Executive summary

Employment growth among women in Estonia has been strong in recent years. The female employment rate (72%) in Estonia is well above the OECD average (61%), and the employment gender gap in favour of men was small at 3 percentage points in 2021. In fact, female employment rates are higher than among men, among older workers (age 55-64), as related to a mix of economic and health factors. Also, Estonian women generally work full-time: at 13% the part-time employment rate in Estonia is about half the OECD average. However, economic and labour market gender differences persist. The gender wage gap, which has declined since the mid-2000s, as measured at the median for full-time workers, still stood at 19% compared to an OECD average of 12%. Women continue to shoulder the bulk of unpaid work in and around the house in Estonia.

One contributing factor to the persistent gender labour market gaps is that mothers with very young children often do not engage in paid work in Estonia. The parental leave system facilitates family leave until children turn three years old, and mothers, rather than fathers, often leave the workplace for at least a year, which contributes to gender pay gaps over the life course. Prevailing gender norms in Estonia contribute to the unequal sharing of unpaid housework: about 70% of Estonians believe that the most important role of women is related to care and housework, about 20 percentage points above the OECD average. To enhance gender equality in labour market outcomes, it is critical to foster a more equal use of leave entitlements among fathers and mothers, Estonian policy has already moved by extending paternity leave to 30 days in 2020. Future policy reform could go further by extending the duration of paternity leave or introducing a “father quota” – a non-transferable period of parental leave that is reserved for fathers who take time off to care for children.

Estonia has a comprehensive Early Childhood Education and Care (ECEC) system, especially for older children of pre-school age. However, access is an issue for children below three years of age. Despite the demographic trends that will reduce the demand for childcare places, more public investment in formal childcare is required to ensure that both parents can return to full-time work when the period of parental leave runs out, or when parents want to return to work before that time. At present, spending on family benefits focuses on cash support rather than investing in services: there is a case for introducing a greater focus in family support on family services, including formal ECEC services.

A detailed analysis of gender pay gaps based on Estonian administrative data shows that differences in firm pay practices account for about half of the gender pay gap in Estonia. Of this, three-fifths can be attributed to the fact that women tend to work in firms that pay lower wages. The other two-fifths of the explained part of the gender wage gap reflect gender differences in pay within firms and can be attributed to a weaker bargaining position of female employees vis-à-vis employers, but may also partially reflect pay discrimination against women. The remaining half of the gender wage gap reflects differences in tasks, responsibilities and skills.

Pay transparency measures could help inform and strengthen the bargaining position of women. A renewal of the pay transparency measures originally planned under the Gender Equality Act and Other Acts Amendment Act of 2016 could mandate a firm-level reporting of the gender composition of the workforce and pay differences in different job categories. To ensure compliance with pay transparency, reporting measures could oblige employers to make their gender gap statistics publicly available. Government bodies, such as Statistics Estonia, could be tasked with the responsibility of utilising administrative data to compute firm-level gender gaps.

The introduction of a combined package of job-classification systems and pay transparency measures would provide employees with benchmarks to which they can compare their own pay packages and could also be used to enshrine the concept of “equal pay for work of equal value”. This would contribute to reducing within-firm gender wage gaps, but also increase awareness of job-opportunities elsewhere and enhance mobility across firms.

For future generations it is important that gender stereotyping is not perpetuated in classrooms. Training and awareness raising of education staff can help, as well as the publication by the Ministry of Education and Research of guidelines to tackle gender bias in instructional materials. Reducing gender-segregated sorting in education will also help respond to future labour demands. Teaching digital skills has long been considered a national priority in Estonia, and an impressive set of policies have been implemented. However, gender imbalances in this area remain considerable and students’ exposure to female role models in the field could help more girls choose ICT careers.

Further increases in female employment participation, bringing these closer towards male levels, hold the potential of spurring further economic growth in the future. For example, if Estonia fully closed its gender gap in labour force participation by 2050, it could expect 0.7 percentage points of additional growth per year or a boost of 2.3% of additional GDP per capita in 2050. At the same time, closing the gender gap in working hours could increase annual growth by 0.06 percentage points and lead to 1.9% of additional GDP per capita in 2050. A joint closing of labour force participation and working hours gap is estimated to produce an additional 0.14 percentage points of growth each year – or raise GDP in 2050 by 4.3%. Small but persistent gender gaps mean that Estonia is missing out on a substantial boost to economic growth that could be unleashed if men and women had the same engagement and chances in the labour market.