Erik Gamzejev: When businesses shut down, small towns also fade away

If local entrepreneurship disappears, then sooner or later even a small town with the most magnificent square will decline, notes Erik Gamzejev.
The centers of Estonia's counties have become ever more beautiful over the years, but alongside improving their appearance, their future is largely determined by how strong and viable local entrepreneurship is.
Valga, Võru, Jõhvi and the capitals of several other counties have gotten themselves cool squares. Dozens of kilometers of bicycle paths have been built around them. New school buildings and recreational areas have been established.
For example, the county center of Ida‑Viru, Jõhvi, is an excellent place to live. Within at most a ten‑minute walking distance from each other there are a kindergarten, a high school, a basic school, a coding school, a stadium, a sports hall, a concert hall, a new music square and promenade, a cinema, a large shopping center and a park with a health trail — all built in this century.
Still this year, construction of a new library‑community house should begin. A large part of people live in the immediate vicinity of all this. Local life should also gain spice and open new opportunities from the Jõhvi film campus with its magnificent studios, which will open next week. It is worth acknowledging Jõhvi's local authorities, who have fought in recent decades for strengthening the county center.
Yet the visibly improved living environment has not been able to prevent the constant decrease in the number of inhabitants. One important reason looks back from the regional wage data page of Statistics Estonia. In the second quarter of this year, the median wage in Jõhvi municipality was €1448. Income tax is still deducted from that. In Estonia on average, the median wage was €1840.
Jõhvi's figure would be considerably worse if it did not have a large share of relatively well‑paid public sector wage earners. In Jõhvi, major employers are Viru Prison, the Defense Forces, and also the Ida‑Viru Central Hospital located nearby in Ahtme, where many Jõhvi residents are working. Also schools, where the average gross salary of teachers reaches close to €3000 thanks to the Ida‑Viru coefficient.
Among Jõhvi residents there are also workers of the oil shale industry. As a result of climate policy, which has messed up Estonia's energy system and destroyed thousands of well‑paid jobs in Ida‑Viru County, their share has significantly decreased, but miners and oil producers who have remained in work still receive higher pay than the Estonian average.
If public sector and oil shale industry people are left aside, then the wage level of the remaining entrepreneurship would be considerably lower than the median wage of 1448 euros in Jõhvi municipality. Jõhvi does not differ significantly from most other regions of Estonia. All counties except Harju County and Tartu County fall noticeably — by several hundred euros — below the Estonian median wage of €1840.
Many local entrepreneurs are in a vicious circle from which it is difficult to find a way out. Because inhabitants — that is, consumers of services — are constantly decreasing, companies cannot grow nor pay employees good wages. Because it is difficult to find a well‑paid job in one's home area, people move away for work, which in turn reduces the turnover of local service providers and creates difficulties in finding employees. Taxes and all other costs are of course just as large for a local entrepreneur as in the capital, where the market and turnovers are considerably larger.
If some nationwide monopoly‑scented large company develops a desire for fatter profit, then it imposes a fixed fee on consumers. And, oh wonder, it gets a green light for this from the Competition Authority.
Local small entrepreneurs have no such possibility, although by the same logic, a similar readiness‑to‑provide‑service fee would have reason to be asked also by a local small shop or hairdresser. Or, thinking over the top, why could these large firms not themselves pay consumers a fixed premium, for example for the readiness to purchase electricity, gas or banking services. If there were no consumers, there would be no business.
In a difficult situation, some local small entrepreneurs try to hide revenues to stay alive, in order to pay fewer taxes. For example, in some service company the payment terminal keeps breaking…
The Tax and Customs Board recently announced that according to their analysis, nine percent of Ida‑Viru workers receive under‑the‑table pay. If we leave aside public sector wage earners — assuming that unreported wages are probably not paid there — then in entrepreneurship this share is still enormously large.
Some entrepreneurs who do not want to go down the path of fraud fight for survival as long as they can, but in the end still shut down their businesses. Suppliers raise prices. Employees want more pay. The tax authority demands its due; for it, the regional‑policy importance of a local entrepreneur has no significance. As a result, the choice of services for small‑town residents becomes smaller.
Local enterprising people, who have often provided work not only for themselves but also for others, turn out to be superfluous. Tired from struggling, they move elsewhere or let themselves be carried in the future on the back of the state's social system. If earlier they brought tax revenue to the state treasury and their municipality, now they become a new expense line.
Most parties talk every four years, when votes are needed from people living outside Harju County to get seats in the Riigikogu, about how important supporting the development of local entrepreneurship is. What this essentially means remains vague.
It is precisely strong entrepreneurship, which creates jobs and brings tax revenue, that is the most important player in advancing local life. Everything else may be and is beneficial. But if there is no entrepreneurship, then sooner or later even a small town with the most magnificent square will fade away.
Therefore, when you see candidates for the Riigikogu in party tents in the coming months, go up to them and ask what they plan to do so that entrepreneurship becomes stronger in Jõhvi, Põlva, Valga, Paide, Kuressaare and elsewhere. Do not settle for general slogan‑like and round answers.
Do not let the conversation be dragged to what their political competitors have previously done wrong. Ask until you get substantive answers about what they themselves will do. If they do not want to end up in an embarrassing situation, then they must be prepared for this exam.
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Editor: Kaupo Meiel, Argo Ideon












