EC Review: Incentives for start-ups help their success
The European Commission's review "Activating jobseekers through entrepreneurship: Start-up incentives in Europe", published on Monday, indicates that Estonian subsidies are having a positive long-term impact on the success rate of new businesses.
Estonia launched additional labor market policy measures in 2009, when the unemployment rate started to rise following the economic downturn. The management of the start-up incentives was taken over by the Unemployment Insurance Fund (UIF).
In Estonia, unemployed people who apply for the business start-up subsidy but do not have enough business education or practice, receive free training, counselling and mentoring from the UIF.
Approximately half of the applications for start-up subsidies have, so far, been successful. Of the denied projects, 88 percent have been deemed too high a risk.
The review revealed that business start-up subsidies have a long-lasting impact on retaining employment: the survival rates of such businesses was at 98.7 percent after two years, 96.1 percent after three years, and 93.6 percent four years after creation.
However, the potential for creating additional jobs is slightly smaller. The recipients of the subsidy planned to create 1.6 new jobs on average. In reality, 46 percent of the businesses did not have employees after two years, 41 percent had one employee, 8 percent had three and only 5 percent had four or more.
A business start-up subsidy is a one-time financial boost provided by the UIF to unemployed people who want to start their own enterprises. In 2014, the maximum allowance was 4,474 euros. The subsidized activities are usually developed either as a self-employed person, or by setting up a small company with limited liability.