Estonian ministry developing new way to calculate minimum subsistence level

Groceries getting more expensive more heavily impacts people and households with smaller incomes.
Groceries getting more expensive more heavily impacts people and households with smaller incomes. Source: Priit Mürk/ERR

The number of recipients of subsistence benefits in Estonia has increased compared with previous years, while more and more people are at risk of falling below the poverty line. The Ministry of Social Affairs has now begun to develop a new methodology for calculating the country's minimum subsistence level.

While politicians on Toompea Hill are looking for ways to cut public spending, many families are struggling with how to fit their own family budgets. For some, saving money may mean canceling a trip to the movies or travel, for yet others, it's literally a matter of survival — how to keep their kids fed and a roof over their heads.

ETV+'s Russian-language news broadcast "Aktuaalne kaamera+" reported Sunday that a Salvation Army soup kitchen in Tallinn offers free meals to some 1,500-2,500 people a month, and food packages and other humanitarian aid are available as well. The majority of those visiting the soup kitchen are unhoused and residents of social housing, but increasingly common are people leading ordinary lives as well.

"There are older people whose pensions don't suffice," said Jüri Põld of the Salvation Army. "And lately there are young families, who come here with their kids. At one time there were a lot of refugees as well. We're seeing increasing numbers of young folks. But people are very embarrassed about it, because they think this is the bottom of society or something."

In order to help keep people from hitting the bottom of society, the state has established a minimum subsistence level. Currently, this is set at €200 for the first adult member of a family, €160 for the second and €240 per child. This is how much money a family should have to live off each month after paying for utilities and rent or the mortgage.

If they end up with less than that, then this is considered absolute poverty, and the state will compensate the difference via subsistence benefits paid through local governments. In other words, if someone living alone is left with €140 after paying for utilities and either rent or the mortgage, they will receive an additional €60; if they're left with just €90, they'll receive €110. If that isn't enough to pay for utilities, the benefit amount may be even bigger than that.

Until last year, the number of recipients of subsistence benefits in Estonia was declining steadily. According to the Ministry of Social Affairs' data, by 2022, just 1.2 percent of the population was living below the poverty line. Last year, however, changed everything.

"The energy crisis and the arrival of war refugees from Ukraine changed this trend significantly," said Minister of Social Protection Signe Riisalo (Reform). "According to 2022 figures, 3.6 percent of the population needed subsistence benefits. It must be acknowledged, however, that around half of them are Ukrainian citizens who have received temporary protection."

From January through June of this year, 48 percent of all those who have received subsistence benefits have been war refugees from Ukraine, Riisalo noted. "And we're seeing that the share of Estonian residents hasn't increased," she added.

Last year, the City of Tallinn paid out a combined €15 million in subsistence benefits. In the first seven months of this year alone, the capital city has already paid out more than €11 million.

"The flow of refugees has decreased significantly this year; many have either returned to their homeland or moved on from Estonia," said Tallinn Deputy Mayor Betina Beškina (Center). "Many have found work and don't receive subsistence benefits anymore. But we don't count the war refugees as a separate group, because everyone who is registered as a resident of Tallinn is a Tallinner, and they are entitled to benefits intended for Tallinners."

The number of families in need has decreased, she said, but while one beneficiary received an average of two payments a year last year, this year they've already received four.

"People who managed to get by on their pensions or work incapacity benefits last year aren't able to live off of that anymore this year," the deputy mayor noted. "Because food alone already costs more, nevermind everything else. We can see from the results of the Statistics Estonia survey that consumer prices officially rose by more than 9 percent, but food prices saw a much bigger increase."

Starting last June, the state's minimum monthly subsistence level was increased by a quarter for the first time in years — from €150 to €200. Mortgage and interest payments were also allowed to be included as extraordinary expenses in the calculation of subsistence benefits, which made things easier for some families. People were permitted to work while receiving benefits as well.

Within the year and four months since, however, the impact of these measures has already been substantially reduced by inflation.

New method to calculate cost of living differently

Where the absolute poverty line lies is up to the will of politicians, and it's impossible to predict when it will next be shifted. Now, however, the Ministry of Social Affairs has begun working out a new methodology for calculating the minimum subsistence level in Estonia.

"The new methodology is a different way of calculating the cost of living," Riisalo noted. "It should provide an adequate picture of what the minimum [amount of money] is that would enable a household to cope with their basic expenses."

The new system should be ready by the start of 2025, she said, adding that this is a fairly long process that will involve researchers from various fields.

"And then it will be possible to decide how to apply this methodology in real life," the minister continued. "We most likely won't be able to change the size of the subsistence benefit until then. In 2022, we increased it by €50. But before that, it hadn't been increased at all for some time, and sometime before that it was increased by €10. So we made a steep jump."

Thus, a new system is coming, but not anytime soon. Until then, households have to cope with new tax hikes as well as inflation. The Euribor is rising as well, which is driving up loan repayments and leasing payments.

Under these circumstances, a working mother with two children and monthly wages just below the national average could easily end up below the poverty line. Or, even more easily, drop close to it, but thus end up without the right to additional benefits. Even if they have enough money to buy food and pay the bills, they can only dream about anything else.


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Editor: Aili Vahtla

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