowest formal childcare costs for parents of all OECD countries.

Despite these low fees in general, the satisfaction with the childcare cost in public centres varies greatly. A roughly similar share of Estonian parents are “satisfied”, “unsatisfied” as well as “neither satisfied nor unsatisfied” with the fees they have to pay for formal childcare. At the same time, poor and low-income families are generally less satisfied with the costs of ECEC in Estonia (Lang et al., 2021[2]). The considerable variation may be due to the fact that the amount of the childcare fee is in the exclusive competence of the local governments, which results in very diverse childcare costs all over Estonia (Kalma, 2019[16]).

Irrespective of the childcare costs, getting access to a formal ECEC-place is a different matter altogether. The logic of the Estonian system is that when the period of paid parental leave ends, a childcare place is available to ensure a continuum of supports for families during early childhood. However, as illustrated above, a significant share of parents who were working before childbirth stay on parental leave beyond the paid leave period. One reason is the lack of capacity in local government kindergarten when children turn 18 months. Indeed, although the Preschool Childcare Institutions Act requires municipalities to provide pre‑primary education services to all children aged 1.5‑7 years, Estonia has been consistently below the Barcelona target of having at least 33% of children under 3 attend pre‑primary education. In 2019, the average number of places for 1.5‑3 year‑old children in local government kindergartens was 0.47 per child of that age, which is almost half of the average number of places for 3‑7 year‑old children (Lang et al., 2021[2]). Capacity falls short of demand. While the share of children below 1.5 and above 3 who applied to a place in local government kindergarten but did not get one is negligible (less than 1%), it reaches nearly 10% among children between 1.5 and 3. Moreover, when parents finally get a place, this is usually several months after the date when they had intended for their child to attend formal care (usually when paid parental leave ends and the child turns 18 months).5 A survey conducted late 2020 among a representative sample of nearly 3 500 Estonian parents of preschool children aged 0‑7 showed that the average waiting time for a kindergarten place among those who did not get a place at the desired time varied between 7.6 and 10.1 months (Lang et al., 2021[2]). In general, it is only in August/September that empty spots open-up in formal childcare since it is at that period that children in their last year of pre‑primary education leave kindergarten and start compulsory basic education.

The demographic trends should partly absorb the current demand for places in local government kindergarten for children between 1.5 and 3. Due to the declining share of women in childbearing age and a low fertility rate, the number of pre‑school children will fall by 11.1% between 2020 and 2030. Assuming the demand will remain unchanged, there should be no shortage of kindergarten places in 2030 in Estonia, except in Tallinn and Tartu counties (Lang et al., 2021[2]).

Figure 4.7. Net childcare costs in Estonia are low in international comparison

Note: Net childcare cost are equal to gross fees less childcare benefits/rebates and tax deductions, plus any resulting changes in other taxes and benefits following the use of childcare. Calculations are for full-time care in a typical childcare centre for a two‑child family, where both parents are in full-time employment and the children are aged two and three. Full-time care is defined as care for at least 40 hours per week. For couples, both parents earn 67% of the average wage. In countries where local authorities regulate childcare fees, childcare settings for a specific municipality or region are modelled. In the case of Estonia, childcare settings for Tallinn municipality were modelled. Data for Australia, Canada, Israel, Korea, Switzerland, Türkiye, and the OECD average refer to 2020. For more detail, see the OECD Tax-Benefit Model Methodology.

Source: OECD Tax and Benefit Models, 2022, http://oe.cd/TaxBEN.

However, the demand for places in local government kindergarten may not remain at its current level, as the labour supply of women with very young children is intended to increase. Efforts to accomplish a more gender-equal distribution of parental leave use over a shorter period of overall duration (see above), including more parents getting back to paid work after a year at most – at least on a part-time basis, will require an increase in capacity so that more one‑year olds can attend local government kindergarten.

One way to achieve this objective could involve, following a recommendation by the Estonian Commissioner for Gender Equality and Equal Treatment, starting compulsory education one year earlier (Pakosta, 2017[17]), as in most OECD countries (OECD, 2018[18]). This measure would free up a large number of places in local government kindergarten given that 97% of children aged 6‑7 are enrolled in preschool education (Lang et al., 2021[2]). In addition, advancing the age of entry into compulsory education by one year and thus allowing local government kindergarten to welcome a greater share of children aged between 1.5 and 3 would also be highly beneficial in terms of children’s learning and development. There is widespread evidence that it is during their first three years of life that children grow and learn at a faster rate than at any other time in their lives (OECD, 2020[19]).

