Estonia's population is aging and natural population growth has been negative for a long time. This means the number of young people entering the labor market is smaller than the number leaving it. This is not unique to Estonia — immigration has become the main and often only factor slowing population decline in many European countries.

In addition to education policy, the government has various measures in place to ease labor shortages, including reducing unemployment, improving the skills and qualifications of the local workforce and more. However, internal resources remain limited due to population decline and aging.

According to OSKA (Estonian Qualifications Agency — ed.) forecasts, the demand for foreign labor in Estonia is likely to increase over the next decade. Each year, there is a shortfall of about 1,400 top-level specialists and 700 skilled workers — needs that cannot be met by graduates of Estonia's formal education system. Moreover, it is expected that a large number of Ukrainian war refugees will eventually return to their home country and exit the Estonian labor market.

People coming to Estonia on different bases

Estonia's current migration policy is fragmented, complex and riddled with exceptions, making it difficult for both employers and labor migrants to navigate all the requirements. Labor migration policy is based on an immigration quota (0.1 percent of the population) and its various exemptions, which is why the quota often lies at the center of debates about foreign labor.

At the same time, it's clear that Estonia's labor market is influenced not only by labor migration, but also by the number of people receiving international protection, intra-EU migration, family reunification and more. In 2023, citizens of third countries who entered Estonia under the immigration quota with fixed-term residence permits accounted for only 12 percent of all foreign workers in Estonia holding such permits.

The data also shows that while the current migration policy aims to attract top specialists and highly qualified foreign labor, many foreign-born workers are employed in lower-skilled positions or as manual laborers. In 2023, there were 66,400 foreign workers in the Estonian labor market. Of these, 11,500 were employed as top specialists or executives, 35,650 as skilled workers and 15,400 as unskilled laborers.

The number of both top specialists and unskilled workers has more than doubled in five years, while the number of skilled workers has grown somewhat less. Ukrainian war refugees have made the largest contribution to the increase in the number of skilled and especially unskilled workers.

Estonia's migration policy does not encourage the recruitment of unskilled labor. In general, employers are required to pay foreign workers at least the Estonian average wage. This requirement does not apply to war refugees or others granted international protection. As a result, those with international protection status have the fastest and easiest access to the labor market through unskilled jobs, which also have the lowest language proficiency requirements. Without the war in Ukraine, it is unlikely that Estonia's labor market would include so many foreign unskilled workers.

Experience from wealthier countries shows that as prosperity grows, local residents' values around work also shift — and unskilled jobs are often the first that locals are unwilling to do. Seasonal agricultural work is a particularly telling example.

Long- and short-term stays

Employing foreign labor in skilled and unskilled positions is both beneficial and sensible for society. For example, bringing in workers from abroad can help smooth out fluctuations in labor demand — those peaks and valleys — in sectors like industry, tourism and agriculture. During economic booms, companies can bring in temporary foreign labor, and during downturns, they can scale back without laying off local employees. This approach also avoids overtraining locals for jobs that may quickly disappear.

Such supplemental labor should ideally come to the country for a limited time — one to three years. To minimize potential risks associated with immigration, the state could work with employers to identify target countries from which to recruit short-term workers. Several European countries have already established cooperation agreements with third countries to manage labor migration.

In the case of highly qualified foreign labor, companies are often interested in having engineers or top-level technologists become part of their core workforce for the long term. To retain skilled professionals in Estonia's labor market, integration efforts are needed at both the governmental and company levels.

Highly qualified specialists are typically people in their prime working years with prior job experience — and often with families they bring with them to Estonia. It is therefore important to support the integration of the entire family, including helping spouses enter the labor market.

According to OSKA research, about 40 percent of people who arrive through family migration — including children — are employed, and nearly 20 percent of them are top specialists. This makes them a valuable addition to Estonia's labor force. Unfortunately, one of the main reasons some leave before their work permits expire is that their families have difficulty adjusting.

One way to attract more specialists to professions facing acute labor shortages — such as doctors, nurses and engineers — is to invite them to study at Estonian universities. Many countries use international students as a guided and desirable migration pathway. While studying, students are introduced to Estonian culture and learn the language, allowing them to begin integrating into society even before they enter the labor market — and do so more smoothly.

Clear set of rules needed

We therefore need both types of foreign workers: those who come to Estonia temporarily to provide a better life for their families back home and foreign specialists who wish to live and work here long term and integrate into Estonian society.

To achieve this, a range of labor migration regulatory measures is needed, along with a clear labor migration policy that also takes other forms of migration into account. The policy should establish both short- and long-term goals and principles for labor migration, helping to reduce the complexity of the current system while keeping it flexible and responsive to labor market needs.

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