The Long-term Impact on Estonia of the War between Russia and Ukraine

Refugees from the war in Ukraine have done better in the labour market than expected

Ukrainian refugees from the war have integrated in the labour market in Estonia more successfully than they have in those in other countries, but there remains room for improvement in matching the qualifications of those arriving from Ukraine with appropriate jobs concludes a report published today by the Foresight Centre on how Ukrainian refugees have affected employment and the economy.

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More than a third of the refugees from the war in Ukraine who have arrived in Estonia have found a job, and 27,000 people have entered the local labour market. Ukrainians with jobs are now about 4% of the Estonian labour force. Märt Masso of the Foresight Centre noted that the participation of the refugees in the labour market and the economy will give a boost to the Estonian economy. “The growth in expected value added that can be connected to refugees is projected at 142 million euros this year, and the additional tax revenues from the Ukrainians will reach 56 million euros”, he said.

Although the arrivals from Ukraine have increased the number of people in employment in Estonia, the unemployment rate among them is still higher than the rate among locals. The report also observes that the downturn in the economy means the need for employees, including those who have arrived from Ukraine, will decline in the coming months.

The report by the Foresight Centre finds that a large share of the Ukrainians are working in jobs for which they are overqualified. “Matching the qualifications of refugees with jobs is a challenge in many countries in Europe, and one part of it is the need to recognise skills through the education system. If we can get more refugees into jobs that match their skills though, their job security, incomes and economic benefit to Estonia would all increase”, said Märt Masso.

Earning income from work allows refugees to manage independently, and the income earned from work by those under temporary protection averages about 70% of the Estonian average and 86% of the average earned from work by non-citizens.

The Foresight Centre notes that there are also significant costs to helping the Ukrainian refugees. The cost of supporting the integration of refugees and their families is some 0.6-0.8% of GDP, which is in line with the projections made at the start of the war by the Foresight Centre.

The Foresight Centre and CentAr estimated at the start of the war that the annual cost of helping each refugee would be 7590 euros, which totalled 227 million euros for the 30,000 refugees expected to stay in Estonia. The Ministry of Finance calculated the actual cost in 2022 at around 224 million euros. The actual number of refugees in Estonia is higher than forecast, but the cost for each refugee has turned out a little lower at 6281 euros.

The money spent by the refugees has also boosted the Estonian economy. It is estimated that each adult with temporary protection spent 797 euros on average on goods and services in Estonia. That makes a total of 242 million euros of spending a year, and the increased consumption results in additional GDP growth of 287 million euros a year.

The report on how Ukrainian refugees have affected employment and the economy is part of the Foresight Centre’s research stream on the long-term impact on Estonia of the war between Russia and Ukraine.

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