However, the latter option may not fit in with the prevailing education policy objectives. An alternative could consist in devoting more public investment to formal childcare to ensure that parents with very young children can return to work when they want, rather than when a childcare place becomes available. There is room in Estonia to re‑direct public investment in families away from cash support to greater investment in childcare (Figure 4.8). Estonia spends about 3% of GDP on family benefits, almost the same as in Iceland (3.2% of GDP). But where 70% of such spending in Iceland – and over 60% in Denmark and Sweden as well as 40% across the OECD on average – goes toward formal childcare and other family services, this proportion is only 27% in Estonia (i.e. 0.8% of the total 3% of GDP that go to any public spending on families, see Figure 4.8). However, micro-simulations suggest, that the Estonian family benefits had an important role in reducing child poverty in the country (Sinisaar, 2021[20]).

Figure 4.8. The share of public spending on family benefits devoted to formal childcare and other services is one‑third lower in Estonia than OECD-wide

Note: Public spending accounted for here concerns public support that is exclusively for families only (e.g. child payments and allowances, parental leave benefits and childcare support). Spending in other social policy areas such as health and housing support also assists families, but not exclusively, and is not included here.

Source: OECD Social Expenditure Database, http://www.oecd.org/social/expenditure.htm.

4.3. Supplementing informal care with formal home and institutional care for family members in need of long-term assistance

In Estonia, informal care is the backbone of current long-term care provisions. According to Article 27 of the Constitution of the Republic of Estonia, “the family is required to provide for its members who are in need”, i.e. typically elderly individuals and non-elderly individuals with disability. In addition, Chapter 8 of the Family Law Act established a duty to provide maintenance “arising from filiation”. It stipulates a two generations up and down legal obligation to assist family members unable to cope by themselves: “adult ascendants and descendants related in the first and second degree are required to provide maintenance” (Article 96(1)). Importantly, upcoming changes to the Social Welfare Act and Family Law Act – foreseen for the second quarter of 2022 – will remove second degree relatives from the list of persons required to provide care and assistance. Nevertheless, these legal provisions contributed to the view that public authorities should first make sure that the family of the person in need is not capable of giving assistance themselves before providing tax-financed public support. As such, these provisions explain why public spending on long-term care in Estonia is substantially lower than on average in other OECD countries, leaving most of this care to be financed out-of-pocket (OECD, 2020[21]).

A comprehensive review of long-term care policies would involve a detailed assessment of the interaction of policies, such as social care provisions and health- and pension systems. Such an undertaking is beyond the scope of this review. However, the issue is directly relevant, as long-term care responsibilities curtail family members’ (especially women’s) ability to participate actively in the labour market at an increasing rate. According to the Estonian Social Survey, women made up almost 60% of informal long-term carers in 2020, and women assisting elderly relatives and family members with disability were more than twice as likely as their male counterparts to devote 20 hours or more per week providing such care. This gender divide has worsened since 2016 and is not expected to improve in future years since the Estonian population is not only ageing rapidly, it is also ageing less healthily than in most other EU countries, predisposing people to more severe disabilities in old age. In Estonia, one in four individuals aged 65 years or over report long-standing severe limitations in usual activities due to health problems in 2019, as opposed to one in six on average in other OECD countries which are also EU members (Eurostat, 2022[22])

Estonian authorities are taking action to alleviate the informal care burden by focusing on getting more value for money with the current low level of public funding, notably through the provision of better integrated long-term care services. Currently, these services are fragmented due to the separation of funding streams between state and local government levels. Long-term health care services, such as inpatient and home‑based nursing care, are financed at the state level through social security contributions and payroll taxes. In turn, long-term social care services, such as help with daily activities in the home or in social welfare institutions, are financed primarily through local government taxes with limited equalisation payments from the state for lower-income municipalities (European Commission, 2018[23]; European Commission, 2020[24]).

However, to support increased female labour supply it is important to complement efforts to counter the fragmentation of long-term care between health and social services by strategies to significantly increase public spending, in order to improve coverage of formal health and long-term care services. From an efficiency and equity point of view, there is limited room for additional public funding for long-term care to flow from social security contributions and payroll taxes. The tax wedge, which measures the extent to which labour income is taxed, is higher in Estonia than on average in other OECD countries (OECD, 2021[25]). Further increasing the tax burden would be detrimental to employment, especially for low-income workers, and thus to equity in a context where Estonia already lags behind in terms of income inequality and poverty (OECD, 2017[26]).

Some of the health problems in Estonian, which contribute to the long-term care needs, may be related to specific risky behaviour. For example, Estonia shows one of the highest alcohol consumption levels OECD-wide. This does not only have individual health implications, but is also associated with an expected decrease in GDP between now and 2050 because of its upward effect on health expenditure and downward effect on workforce productivity (OECD, 2021[27]). Estonia’s GDP is estimated to be 3.4% lower on average between now and 2050 due to alcohol consumption (excluding any impact on the alcohol industry), while GDP is expected to decrease by just slightly more than 1.5% OECD-wide over this period (Figure 4.9. ). Thus, on top of improving public funding for long-term care, it would be important to reduce heavy alcohol consumption in order to reduce health spending, increase workforce productivity, and close the gender health gap (Chapter 2), in a context where men are more likely to be heavy drinkers than women (OECD, 2021[27]).

Figure 4.9. Estonia shows one of the strongest alcohol consumption-related decrease in GDP forecast between now and 2050 OECD-wide

Source: OECD (2021[27]), Preventing Harmful Alcohol Use, OECD Health Policy Studies, https://doi.org/10.1787/6e4b4ffb-en.

References

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[24] European Commission (2020), Peer Review on “Financing Long-term Care”. Approaches to Long-term Care Financing in Estonia., http://ec.europa.eu/social/mlp.

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[23] European Commission (2018), ESPN Thematic Report on Challenges in long-term care Estonia.

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[6] Goldin, C. (2014), “A Grand Gender Convergence: Its Last Chapter”, American Economic Review, Vol. 104/4, pp. 1091-1119, https://doi.org/10.1257/aer.104.4.1091.

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Notes

← 1.  According to the Basic Schools and Upper Secondary Schools Act that was passed in 2010, the maximum weekly workload of a basic school student in terms of “number of lessons” is as follows: Year 1: 20; Year 2: 23; Years 3‑4: 25; Year 5: 28; Years 6‑7: 30; and Years 8‑9: 32. A lesson is associated to approximately 60 minutes: 45 minutes of learning/teaching and a minimum of 10 minutes of recess.

← 2.  Before 1 July 2020, the parental leave benefit could be claimed only during the 18 months consecutive to childbirth. Starting from 1 July 2020, while the total amount of the parental leave benefit remains unchanged, it can be claimed in instalments until the child turns 3. Yet, there does not seem to be a risk that this change will lead more parents to return to full-time work only then: data from the Estonian Social Insurance Board show that a negligible fraction of parental leave benefit recipients (0.1%) makes use of this possibility to claim the benefit in instalments.

← 3.  If the mother did not work before childbirth she is entitled to 30 days of maternity leave after birth, after which the parental benefit is paid for 515 days or 74 weeks. If the mother did work before childbirth and was entitled to full maternity leave, including weeks before expected birth, the right to the parental benefit begins when the maternity leave ends. The maternity leave for these mothers lasts 100 days compensated at 100% of previous earnings. Given that mothers can take up to 30 days of maternity leave after childbirth, the parental benefit is paid for 475 days (or 68 weeks) starting from the day following the end of the maternity leave. However, up to 40 of the pre‑birth maternity leave days can be transferred to paid parental leave and thus extend it to 515 days or 74 weeks.

← 4.  29% of women in childbearing age did not report having interrupted their career for childcare reasons in the LFS ad hoc module of 2018, this group includes women who did not take leave, women who dropped out of the labour force altogether, childless women, non-response and misreporting (women who may not consider that taking parental leave constitutes a work interruption).

← 5.  The fact that their entitlement to the parental leave benefit comes to an end is one of the two main reasons why parents apply to a place in a local government kindergarten, the other being their belief that formal childcare is a key contributor to their child’s development (Lang et al., 2021[2]).